What is a hard money loan? It is short-term, asset-based real estate financing secured by the property — not your W-2 income or tax returns. Real estate investors use hard money to acquire, renovate, bridge, or exit deals faster than conventional banks allow.
The name comes from the hard asset — the collateral — not from harsh terms. Professional hard money lenders like Jaken Finance Group underwrite to after-repair value (ARV), loan-to-cost (LTC), documented scope of work, and a defined exit. That is fundamentally different from how CFPB-regulated consumer mortgages evaluate debt-to-income and employment history.
This is the canonical Jaken Finance Group explainer for hard money in 2026. For metro-specific programs, see hard money lenders Chicago or hard money lenders Washington DC.
How hard money works
Hard money lenders underwrite to collateral and exit strategy — ARV, LTC, scope of work, and how you plan to sell or refinance. Credit-flexible programs are available on select files; approval is collateral-first, not FICO-driven.
Typical structure:
| Feature | Hard money (2026) |
|---|---|
| Interest rate | 8.99%–13.5% (interest-only) |
| Term | 6–12 months (extensions available) |
| LTC | Up to 90% on qualified fix-and-flip files |
| ARV cap | Up to 80% after-repair value |
| Close speed | 7–10 business days with complete file |
Compare products: DSCR vs hard money vs conventional · hard money loan statistics 2026 · interest rates hub
The hard money underwriting stack
Every hard money file answers four questions in order:
- What is the collateral worth when the project is done? Lenders order appraisals or broker price opinions (BPOs) anchored to recent sold comps — not active listings or Zillow estimates.
- What does the project cost all-in? Purchase price plus documented rehab, carrying costs, and closing fees form total project cost — the denominator for LTC.
- Can the sponsor finish the work? Liquidity reserves, contractor bids, and track record determine whether the lender trusts the timeline.
- How does the loan get paid off? Sale, DSCR refinance, bridge takeout, or wholesale assignment must be documented at origination.
Jaken Finance Group structures most acquisition-rehab files as two components: an advance at closing for purchase (typically up to 90% of price) and a rehab holdback released in draw milestones as work completes. Interest accrues on funds actually disbursed — understanding draw timing matters when you model carry.
When investors choose hard money
- Speed — auction wins, estate sales, and off-market deals close in days, not 45-day bank timelines
- Distressed condition — banks require habitable collateral; hard money funds the rehab that makes the property financeable
- Entity borrowing — LLC-vested acquisitions without personal guarantee on every file
- Bridge-to-DSCR — buy and rehab with hard money, exit to DSCR rental debt when stabilized
- Construction and ground-up — new construction loans with milestone draws
When hard money is the wrong tool
Hard money solves timing and collateral-condition problems — not every investor deal needs it. Skip hard money when:
| Situation | Better alternative |
|---|---|
| Turnkey rental with clean title and lease in place | DSCR loan at 5.75%–10.5% amortizing |
| Owner-occupied primary residence | Conventional or FHA — hard money is business-purpose only |
| Thin ARV margin (under 15% spread after costs) | Pass the deal — carry and points erase profit |
| No defined exit within 12 months | Longer bridge or equity partner, not a flip term sheet |
| Cosmetic refresh on a property you plan to hold 10 years | Bank HELOC or portfolio refi if eligible |
| Sponsor with zero liquidity and no contractor lined up | Fix the file first — max leverage still requires reserves |
The CFPB Ability-to-Repay rules apply to consumer mortgages. Investor hard money on non-owner-occupied property is business-purpose financing — underwritten on asset economics, not household DTI. Do not confuse the two products.
Hard money vs bridge vs DSCR
| Product | Best for | Term |
|---|---|---|
| Hard money / fix-and-flip | Acquisition + rehab + resale | 6–18 months IO |
| Bridge | Stabilized hold, 1031 gap, maturity wall | 12–24 months IO |
| DSCR | Long-term rental hold | 30-year fixed/ARM |
Read bridge loans vs hard money when your exit is refi, not sale. For stabilized assets already generating rent, bridge loans for real estate investors may price better than a full rehab structure.
