Hard money lending provides short-term, collateral-focused financing for borrowers and investors who cannot access conventional loans. It's commonly used for fix-and-flip projects, unusual properties, or to avoid foreclosure. These loans close faster and require less documentation, but carry higher costs and varying legal oversight; borrowers should compare offers and confirm regulatory compliance before proceeding.

What is hard money lending?

Hard money lenders are private individuals or nonbank companies that make short-term, asset-backed loans when conventional banks and institutional lenders will not. They focus on the collateral (typically real estate) rather than on a borrower's credit score or full income documentation. That focus lets them finance situations that traditional lenders avoid.

Who uses hard money loans?

• Real estate investors doing fix-and-flip projects who need fast funding with fewer underwriting requirements.

• Borrowers who cannot qualify for conventional loans because of credit issues, missing documentation, or time-sensitive needs.

• Owners facing imminent foreclosure who need short-term liquidity to avoid losing a property.

• Developers or buyers of unusual or remote properties that conventional lenders consider risky.

How hard money loans work

Hard money loans are usually short-term and priced higher than conventional mortgages. Lenders charge higher interest rates and origination fees, and they rely heavily on loan-to-value (LTV) ratios and the resale value of the collateral to manage risk. If a borrower defaults, the lender's primary recourse is the collateral property rather than pursuing the borrower's income.

Because underwriting is faster and less documentation-heavy, hard money deals can close in days or weeks - a key advantage for time-sensitive transactions.

Typical terms and cost (what to expect)

Expect shorter loan terms than traditional mortgages and higher overall borrowing costs. Lenders often set lower LTV limits to protect their position, commonly in the low-to-mid range such as 60-75% of the property's value.

Fees and interest vary widely by lender and market. Always request a full cost breakdown (interest, points, fees, and prepayment penalties) before signing.

Risks and regulatory considerations

Hard money lending sits between private lending and regulated mortgage markets. Many lenders are legitimate, licensed mortgage professionals; others are private investors. State licensing, usury limits, disclosure requirements, and consumer protections differ across jurisdictions, so legal and regulatory compliance matters. Check local rules and confirm a lender's licensing status. ¹

Borrowers should treat hard money as bridge or short-term financing, not a long-term replacement for a conventional, lower-cost mortgage.

When to consider a hard money loan

Use hard money when speed, flexibility, or collateral-focused underwriting outweighs higher costs. Typical use cases include rapid acquisition for investment, funding renovation before refinance, or buying time to resolve short-term financial setbacks.

Before proceeding, compare multiple lenders, inspect loan documents for hidden costs, and consult a real estate attorney or mortgage professional.

1. Verify typical LTV ranges for hard money loans (commonly quoted 60-75% in many markets).
2. Confirm common state-level regulatory requirements for private mortgage lending (licensing, usury limits, and disclosure rules) as of 2025.