Guide
Hard money versus everything else
Six alternatives, what each is actually for, and the specific situation in which hard money is the right answer rather than the only answer.
Hard money is expensive. It is worth using when it buys you something the alternatives cannot. Here is the honest comparison.
The comparison
| Option | Cost | Speed | Best for | The catch |
|---|---|---|---|---|
| Hard money | 8.0% to 15.0% + 1.0 to 4.0 points | 3-14 days | Distressed property, fast close, rehab funding | Short term with a hard deadline |
| DSCR rental loan | Roughly 1-2 pts over conventional | 3-5 weeks | Holding a finished rental long term | Property must already cash-flow; prepayment penalties |
| Conventional investment mortgage | Cheapest available | 30-45 days | Turnkey rental you will hold | Property must be habitable; income and credit fully underwritten |
| HELOC on your own home | Prime-linked, variable | 2-6 weeks | Funding down payments and rehab cheaply | Your residence is the collateral; consumer rules apply |
| Private money from an individual | Negotiable, often 8-12% | Days | Repeat relationships, flexible structures | Informal documentation; relationship risk |
| Partnership / equity | A share of the profit | Immediate | No cash, or no track record | The most expensive capital if the deal goes well |
When hard money is genuinely right
- The property will not pass a conventional appraisal - no kitchen, no heat, no certificate of occupancy.
- The seller requires a close in under three weeks and there is a real discount attached to that.
- You need renovation funds released in draws, which no conventional purchase loan provides.
- Your income documentation genuinely does not fit a conventional box and the deal is time-sensitive.
- You are competing at auction or on a foreclosure timeline.
When it is the wrong tool
The stacking pattern that works
Hard money and DSCR are complements, not competitors. Bridge in to buy and renovate, refinance out to hold. The discipline is confirming the second loan is achievable before you take the first: get a rental lender's view on the rent, the DSCR and the seasoning requirement while you are still shopping bridge quotes. See the refinance-out check.
Questions people actually ask
Are DSCR loans considered hard money loans?
No, though they are often sold by the same lenders and confused constantly. A DSCR loan is long-term rental financing - typically 30 years, amortising, qualified on the property's cash flow instead of your tax returns. Hard money is short-term, interest-only, asset-based bridge capital. They are complements, not substitutes: hard money buys and renovates the property, the DSCR loan takes it out.
What's the downside of a DSCR loan?
Rates above conventional owner-occupied pricing, prepayment penalties that are common and sometimes steep, a hard floor on the debt-service ratio that a vacancy can breach, and reliance on a market-rent opinion that may not match what you actually collect. It is still usually far cheaper than staying in hard money.
How risky is hard money lending?
For the borrower, the risk concentrates in the term ending before the exit is ready, and in the personal guarantee that usually sits behind the loan. For the lender, the risk is a collateral value that turns out to be wrong. The product is not inherently dangerous; a short term against an uncertain exit is.