- A hard money loan is short-term and asset-based. Lenders size it on the purchase price, the rehab budget and the after-repair value (ARV): 85–100% of the price, 100% of the rehab and a cap of 70–80% of ARV on October 2026 program pages.
- Federal HMDA data for 2025 puts the median short-term investor loan at 10%. Non-bank lenders came in at 10.45%, with the middle half between 9.75% and 11%; banks at 7.5%. Points, usually 0–2, are extra.
- The structure is nearly universal: 91% of 2025 loans were interest-only, 95.1% ended in a balloon and 70.9% were written for exactly 12 months.
- The exit repays the loan: you sell, or you refinance into a 30-year rental loan. Miss the date and you pay for time, from 1% for a 3-month extension on one published schedule to default interest of up to 24% at one public lender.
- In the worked loan below, $248,800 at 10.5% held 7 months costs $20,956 in interest, points and fees: 8.4% of the loan.
Here's how hard money loans work in one line: a non-bank lender lends against an investment property and your plan to exit it, for 6–24 months, interest-only, and wants the whole balance back in one payment at the end. Your income barely figures. What decides the deal is the purchase price, the rehab budget, the after-repair value and how you'll repay, usually by selling or by refinancing into a rental loan qualified on DSCR (debt service coverage ratio), which divides the property's rent each month by its loan payment each month. Below, each moving part in turn, then one loan from closing day to payoff.
Eight lines on a hard money term sheet
Every quote reduces to the same short list. Get each line in writing before you pay for an appraisal, because a low rate can sit next to high points, and a long term can hide an expensive extension.
| Line | What it means | Published range |
|---|---|---|
| Note rate | Yearly interest on the balance you owe | 2025 median 10%: non-bank 10.45%, banks 7.5% |
| Points | An upfront fee; one point is 1% of the loan | 0–2 at most programs; 1–3% at Sachem Capital |
| Term | Months until the full balance is due | 6–24 months; 70.9% of 2025 loans ran exactly 12 |
| Payment | Interest only, then a lump-sum payoff | 91% interest-only and 95.1% with a balloon in 2025 |
| Leverage | Share of price, rehab and ARV the lender funds | 85–100% of price and all of the rehab, up to 70–80% of ARV |
| Minimum credit | The lowest score a program publishes | 600–660 on fix-and-flip programs |
| Loan size | Smallest and largest loans offered | $50,000–$5,000,000; 2025 median $265,000 |
| Prepayment | A charge for paying off early | None on Kiavi, LendingOne or RCN rehab loans |
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Rates: the federal data beats the advertised floor
Lender pages advertise a starting rate. The Home Mortgage Disclosure Act (HMDA) file shows what borrowers paid. A Crowdfunded Wealth analysis of the 2025 file, updated October 26, 2026, counted 66,029 short-term business-purpose investor loans with a median note rate of 10%; the 10th percentile was 7.65% and the 90th 11.9%. Non-bank lenders made 83.3% of them at a 10.45% median, with the middle half between 9.75% and 11%. Banks and credit unions made 14.8% at 7.5%.
Read a quote against those numbers. At 10.5% you're in the middle of the non-bank market. An advertised rate from 8.25%, as on Kiavi's fix-and-flip page in October 2026, is the price for its strongest files. Sachem Capital, a listed lender, told shareholders in its 2025 annual report that its fixed rates typically run 10% to 13%.
What moves your rate up or down
- Loan size. Small loans cost more. The 2025 non-bank median was 10.5% under $150,000 and 9.95% at $1,000,000 or more.
- Purpose. Loans coded as home improvement carried the highest non-bank median, 11.25%, against 10.45% on purchases.
- Lender type. The 2.95-point gap between the non-bank and bank medians is what speed, and lending on houses a bank won't take, costs.
- Experience. Most programs price in tiers by completed projects. Lima One says experienced flippers get higher leverage and lower rates and fees.
- Credit and leverage. Kiavi says your score, your record of property exits and the ARV together play a key role in what it will lend.
