If you've spent any time around real estate investing, you've heard the term "hard money." It gets thrown around at meetups, in flipping forums, and on every late-night podcast about building a rental portfolio. But beneath the jargon, hard money loans are a straightforward and powerful tool — one that lets investors move on deals conventional banks would never touch in time.
Hard money loans are short-term, asset-based loans secured by real estate. Instead of underwriting your personal income and tax returns, a hard money lender underwrites the property itself: what it's worth today, what it will be worth after repairs, and how strong the deal is. That single difference is why an investor can go from offer to closing in days rather than months.
This guide breaks down exactly what hard money loans are, how they work, what they cost in 2026, when to use them, and how to qualify. Whether you're financing your first flip or scaling a rental portfolio, understanding hard money is foundational. At Funded Capital, it's the core of what we do — and we close these loans in as little as five days.
What Is a Hard Money Loan?
A hard money loan is financing provided by a private lender — not a bank — that is secured primarily by the value of a real estate asset rather than the borrower's creditworthiness or income. The "hard" in hard money refers to the hard asset (the property) backing the loan.
Because the property is the collateral, the lender's main question isn't "Can this borrower prove two years of W-2 income?" but rather "If this deal goes sideways, can we recover our capital from the asset?" That shift in focus is what makes hard money fast, flexible, and accessible to investors who don't fit the conventional mortgage box.
These are almost always business-purpose loans used for investment properties — fix-and-flips, rentals, ground-up construction, and small multifamily. They are not used to buy a primary residence, which keeps them outside the consumer-mortgage rules that make bank loans so slow.
Hard Money vs. Conventional Loans
The contrast with a traditional bank mortgage is stark. A conventional loan is built around the borrower; a hard money loan is built around the deal.
| Feature | Hard Money Loan | Conventional Mortgage |
|---|---|---|
| Underwriting basis | The property and deal | Personal income and credit |
| Income verification | Not required on most programs | Required (W-2s, tax returns) |
| Time to close | As little as 5 days | 30–45 days or more |
| Loan term | 6–36 months (short-term) | 15–30 years |
| Interest rate | From 8.75% (Funded Capital) | Lower, but slower and stricter |
| Best for | Flips, BRRRR, fast acquisitions | Owner-occupied, long holds |
The tradeoff is real but logical. Hard money carries higher interest because it's faster, shorter, and tied to higher-risk active deals. For an investor whose profit depends on speed and certainty of close, that cost is simply part of the deal math — and often far cheaper than losing the property to a slower buyer.
How Do Hard Money Loans Work?
The mechanics of a hard money loan revolve around two numbers: how much the lender will advance against the purchase, and how much against the rehab. Most hard money lenders structure deals around loan-to-cost (LTC) and after-repair value (ARV).
A typical fix-and-flip structure might advance up to 90% of the purchase price plus 100% of the renovation budget, capped at a percentage of the ARV. The investor brings the remaining down payment and any reserves, and the lender funds rehab in stages called draws as the work gets completed and inspected.
Payments are almost always interest-only during the term. You're not amortizing principal over 30 years — you're paying interest on the drawn balance each month and then repaying the full principal when you sell or refinance. That keeps monthly carrying costs manageable while the project is in progress.
A Simple Example
Say you find a property to flip for $200,000 that needs $50,000 in work and will be worth $320,000 after repairs (the ARV). A lender offering 90% LTC plus 100% of rehab would advance $180,000 toward the purchase and the full $50,000 in renovation draws — $230,000 total. You'd bring roughly $20,000 down plus closing costs and reserves.
You make interest-only payments during the rehab and listing period. When the home sells at $320,000, you repay the principal, keep the spread, and your effective cost of capital is just a few months of interest plus points. To model your own deal, use our loan calculator and review exactly how the process works.
What Do Hard Money Loans Cost in 2026?
Hard money is priced for speed and risk, so it costs more than a bank mortgage — but the market has tightened and rates are competitive in 2026. Across the industry, hard money interest rates generally run between roughly 9.5% and 12.5%, with origination fees ("points") typically between 1.5 and 3 points of the loan amount.
