What is the main difference between private money and conventional loans?

Private and hard money size on ARV, LTC, scope, and exit for non-owner-occupied investment property. Conventional loans size on borrower income, DTI, credit, and as-is collateral — typically on habitable, stabilized stock.

What rates does Jaken Finance Group charge on private money bridge?

Qualified non-owner-occupied bridge files run 8.99%–13.5% interest-only on acquisition and rehab. DSCR permanent exits run 5.75%–10.5% on stabilized rentals.

Can conventional lenders finance distressed investment property?

Rarely. Banks decline or slow-file gut rehabs, fire damage, and vacant distress. Private money bridge at 8.99%–13.5% IO funds acquisition plus rehab draws, then exits to sale or DSCR refi.

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Private Money vs Conventional Loans for Investors

Published June 12, 2026 · Updated July 18, 2026

By Jason Taken · Principal, Jaken Finance Group

Private and hard money vs conventional for non-owner-occupied investors — underwriting, rates, close speed, and when each product fits your deal.

Private money and conventional financing serve different moments in the same investor portfolio. Jaken Finance Group provides private and hard money bridge on non-owner-occupied investment property — sized on ARV, LTC, scope, and exit — while conventional channels excel at long-term, habitable collateral with amortizing terms.

This guide compares private/hard money vs conventional for non-owner-occupied investors only — not owner-occupied primary homes. Pair with DSCR vs hard money vs conventional comparison and hard money vs conventional financing.

Private money vs conventional — full comparison

Factor	Private / hard money (Jaken Finance Group)	Conventional (bank / agency)
Lender type	Private capital, asset-based	Banks, credit unions, mortgage companies
Rate band	8.99%–13.5% IO bridge; 5.75%–10.5% DSCR	~6%–8% fixed amortizing
Term	6–18 months (bridge); 30 years (DSCR)	15–30 years
Close	7–14 business days	30–60+ days
Underwriting	ARV, LTC, scope, exit	Income, DTI, credit, reserves
Collateral condition	Distressed / value-add OK	Move-in ready, habitable
Rehab funding	Draw holdback standard	Rare on investment distress
Entity	LLC vesting standard	Varies by product
Occupancy scope	Non-owner-occupied only	Owner-occ and investment
Regulation	Business-purpose, state licensed	GSE / agency guidelines

Hard money glossary · Private money for beginners

Lender type and capital source

Conventional loans flow through banks and mortgage companies that sell or guarantee paper to agencies. Underwriting follows rigid guidelines — FICO floors, DTI caps, reserve requirements, and property condition standards that exclude most value-add distress.

Private money loans — including hard money bridge — come from private lenders who lend their own capital or investor pools. Jaken Finance Group underwrites on collateral and exit, not a scorecard designed for W-2 homeowners. That flexibility matters when the asset is the thesis — not the borrower’s tax return.

Element	Private money	Conventional
Decision maker	Asset-based underwriter	Committee + guidelines
Negotiation	Terms tied to deal specifics	Standardized product grid
Repeat relationship	Track record accelerates files	Each file re-underwritten
Geographic scope	Jaken Finance Group — 50 states	Lender footprint varies

Qualification and underwriting process

Conventional approval requires credit score, debt-to-income ratio, employment history, tax returns, and reserves. On non-owner-occupied product, banks add stricter LTV caps, higher rate adjustments, and often decline properties needing renovation.

Private money qualification centers on:

Requirement	What underwriters verify
Sold comps	3+ supporting ARV within submarket
Scope + bids	Line-item rehab with 10%–15% contingency
Liquidity	Down payment + 3-month carry after close
Exit path	Sale timeline or DSCR refi pro forma
Entity	LLC docs, EIN, good standing
Insurance	Investor / landlord policy quote

Credit is reviewed for patterns — Jaken Finance Group is credit-flexible with no minimum FICO on select programs — but collateral without comps is still a decline. See checklist for evaluating proposals.

Collateral requirements — distress vs stability

Conventional borrowers pledge the subject property; the lender appraises as-is condition. Properties without functioning kitchen, HVAC, or habitability fail agency standards — even when ARV after rehab is obvious from sold comps.

Private money expects renovation. Collateral can include:

Vacant SFR needing cosmetic or full gut rehab
Duplex / small multifamily with deferred maintenance
Fire or water damage with documented scope
Auction and REO acquisitions with short close windows

Property state	Private money	Conventional
Gut rehab, no kitchen	Standard bridge product	Decline
Stabilized, leased 12+ mo	Overkill — use DSCR	Strong fit
Vacant, cosmetic	Bridge → sale or refi	Possible if habitable
Pre-1978 with lead/asbestos scope	Underwritten with abatement bids	Often decline

Funding speed — days vs months

Conventional pipelines run 30–60 days minimum — income verification, appraisal, underwriting, and title on habitable collateral. Time-sensitive deals die in that window.

