La Guía de Préstamos de Dinero Privado

What Is a Hard Money Loan?

A hard money loan is short-term, asset-based financing secured primarily by the property itself rather than the borrower's personal income and credit.

Where a bank spends weeks verifying your W-2s and debt-to-income ratio, a hard money lender is mostly asking one question: does this deal make sense? That's what lets it close in days instead of over a month — and it's why investors use it for time-sensitive purchases a conventional loan can't move fast enough to win.

How Loan Amounts Are Calculated

Two numbers drive most hard money underwriting:

• Loan-to-Cost (LTC) — a percentage of your total project cost (purchase price plus rehab budget). An 85% LTC on a $300,000 purchase with a $50,000 rehab budget finances roughly $297,500 of your $350,000 total cost.
• Loan-to-ARV — a percentage of the property's After-Repair Value, the number an appraiser expects the property to be worth once renovations are complete. Lenders cap this around 70-75% as a safety margin, even if your LTC math would allow more.

Your actual loan amount is typically whichever of the two produces the smaller number. Run your own numbers on our calculadora de préstamos de dinero privado.

What Hard Money Actually Costs

Hard money costs more than a conventional mortgage. Three pieces make up that cost:

• Interest rate — materially higher than a conventional mortgage, typically in the high single digits to mid-teens.
• Points — an upfront origination fee, usually 1-3% of the loan amount.
• Closing costs — standard, on top of the above.

Payments are almost always interest-only during the term, with the principal due at term's end through a sale or refinance. The higher cost buys speed: you're paying for a lender willing to close in days on a file a bank would take a month — or decline — to underwrite.

The Process, Start to Finish

1. Submit the deal. Property details, purchase price, rehab scope and budget, and your exit strategy (sell or refinance).
2. Property review. The lender evaluates the property and, on rehab deals, the ARV — sometimes with a desk review, sometimes a full appraisal.
3. Approval and closing. Terms get finalized and you close, often within a week to ten days of a clean submission.
4. Rehab draws (if applicable). Funds release in stages as work is completed and inspected, rather than all at once.
5. Exit. You sell or refinance before the term ends, paying off the loan's principal balance.

Who Hard Money Is — and Isn't — For

It's built for investors — fix-and-flip buyers, builders, and anyone acquiring investment or business-purpose property who needs speed or doesn't fit conventional underwriting.

It isn't for everyone. Hard money is not available for owner-occupied primary residences, and it's the wrong tool for a long-term buy-and-hold — the rate is too high to carry indefinitely. Most investors use it as a bridge: close fast, do the work, then sell or refinance into cheaper long-term financing.