What Is Hard Money Lender?

A hard money lender funds a loan based primarily on the value of the property itself, rather than on the borrower's income, credit score, or debt-to-income ratio the way a conventional mortgage lender would. That asset-based approach lets hard money lenders close much faster than a bank, often in days rather than weeks, which is why they are common among fix-and-flip investors and wholesalers' end buyers who need to close on a tight wholesale timeline.

The tradeoff for that speed is cost. Hard money loans typically carry higher interest rates than conventional financing, along with origination points, a percentage of the loan amount charged upfront, and sometimes draw schedules that release rehab funds in stages as work is completed and inspected. Terms, rates, and points vary widely by lender and by market, so there is no single standard rate that applies everywhere; a buyer's actual cost of capital depends on their specific lender relationship and deal terms.

For a wholesaler, hard money matters less as something to arrange directly and more as something to understand about buyer economics. A flipper using hard money is paying interest and points on top of the purchase price and rehab budget, which lowers the maximum they can pay for a wholesale contract compared to a buyer using their own cash. Knowing which buyers on a list use hard money, and roughly how expensive their capital is, helps disposition price deals realistically instead of assuming every cash buyer has the same margin to work with.