Funded Capital prices below much of the market. Our fix-and-flip loans start at 8.75% with up to 90% LTC, DSCR rental loans start at 6.0% with up to 80% LTV, and new construction loans start at 8.75% with up to 85% LTC. We also fund multifamily deals for investors scaling into larger assets.
The Real Cost Math
Because hard money is short-term and interest-only, the headline rate matters less than total carrying cost over your actual hold period. A 9% rate on a six-month flip is a fraction of the annual percentage you'd assume — you're only paying interest for the months you hold the asset.
The fastest way to lower your true cost is to close quickly and exit quickly. Every week shaved off your timeline is interest you don't pay, which is precisely why investors value lenders that issue term sheets in hours and close in days. Apply now to get a term sheet on your next deal.
When Should You Use a Hard Money Loan?
Hard money shines in any situation where speed, flexibility, or property condition rules out a conventional loan. The most common use cases are predictable.
Fix-and-flips top the list: distressed properties rarely qualify for bank financing, and investors need to close fast to win deals. The BRRRR strategy — buy, rehab, rent, refinance, repeat — relies on hard money for the acquisition and rehab phases before refinancing into a long-term DSCR loan. Ground-up construction, time-sensitive auction purchases, and bridge situations between buying and selling all fit the same mold.
Hard money is also the answer for investors who can't easily document income — self-employed borrowers, those who write off most of their earnings, or anyone borrowing through an LLC. Since qualifying is based on the deal, not your tax return, these borrowers get funded where banks would decline.
When Hard Money Isn't the Right Fit
Hard money is not designed for buying your own home or for long-term holds where you want a low fixed rate amortized over decades. If you have time, strong documentable income, and a stabilized property, a conventional or DSCR loan may cost less over a long horizon. The skill is matching the loan to the job — short-term, active deals call for hard money; long-term passive holds call for term financing.
Ready to Get Funded?
Funded Capital is a Miami-based private lender serving real estate investors in 44 states. We underwrite the deal, not your tax return — with no income verification required on most programs.
We issue term sheets in 2 hours and fund deals in as little as 5 days, with fix-and-flip rates from 8.75%, DSCR from 6.0%, and new construction from 8.75%. Whether it's your first flip or your fiftieth, we have the capital and the speed to keep your projects moving.
Or call us directly: (305) 857-5620 | processing@fundedcapital.com
If you place loans for investor clients, our broker program is built to make hard money deals fast and predictable.
Frequently Asked Questions
What are hard money loans used for?
Hard money loans are short-term, asset-based loans used by real estate investors to finance fix-and-flips, BRRRR deals, ground-up construction, small multifamily, and time-sensitive acquisitions. Because they're underwritten on the property rather than personal income, they close far faster than bank loans — making them ideal for distressed properties and competitive deals where speed wins. They are business-purpose loans for investment properties, not primary residences.
How fast can you get a hard money loan?
Much faster than a conventional mortgage. While banks typically take 30 to 45 days, a hard money lender can move in days. Funded Capital issues term sheets in as little as 2 hours and closes loans in as little as 5 days, because we underwrite the deal and the asset rather than waiting on income documentation and a lengthy bank approval process. Apply now to start.
What credit score do you need for a hard money loan?
Credit requirements are far more flexible than with banks because the property secures the loan. Many hard money lenders work with a wide range of credit profiles, and qualifying is driven primarily by the deal — purchase price, rehab budget, and after-repair value. Funded Capital requires no income verification on most programs and focuses on the strength of the property and project rather than your personal financials.
How much do hard money loans cost?
In 2026, hard money interest rates across the industry generally run between about 9.5% and 12.5%, with origination fees of 1.5 to 3 points. Funded Capital prices below much of the market — fix-and-flip from 8.75%, DSCR from 6.0%, and new construction from 8.75%. Because loans are short-term and interest-only, your true cost depends on how long you hold the asset, so a fast close and exit keep total carrying costs low.
Can I get a hard money loan through an LLC?
Yes. Most hard money lenders, including Funded Capital, close investment property loans directly in the name of an LLC, LP, or corporation. This is standard for investor lending and provides liability protection while keeping the loan off your personal credit. Learn more in our guide to borrowing as an LLC, or contact us at (305) 857-5620 to structure your deal.