Points: a one-time fee priced against a short hold
A point is 1% of the loan, charged at closing; on a $248,800 loan, one point is $2,488. Published fix-and-flip programs mostly charge 0–2. New Silver lists 1–1.75%, Easy Street 0–2 points plus a $1,995 doc fee, and OfferMarket 1.5–2 points with a $2,000 minimum. Among listed lenders, Sachem Capital reports 1–3% and Manhattan Bridge Capital 0–2%.
You pay points once, so what they cost per year depends on how long you keep the loan. Spread them across the hold:
At 1.5 points, a 9-month hold adds 2 percentage points a year (1.5 ÷ 0.75); a 4-month hold adds 4.5. A quick flip with heavy points can cost more per year than a slower one at a higher rate. Minimums bite on small loans: 2 points on $90,000 is $1,800, so a $2,000 minimum sets the price instead. Lima One lets you defer origination fees until you exit, which keeps cash in the rehab without shrinking the fee. Every fee by name is in investor loan points and fees.
Interest-only now, the whole balance later
Hard money payments cover interest and nothing else, so you owe as much on the last day as you did on the first. The entire principal comes due on the maturity date: the balloon. Sachem Capital's 2025 annual report says it plainly: principal is due in a balloon payment at maturity. In the 2025 HMDA file, interest-only loans made up 91% of the total and balloon loans 95.1%. Terms cluster at a year: 70.9% ran exactly 12 months and 10.9% less. Banks lend longer; 29.3% of bank loans ran 36 months.
Published rehab terms run 6–24 months: 6–18 at Easy Street, 12–18 at RCN, 12 at Roc, 12, 18 or 24 at Kiavi, and 13, 19 or 24 at Lima One.
The word that matters is drawn. On a rehab loan the renovation money is held back at closing and paid out in draws as each stage passes inspection. Lima One and LendingOne charge interest only on funds you've drawn; Lima One calls this a non-Dutch structure. A Dutch-interest loan charges on the full amount from closing. In the worked loan below, the difference is $910 over 7 months, so ask which method your note uses.
Asset-based underwriting: the deal is the borrower
A bank asks whether you can pay. A hard money lender asks whether the property can, through a sale or a refinance, and whether you can carry it until then. The file changes to match.
- Value today and after repair. Some lenders order an appraisal with both values; others value in-house. Kiavi says its team weighs more than 20 factors, including square footage, location and market dynamics, and orders no third-party appraisal. The ARV caps the loan.
- The rehab plan. Lima One asks for a documented rehab plan and a construction budget. The budget becomes the draw schedule, so a vague one slows every draw. See a rehab budget a lender will fund.
- Your cash. Bank statements show the down payment, closing costs and the interest you'll carry. Lima One expects a cash contribution toward the price at closing.
- Credit. Published minimums: 600 at Easy Street, 650 at RCN and New Silver, 660 at Lima One.
- Experience. Plenty of programs take first-time investors at lower leverage. Lima One wants to see one exit on an investment property within the past 36 months.
- The entity and a guarantee. In 2025, 80.9% of these loans went to an LLC, corporation or trust. Expect to sign a personal guarantee too; Rehab Financial Group requires one.
- What's usually missing: W-2s and tax returns. LendingOne and Kiavi don't ask for income documents on their rehab loans.
How the loan amount is set
Three caps apply and the lowest wins: a share of the price (85–100% on October 2026 program pages), the rehab budget (fully financed at Civic, Easy Street, Kiavi, LendingOne, Lima One, RCN and Roc) and a share of ARV (70–80%; 75% at Roc, Civic, Easy Street and New Silver). New investors and heavy rehabs land at the low end. The three measures are compared in LTV vs LTC vs ARV.
