Hard Money Loan

A hard money loan is a short-term, asset-based loan from a private lending company, secured by the property and used by flippers and other investors who need speed.

A hard money loan is a short-term loan from a private lending company, secured by the property itself. Approval is based on the asset and the deal — purchase price, rehab budget, and after repair value — more than the borrower's tax returns. That focus is what makes hard money fast: closings in days instead of weeks, which is why flippers and wholesale buyers use it even though it costs far more than a bank mortgage. The typical structure is six to eighteen months, interest-only payments, rates well above conventional loans, plus origination points paid up front.

Here is how it looks in a deal. A flipper buys a house at $100,000 that needs $40,000 of work and will be worth $200,000 repaired. A hard money lender agrees to fund a percentage of the purchase and releases the rehab money in draws as work is completed. The flipper pays interest only while the flip runs, sells the finished house, and pays off the loan at closing. The speed matters as much as the money — a hard money buyer can close inside a wholesaler's contract window, which is why buyers funding with hard money still count as cash buyers: no mortgage contingency, no bank underwriting.

What beginners get wrong is shopping rate and ignoring everything else. Points, draw fees, extension fees, and every extra month of interest all come out of the same profit margin, so model the full cost over your real timeline — not the best-case one — before you sign.