Hard Money Loans for Real Estate: How They Work for Flips and BRRRR
Hard money loans are short-term, asset-based loans used for flips and BRRRR deals. Learn how they are priced, what they cost, and when the speed is worth the higher rate.
By Jennifer Walsh, Mortgage & Lending Writer · Last reviewed: August 1, 2026 · 8 min read
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What Is a Hard Money Loan?
A hard money loan is a short-term loan secured by the property itself rather than by the borrower income history. It is provided by private lenders or funds and is designed for investors who need to buy and renovate quickly.
Because the loan is asset-based, approval hinges on the deal, especially the after repair value, rather than on tax returns and debt-to-income ratios. That is what makes hard money fast, but also expensive.
How Hard Money Loans Are Priced
Loan Amount = After Repair Value x LTV Limit (often 65% to 75%)
Hard money lenders typically lend a percentage of the after repair value, or sometimes of purchase price plus rehab. Common limits fall around 65% to 75% of ARV, which caps how much of the project the loan will cover.
Costs are higher than a conventional mortgage. Expect interest rates roughly in the low double digits plus origination points, often 1 to 3 points paid up front. Terms are short, commonly 6 to 18 months.
Typical Terms
- Interest rates commonly in the 10% to 14% range, well above conventional loans.
- Origination fees of 1 to 3 points charged at closing.
- Short terms, usually 6 to 18 months, structured around a renovation timeline.
- Interest-only monthly payments, with the principal due as a balloon at the end.
- Loan sized to ARV, so a strong, well-supported ARV unlocks more funding.
When Hard Money Makes Sense
Hard money shines when speed and flexibility matter more than rate: winning a competitive off-market deal, funding a property too distressed for a conventional loan, or bridging a BRRRR project until a cash-out refinance replaces it with cheaper long-term debt.
The high cost is tolerable because the loan is short. On a flip that closes in six months, a few points and a double-digit rate are a small share of the profit if the deal is priced right.
The Exit Is Everything
A hard money loan is only as safe as its exit. Before borrowing, you need a clear plan to pay it off: a sale for a flip, or a refinance into a conventional or DSCR loan for a BRRRR hold.
If the renovation runs long or the ARV comes in low, the short term and balloon payment turn into pressure. Model the deal with realistic timelines and a conservative ARV so the exit is comfortable, not a scramble.
Frequently Asked Questions
How much do hard money loans cost?
Expect interest rates roughly in the 10% to 14% range plus 1 to 3 origination points paid at closing, with short terms of 6 to 18 months. The all-in cost is high, but because the loan is short-lived it can still be worthwhile on a fast flip or BRRRR project.
Do hard money lenders check credit and income?
They focus mainly on the deal and the property value, especially the after repair value, rather than on income documentation. Credit may still be reviewed, but hard money is far more flexible than a conventional loan, which is why investors use it for speed.
How do you pay off a hard money loan?
Through a defined exit: selling the property on a flip, or refinancing into a longer-term conventional or DSCR loan on a BRRRR hold. Because the term is short and ends in a balloon, you need that exit planned before you borrow.
Jennifer Walsh · Mortgage & Lending Writer, Charlotte, NC
Jennifer covers investment property financing, DSCR loans, and how lenders evaluate rental income. She focuses on turning loan jargon into plain-language guidance investors can actually use.
Educational Disclaimer
All calculations are estimates for educational and planning purposes only. PropertyFlowTools.com does not provide financial, tax, legal, lending, or investment advice. Verify calculations and consult qualified professionals before making property or financing decisions.