One hard money loan, from closing to payoff
Take a 3-bed that needs a full interior: $212,000 price, $58,000 rehab, $360,000 ARV from recent sales nearby. The lender offers 90% of the price, 100% of the rehab and a cap at 75% of ARV; 10.5% on drawn funds, inside the 2025 non-bank middle half; 1.5 points; a $1,995 doc fee; and $300 a draw ($270 inspection plus a $30 wire, from one published schedule). The term is 12 months. The plan: three draws, and a sale that closes in month 7.
| Step | Math | Result |
|---|---|---|
| Purchase advance | 90% × $212,000 | $190,800 |
| Rehab holdback | 100% of $58,000 | $58,000 |
| Total loan | $190,800 + $58,000 | $248,800 |
| ARV cap | 75% × $360,000 | $270,000, not binding |
| Loan-to-ARV | $248,800 ÷ $360,000 | 69.1% |
| Down payment | $212,000 − $190,800 | $21,200 |
| Cash at closing, before title, insurance and appraisal | $21,200 + $3,732 points + $1,995 doc fee | $26,927 |
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| Month | Drawn balance | Interest |
|---|---|---|
| 1 | $190,800 | $1,669.50 |
| 2, after a $25,000 draw | $215,800 | $1,888.25 |
| 3, after a $20,000 draw | $235,800 | $2,063.25 |
| 4–7, after the last $13,000 | $248,800 | $2,177.00 a month |
| Total, 7 months | $14,329.00 |
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| Item | Amount |
|---|---|
| Interest | $14,329 |
| Points, 1.5% | $3,732 |
| Doc fee | $1,995 |
| Three draws at $300 | $900 |
| Total financing cost | $20,956 |
| Balloon paid from the sale | $248,800 |
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Financing costs $20,956 over 7 months, 8.4% of the loan. The $6,627 of fees alone add about 4.6 percentage points a year to the 10.5% rate over that hold. Had the lender charged interest on the full $248,800 from closing, interest would have been $15,239, or $910 more.
The number that decides it is the payoff against the exit. The sale has to net at least $248,800 after selling costs, 69.1% of ARV, just to clear the lender, before you recover any of your own cash. Run your deal in the fix-and-flip calculator.
What a late exit adds
Say the sale closes in month 10, not 7. That's 3 more months at $2,177, or $6,531, still inside the 12-month term. Go past month 12 and you're buying time: one published schedule charges 1% for a 3-month extension, $2,488 here, on top of the interest. If the lender won't extend and the loan defaults at maturity, a 24% default rate, the ceiling Sachem Capital discloses, runs $4,976 a month instead of $2,177.
Exits: how the loan actually gets repaid
The lender sized the loan on your exit strategy. Treat it as a promise with a date on it.
- Sell. Sale proceeds pay the balloon. Kiavi, LendingOne and RCN publish no prepayment penalty on rehab loans, so an early sale saves the remaining interest. Allow for market time: Realtor.com's national median was 61 days on market in September 2026.
- Refinance and keep it. A 30-year DSCR loan pays off the hard money once the house is rented. DSCR lenders published about 75% of appraised value on most cash-out refinances, and about 90 days of ownership first, which some waive when they made the rehab loan. The steps are in refinance after rehab.
- Extend, if you have to. One published schedule charges 1% for 3 months or 2.5% for 6, capped at half the original term. Rehab Financial builds a 3-month extension into its 9-month loan, automatic, for a 1% fee. Sachem Capital extends only when the borrower has met every covenant and the loan still meets its current underwriting, and charges more points to do it.
- Default: the outcome to plan against. Notes raise the rate when maturity passes unpaid: up to 24% at Sachem Capital, and the greater of the note rate and prime plus 3% on most of Manhattan Bridge Capital's loans. With a personal guarantee, the debt can follow you past the property.
Each route, and what to do when one slips, is covered in bridge loan exit strategies.
Five questions to ask before you sign
- Is interest charged on drawn funds, or on the full loan from closing?
- What are the points, and what is every other fee called and priced at: doc, processing, draw, wire, extension, exit?
- How long is an extension, what does it cost, and what conditions must you meet to get one?
- What is the default rate, and what triggers it: a late payment, a missed maturity, or both?
- Is there a prepayment penalty, a minimum-interest clause or an exit fee?
One limit applies to every loan in this guide: the property has to be an investment. If you or a relative will move in, that's a residential mortgage, from a residential lender.