◆Hard money rates: 9.5%–12% · 1–3 pts origination◆Avg hard money close: 7–14 days · vs 45+ for banks◆70% Rule: Max Offer = ARV × 0.70 − rehab◆Hard money rates: 9.5%–12% · 1–3 pts origination◆Avg hard money close: 7–14 days · vs 45+ for banks◆70% Rule: Max Offer = ARV × 0.70 − rehab
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hard money

Hard Money vs. Bank Loans: When Each One Wins

6 min read

Hard Money vs. Bank Loans: When Each One Wins

Banks and hard money lenders are not competing for the same customer. They're two tools for two different jobs, and using the wrong one is how investors lose deals — or lose money on the deals they win.

Here's exactly when each one wins.

Speed: hard money wins, badly

  • Bank loan: 30–60 days to close, sometimes 90.
  • Hard money: 7–14 days, sometimes 3 on an experienced borrower.

    • If the seller wants a fast close, a bank literally cannot compete. Auctions, foreclosures, tired landlords, and off-market wholesale deals all live in the hard-money-only zone.

    Cost: banks win, badly

  • Bank loan: 6–8% interest, 0–1 points, 30-year amortization.
  • Hard money: 9.5–12% interest, 1–3 points, interest-only, 6–18 months.

    • On a long hold, bank money is dramatically cheaper. On a 6-month flip, the cost gap almost disappears — a 5% rate difference on a $200K loan for 6 months is ~$5,000. That's less than the profit you'd lose by closing 45 days later.

    Underwriting: different worlds

  • Bank: DTI ratios, W-2 income, 2 years of tax returns, credit score minimums, appraisal contingencies, property condition requirements.
  • Hard money: the deal itself. LTV/LTC ratios, ARV, rehab budget, exit strategy. Credit matters but rarely disqualifies.

    • Self-employed investors, people with recent credit dings, and anyone buying a property "in condition" a bank won't lend on all end up at hard money by default.

    Property condition

    Banks require the property to be habitable. Missing kitchen? No loan. Roof caving in? No loan. Foundation issues? No loan.

    Hard money doesn't care. The worse the condition (and the deeper the discount), the more the deal actually fits the product.

    When each one wins

    Use a bank when:

  • Buying a rental to hold for years
  • The property is in livable, financeable condition
  • You have time to close
  • You qualify (income, credit, DTI)

    • Use hard money when:

  • Flipping in under 12 months
  • Buying at auction or off-market
  • The property needs major rehab
  • You need to close in under 3 weeks
  • You'll refinance out later (BRRRR)

    • The pro move: use both

    Serious investors use hard money to *acquire and renovate*, then refinance into a bank loan to *hold*. That's the BRRRR strategy in one sentence. Hard money's speed wins the deal. The bank's rate makes it profitable long-term.

    The bottom line

    Don't argue which is "better." Ask which one gets *this deal* closed. Speed vs. cost — pick the constraint that matters, and the choice makes itself.

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