Private money on a complete investor file:

Milestone	Timing
Term sheet (complete file)	24–48 hours
Close	7–14 business days
Rehab draw release	3–5 business days post-inspection

Speed matters for auction REO purchases, wholesaler assignments, and MLS listings where sellers prioritize certainty. The IO premium at 8.99%–13.5% is often less than the basis lost waiting on bank approval.

Hard money loan application process

Loan terms and repayment structure

Conventional loans amortize over 15–30 years with fixed or adjustable rates. Monthly payment includes principal — building equity from day one on long holds.

Private money bridge uses interest-only payments during the hold:

Structure	Bridge (private money)	Conventional
Payment type	Interest-only	Principal + interest
Typical hold	4–18 months	5–30 years
Payoff trigger	Sale or DSCR refi	Refi or maturity
Prepayment penalty	Usually none at sale	Often on early years

IO during rehab keeps carry predictable while capital goes to scope — not principal reduction you will refinance away in six months anyway.

Interest rates and total cost

Conventional wins on stated rate for long holds. Private money wins on transaction efficiency for short holds where speed and rehab funding unlock profit conventional channels cannot access.

Worked cost comparison — $220,000 bridge loan, 6-month hold:

Cost line	Private money @ 10.5% IO	Conventional @ 7% (if approved)
Monthly payment	~$1,925 IO	~$1,464 P+I
6-month carry	~$11,550	~$8,784
Close timeline	7–14 days	30–45+ days
Rehab draws	Included in LTC	Not available
Deal capture on distress	Yes	Unlikely

The $2,766 IO premium is irrelevant if conventional never closes on the asset — or if waiting 45 days costs $15,000 in lost basis. Model total cost at LOI: points, origination, per-draw fees, appraisal, and carry.

Fix and flip calculator · Hard money loan mistakes

Flexibility — scope changes and exit paths

Conventional loans lock terms at closing with limited modification options. Private money structures adapt to investor timelines:

Flexibility	Private money	Conventional
Scope change orders	Re-underwrite with updated LTC	N/A
Draw schedule	Milestone-based	Not offered
Extension (if needed)	Negotiated on case	Rare
Exit to DSCR	Planned at origination	Separate application

Jaken Finance Group bridge files should document dual exit — sale and DSCR refi at 5.75%–10.5% — before close. Confirm seasoning clock on the permanent product so bridge term matches lease-up reality.

When private money fits — investor decision matrix

Your situation	Use private / hard money	Use conventional or DSCR
Fix-and-flip, 4–9 month hold	Yes — bridge IO	No
BRRRR acquisition + rehab	Yes — bridge → DSCR	No on distress
Auction close under 14 days	Yes	Too slow
Stabilized rental, executed lease	No — use DSCR	Yes
Turnkey with 12+ mo tenant history	No — use DSCR	Yes
Owner-occupied primary	Out of scope	Conventional

When conventional fits — and when it does not

Conventional (or DSCR permanent) fits when:

Property is habitable with no major deferred maintenance
Tenant is in place with documented rent history
DSCR ≥1.0 at 5.75%–10.5% on permanent terms
You plan to hold 5+ years and prioritize rate over speed

Conventional does not fit when:

Property needs gut rehab before habitability
Close deadline is under three weeks
ARV thesis depends on renovation banks will not fund
Borrower is strong on assets but weak on W-2 documentation

Private money is not “better” — it is appropriate for the deal phase. Using bridge on stabilized stock wastes IO carry. Using conventional on fire-damaged duplexes wastes application fees.

Entity and compliance — non-owner-occupied only

Jaken Finance Group files close in LLC with business-purpose representations:

Document	Purpose
Operating agreement	Vesting match on title
EIN + good standing	Entity verification
Business-purpose letter	Non-owner-occupied certification
Landlord / investor insurance	Not owner-occupied HO-3

Mismatch between personal name and LLC at refi can reset seasoning on some DSCR programs — vest correctly at acquisition.

Pre-submission checklist

Item	Status to verify
Purchase contract / LOI	Signed with realistic close date
Sold comps (3+)	Same submarket, ≤6 months
Scope + contractor bids	Line items with contingency
Entity docs	LLC complete
Exit pro forma	Sale or DSCR with numbers
Liquidity statement	Post-close reserves

Submit one complete PDF — incomplete packages miss the 24–48 hour term sheet window.

DSCR vs hard money vs conventional comparison
Hard money loan statistics 2026
Using hard money to invest
Questions and misconceptions about hard money
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