Fix and flip
Buy a property that needs work, renovate it with money released in draws, and repay the loan when you sell.
Fix and flip loans
Hard money · fix and flip · bridge
Hard money loans for real estate investors
A hard money loan is short-term financing for a real estate investor, sized on the property rather than on your tax returns, to buy, renovate or carry an investment property until you sell it or refinance it. Ours come from a licensed direct mortgage lender, with your terms in writing before you commit. For business purposes only.
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- Licensed mortgage lender
- NMLS #103098
- Equal Housing Lender
Size up your deal
See how a deal pencils, then talk it through with a licensed loan officer.
Fidelity Residential · NMLS #103098 · Equal Housing Lender
The basics
What a hard money loan is
“Hard money” is what investors call a short-term loan secured by the property and sized mainly on the property: what it is worth now, what it will be worth after any work, and what the whole project costs. Your personal income is not the starting point, the way it is on a home loan.
You pay interest only each month, and the balance is repaid at the end of a term measured in months, when you sell the property or refinance it into a long-term loan. If you need more time, you can ask for an extension while the loan is current.
When the property needs work, the loan has two parts. The money to buy is paid out at closing, and the renovation money is held back and released in draws as the work is finished and an inspector confirms it.
At a glance
- Business purpose: you usually borrow through a company
- Never your home: the property is an investment
- One to four units, townhomes and condos
- Generally no prepayment penalty when you sell or refinance
Who you deal with
Hard money from a licensed lender
Hard money has long meant a loan from a private lender or a group of investors. Ours work the way investors expect, sized on the deal rather than on your tax returns, but you deal with a licensed direct mortgage lender you can look up on NMLS Consumer Access (NMLS #103098).
What that means for your deal
- Terms in writing: a term sheet for your deal, signed online, before you commit.
- Draws against inspection: renovation money is released after a third-party inspector confirms the finished work.
- A real person: a licensed loan officer sizes the deal with you and tells you early where it stands.
- A way to keep it: once a renovated property is rented, a long-term rental loan based on the rent can replace the short-term loan.
What it is for
Four ways investors use a hard money loan
Purchase or refinance. Terms depend on the strategy and on your record of completed projects.
Fix and hold
Renovate and keep the property as a rental. Once it is rented, a long-term rental loan based on the rent can replace the short-term loan.
DSCR rental loansGround-up construction
Buy a lot and build, or build on land you already own, to sell or keep as a rental. A feasibility report, contractor details and plans or a permit are part of the file.
Construction loansBridge
Short-term financing on a property that needs little or no work, while you sell, lease it up or arrange a long-term loan.
Bridge loans
Underwriting
What the lender looks at
The deal comes first, but the file is still a real file.
- The property. What it is worth before the work and after it, and what the purchase and the renovation cost in total.
- Your track record. Completed projects count. First-time investors are considered for purchases, on tighter terms.
- Credit and background. The application includes credit and background authorization.
- Cash on hand. Recent bank statements show the money for closing and for the stages of work before each draw.
- The plan. The purchase contract when you are buying, and a line-by-line rehab budget when there is work to do.
Side by side
Hard money loan or long-term rental loan?
Many investors use both: one to buy and fix, the other to keep.
| Question | Hard money loan | DSCR rental loan |
|---|---|---|
| What it is for | Buying, renovating or carrying a property for a short time, until you sell or refinance | Keeping a rental for the long term |
| How it is sized | On the property’s value before and after the work and on the total cost | On the property’s rent compared with its payment |
| Renovation money | Released in draws as the work is done and inspected | Not part of the loan; the property is rented or ready to rent |
| Payments | Interest only each month; the balance is repaid at the end of a term measured in months | A long-term mortgage payment |
| Personal income | Not the starting point | Not used; the rent carries the loan |
Business purpose investor loans are for investment property only. Nobody on the loan may live in the property.
Step by step
How a hard money loan works with us
Tell us the deal
The property, the price, the work you plan and how you will exit. Request a quote or call.
Get your terms in writing
A term sheet for your deal, signed online. See a sample term sheet.
Close and start work
The money to buy is paid out at closing; the renovation money is held back for the draws.
Sell or refinance
Repay the loan when you sell, or refinance into a long-term rental loan once the property is rented.
Questions
Questions about hard money loans
What is a hard money loan?
A short-term loan to a real estate investor, secured by the property and sized mainly on the property rather than on personal income. Investors use it to buy, renovate or carry a property, and repay it when they sell or refinance. It is a business-purpose loan.
Is a fix and flip loan a hard money loan?
Short-term investor loans to buy and renovate are often called hard money or private money loans, and ours do the same job: they are sized on the deal rather than on your tax returns. The difference is who you deal with: a licensed lender you can look up on NMLS Consumer Access, terms in writing on a term sheet before you commit, and renovation money released against a third-party inspection of the finished work. See fix and flip loans.
Do I need to show my personal income?
Not in the way a home loan does. The loan is sized on what the property is worth before and after the work, not on your personal income. The file still includes the application with credit and background authorization, recent bank statements and your track record of completed projects.
Can a first-time investor get a hard money loan?
First-time investors are considered for purchases, on tighter terms than investors with completed projects. A loan officer can tell you early how your deal looks.
What is after-repair value?
The value the property is expected to have once the renovation is finished, often shortened to ARV. The loan is sized on what the property is worth before and after the work, so an after-repair value supported by sales of similar renovated homes nearby makes the deal easier to size.
Can I use a hard money loan for a home I will live in?
No. These are business-purpose loans for investment property, and nobody on the loan may live in the property. To buy or refinance a home you will live in and pay for its repairs, see renovation loans.
How is a hard money loan repaid?
You pay interest only each month, and the balance is repaid at the end of the term, when you sell the property or refinance it into a long-term loan. If you need more time, you can ask for an extension while the loan is current. There is generally no prepayment penalty.
When is a hard money loan the wrong choice?
When you mean to keep the property for years on the same loan. These loans are short-term and priced for speed. They suit a project with a real plan to sell or refinance. If you want to keep a rental, plan for a long-term rental loan based on the rent; see DSCR rental loans.
Have a deal to size up?
Request a quote, apply online, or talk the deal through with a licensed loan officer.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on the property, your experience, credit and underwriting review and are subject to change without notice. Business purpose investor loans are for investment property only.
Reviewed by Robert Shamie, CEO, NMLS #241428 · Last reviewed:
Fidelity Residential (PFN Lending Group, Inc., NMLS #103098) is a direct mortgage lender licensed in 40 states and the District of Columbia, with 26 years in business.