What lenders review on your file
- Purchase price and rehab budget — documented scope, licensed GC bids
- ARV or stabilized value — third-party comps, not seller optimism
- Liquidity — interest reserve, closing costs, contingency
- Track record — first deals need stronger equity; repeat sponsors access higher leverage
- Exit plan — flip sale, DSCR refi, or bridge payoff documented at origination
Full checklist: fix and flip loan requirements · understanding LTV and LTC
Worked example: $280K Chicago flip
| Line item | Amount |
|---|---|
| Purchase | $185,000 |
| Rehab | $95,000 |
| Total cost | $280,000 |
| ARV | $365,000 |
| Loan (88% LTC) | $246,400 |
| Rate | 10.5% IO · 8-month hold |
| Interest carry | ~$17,300 |
| Sale net (after costs) | ~$45,000–$55,000 |
The sponsor brought $33,600 cash to close (12% of cost) plus $8,000 in interest reserves. Margin survived an 8-week permit delay because reserves were sized at origination — not because the lender extended free carry.
Model your file in the fix and flip calculator before LOI.
Worked example: BRRRR exit in Atlanta
Hard money is often the first leg of a BRRRR cycle, not the permanent hold:
| Phase | Product | Key numbers |
|---|---|---|
| Acquire + rehab | Hard money at 90% LTC | $210K loan on $233K cost |
| Lease-up | 60–90 days | Market rent $1,850/mo |
| Refi | DSCR permanent | 75% LTV, 7.1% PITIA ~$1,420/mo |
| Cash-out | Pull equity for next deal | DSCR ~1.30 |
Strategy guide: BRRRR for DSCR success · Case study: Dunwoody no-seasoning DSCR
Points, fees, and total cost of capital
Hard money pricing is more than the rate on the term sheet:
| Cost component | Typical range |
|---|---|
| Origination points | 1.5–3 points on loan amount |
| Processing / underwriting | $500–$2,500 flat |
| Appraisal or BPO | $400–$750 |
| Draw inspection fees | $150–$250 per draw |
| Extension fee | 0.5–1 point if term expires |
On a $250,000 loan at 2 points, origination alone is $5,000. Add 6 months at 11% IO (~$13,750) and the true cost of capital exceeds 7% of loan amount before selling costs. That is why ARV margin must clear 20%+ on first deals.
Hard money vs traditional bank — decision matrix
| Factor | Hard money | Bank investor loan |
|---|---|---|
| Close speed | 7–10 business days | 30–45+ days |
| Property condition | Distressed OK | Habitable only |
| Income docs | Not primary | W-2 / tax returns |
| Rate (2026) | 8.99%–13.5% IO | 6.5%–8.5% amortizing |
| Term | 6–12 months | 15–30 years |
| Entity vesting | Standard | Varies |
Deep comparison: hard money vs traditional loans · choosing hard money over traditional lending
Metro programs and state hubs
- Fix and flip loans Illinois
- Fix and flip loans Washington DC
- New construction loans Chicago
- New investor solutions
- Hard money lenders Florida · Georgia · Texas
- Asset-based hard money lenders
Common mistakes
- Under-budgeting carry — permit delays add months; size interest reserve at origination
- Optimistic ARV — lenders cap at documented comps; your pro forma should match
- Wrong product — DSCR is not a flip tool; hard money is not a 30-year hold solution
- Ignoring draw schedule — mechanicals before cosmetics; front-loading finishes stalls funding
- Skipping entity setup — form the LLC before contract assignment, not at the title table
Red flags when evaluating lenders: what to avoid · Application walkthrough: hard money loan application process · Innovative hard money options · Common scenarios for hard money · Top loan mistakes
Seasoning, extensions, and payoff mechanics
Most hard money loans do not require seasoning before payoff — you can sell or refi the day after closing if the exit supports it. Extensions beyond the initial 6–12 month term typically cost 0.5–1 origination point per 3-month increment and require a progress update on the scope.
Prepayment penalties are uncommon on investor hard money but always confirm on the term sheet. When your exit is a DSCR refinance, order the rent survey and appraisal early — appraisal delays are the most frequent reason flip projects need a bridge extension rather than a direct hard-money payoff.
Pre-qualify for hard money · (833) 264-7776
Rates, terms and conditions offered only to qualified borrowers. Jaken Finance Group only finances non-owner occupied investment properties.