Loan type
Hard money cash-out refinance
Pulling equity out of a property you already own, quickly, when a conventional cash-out will not work or will not arrive in time.
At a glance
| What it funds | Equity release against property you own |
|---|---|
| Leverage | 60% to 75% of as-is value |
| Rate | 8.0% to 15.0% |
| Points | 1.0 to 4.0 points |
| Term | 6 to 24 months |
| Seasoning | Often none, which is the main advantage |
| Exit | Permanent refinance or sale |
A good fit when
You need capital fast against real equity and have a defined path to permanent financing or sale.
A poor fit when
You are pulling equity to cover an operating shortfall with no plan to repay. That is not financing, it is deferral with a fee.
A hard money cash-out refinance places a new loan on a property you own and returns the difference to you in cash. People use it because it is fast, because there is usually no seasoning requirement, and because it does not require income documentation.
When it makes sense
- Recycling capital out of a finished project to fund the next one before the permanent refinance is ready.
- Beating a seasoning requirement. Conventional cash-out generally requires six or twelve months of ownership; hard money often requires none.
- A closing deadline on another deal where the equity is real but the timeline is not.
- Property that will not pass a conventional appraisal in its current condition.
What it costs to do this twice
The specific risk here
In a purchase, the loan buys an asset. In a cash-out, the loan converts equity you already have into cash you will spend, and the asset that secures it is one you already own - often a performing rental. If the repayment plan fails, you lose something that was working, not something you were speculating on.
Consumer-purpose caution
Questions people actually ask
How much do you put down on a hard money loan?
Against as-is value, lenders typically go to 60% to 75%, so 25%-40% comes from you. On a purchase with rehab the more common framing is loan-to-cost: 80%-90% of the purchase price plus 100% of the rehab budget, held back and released in draws.
Do not confuse the down payment with cash to close. Points, flat fees, title, insurance and the first draw you fund yourself all sit on top. Ten to fifteen percent of purchase price is a realistic planning figure for total cash needed on a leveraged flip.
How much down do you need for a hard money loan?
See above - 10% to 20% of purchase is the usual range, before fees and reserves.
Does a hard money lender cover 100%?
Almost never on purchase price, and the offers advertising it usually mean something narrower: 100% of the rehab budget (common and real), or 100% of purchase where the purchase is far below as-is value and the loan is still inside the lender's ARV cap (rare and deal-specific), or 100% with cross-collateralisation against another property you own (real, and it puts a second asset at risk).
Treat a headline promising 100% financing with no cash as the marketing hook it usually is, and read what the offer actually caps at. See the truth about 100% financing.
How long do you have to pay off a hard money loan?
Terms run 6 to 24 months, with 12 months the most common. That is a hard deadline with a fee attached, not a guideline - which is why the exit matters more than the rate.
How do you pay back a hard money loan?
Three ways, and you should know which one before you sign. Sell the property and pay off from proceeds. Refinance into longer-term debt, usually a DSCR rental loan. Or pay it off from other capital. Most hard money loans are interest-only during the term with the principal due as a balloon at the end, so there is no amortisation quietly reducing what you owe.
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.