Hard Money Loans
Fast Asset-Based Financing for Real Estate Investors
Hard money loans through Howell Mortgage Group provide real estate investors and developers with short-term, asset-based financing that prioritizes the property’s value over the borrower’s credit or income profile. With approval timelines measured in days rather than weeks, hard money loans enable investors to act on time-sensitive opportunities that conventional financing cannot accommodate.
What Are Hard Money Loans?
Hard money loans are short-term financing products backed primarily by the value of the real estate collateral rather than the borrower’s creditworthiness or income. Issued by private lenders and investment funds rather than banks, these loans fill the gap when speed, flexibility, or borrower circumstances make conventional financing impractical.
The term “hard money” refers to the hard asset (real property) that secures the loan. Lenders base their lending decisions on the property’s current market value and, for renovation projects, the projected after-repair value. Loan-to-value ratios typically range from 60% to 75% of the property value.
Hard money loans serve multiple investment strategies: bridge financing between purchase and permanent financing, fix-and-flip projects, land acquisition, construction, and situations where borrowers need capital faster than traditional underwriting allows. Terms range from 6 to 24 months, with interest rates higher than conventional loans due to the elevated risk and expedited service.
Hard Money Loan Requirements
Collateral
The real estate property serves as primary collateral. Lenders focus on the property value and loan-to-value ratio, typically lending up to 60% to 75% of the appraised or after-repair value.
Property Type
Residential (single-family, multi-family), commercial, mixed-use, and land are all eligible. Some lenders specialize in specific property categories.
Equity Position
A minimum of 20% to 30% equity in the property is standard. This can come from a down payment on a purchase or existing equity on a refinance.
Credit Score
Less emphasis on credit score compared to conventional loans. Some hard money lenders approve borrowers with scores as low as 550, though higher scores get better terms.
Exit Strategy
A clear, documented plan to repay the loan is critical. This could be selling the property, refinancing into a permanent loan, or another defined source of repayment.
Experience
Experienced investors receive better rates and terms. First-time borrowers can qualify but should expect higher rates and lower leverage.
How Hard Money Loans Work
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Submit the Deal
Provide basic property details including address, purchase price, estimated value, renovation budget if applicable, and your exit strategy. -
Property Evaluation
The lender orders a rapid valuation, BPO (broker price opinion), or full appraisal to establish the property’s current and potential value. -
Term Sheet
Within 24 to 48 hours of receiving deal details, the lender issues a term sheet outlining loan amount, rate, points, fees, and duration. -
Due Diligence
The lender verifies property title, insurance, and any additional documentation needed. This typically takes 3 to 5 business days. -
Funding
Once due diligence is complete, the loan funds. Many hard money loans close in 7 to 14 days from initial application, with some closing in as few as 5 days. -
Repayment
Make monthly interest payments during the loan term. Repay the principal in full through property sale, refinance, or another exit strategy before the term expires.
Benefits of Hard Money Loans
Speed
Close in 7 to 14 days compared to 30 to 45 days for conventional loans. In competitive markets, speed often makes the difference between winning and losing a deal.
Creative Deal Structures
Hard money lenders can accommodate non-standard transactions like auction purchases, estate sales, short sales, and properties in conditions that conventional lenders reject.
Flexible Qualification
Approval is based primarily on the property value, not your income or credit score. Borrowers with recent credit events, self-employment, or complex financial situations can still qualify.
Bridge to Permanent Financing
Use hard money to close quickly, then refinance into a conventional or DSCR loan once the property is stabilized, renovated, or your financial situation improves.
No Income Verification
Most hard money lenders do not require tax returns, W-2s, or employment verification. The property and your exit strategy are the primary underwriting factors.
Who Should Consider a Hard Money Loan?
Hard money loans serve real estate investors who need speed, flexibility, or the ability to close on properties that do not meet conventional lending standards. Fix-and-flip investors use hard money as their primary acquisition tool because the 7-to-14-day closing timeline lets them secure deals before competitors who rely on slower financing.
Borrowers in transitional financial situations also benefit. If you are between jobs, recently self-employed, recovering from a credit event, or have complex income that is difficult to document, hard money provides a financing path while you work toward qualifying for conventional terms.
Developers and land buyers who need short-term capital for acquisition or pre-development work rely on hard money as bridge financing. The loan provides the capital to acquire and begin work on the project, which is then refinanced into construction or permanent financing once the project reaches the appropriate stage.
How Does This Compare?
Feature | Hard Money | Fix and Flip | Conventional | DCSR |
|---|---|---|---|---|
LTV | 60-75% | 70-85% of ARV | 80-97% | 75-80% |
Credit Score | 550+ (flexible) | 600+ | 620+ | 620+ |
Qualification Focus | Property value | After-repair value | Borrower income | Rental income |
Interest Rate | 10-15% | 9-13% | 5-7% | 6-9% |
Loan Term | 6-24 months | 6-18 months | 15-30 years | 30 years |
Approval Speed | 3-7 days | 7-14 days | 30-45 days | 21-30 days |