What is a hard money loan,
and how does it work?
A hard money loan is a short-term real estate loan secured by the property itself, underwritten on what the property is worth and on the plan that repays it rather than on the borrower's income. Private and specialty lenders write it, not banks.
A hard money loan is short-term financing secured by real estate and sized against the property rather than against a pay stub. The lender asks two questions first: what the asset is worth now, and what specifically repays the loan, normally a sale or a refinance at the end of a term counted in months. Payments during the term are normally interest-only, and the principal comes back in one payment at that exit. Hard money is a description of how a loan is priced and underwritten, not a product name: the same capital is written as a fix and flip loan, a bridge loan or a construction loan depending on what it is doing. It is also called private money.
NexWin Capital Corp. is a licensed California broker, not a lender. It reads the scenario, places the file with the private lender whose terms fit the asset and the exit, and stays with it through closing. Because it arranges rather than lends, the rate and the conditions come from that lender, on a term sheet written against your own deal.
The definition, in plain terms.
Hard money is asset-based lending on real estate. A bank reads the borrower: tax returns, employment, debt ratios. A hard money lender reads the collateral and the plan, which is what the word hard points at. The property is the hard asset, and it carries the credit decision. Because the loan is written against a value that is expected to change, or against a position that is expected to clear, it is short, it is priced above a thirty-year mortgage, and the file can move in weeks rather than months.
Who writes it is the other half of the definition. This is private and specialty capital: funds, family offices and individual investors rather than depository banks, which is why the same money is also called private money. They differ from one another in the asset types they will fund, the leverage they will go to, the hold periods they will write and the counties they will lend in, and those edges are not always published where a borrower can read them.
The phrase itself seldom appears on a term sheet. Lenders write the same capital under the name of the job it is doing: a fix and flip loan, a bridge loan, a construction loan. Three numbers do most of the work in all of them, and each has its own glossary entry: loan-to-value, loan-to-cost and after-repair value.
How a hard money loan works.
Five steps carry almost every one of them, in this order.
The scenario goes in as a file
The property, the purchase or the payoff, the plan and the exit, in plain terms. Entity documents, insurance and identification arrive with the file rather than after the appraisal. Personal income documentation matters far less here than it does on a consumer mortgage.
Valuation, as-is and finished
An appraisal or a broker opinion sets what the property is worth today, and on a rehab a second number matters as much: the after-repair value, tied to a specific scope of work and to comparable sales. Leverage is set against those numbers through the loan-to-value ratio, which the CFPB defines as a measure comparing the amount you are financing with the appraised value of the property.
The lender returns a term sheet
Rate, leverage, term, points, extension terms and prepay come back from the lender, written against the deal. That sheet, not a page like this one, is what sets real numbers. Read the six lines together rather than by the headline rate.
Draws, where there is work to fund
Rehab and construction money is not handed over at closing. It is released in draws as stages complete and are inspected, so the lender funds work that exists rather than work that is planned, and the borrower carries interest on what has actually been drawn.
The exit repays the principal
Nothing amortizes. The CFPB describes an interest-only loan as one whose payments cover only the interest for a set time, noting that the amount you owe does not go down with each payment, so the balance falls due at the end in what the CFPB calls a balloon payment: a large, one-time payment at the end of the loan term. The exit that makes it is a sale, a refinance or a stabilization.
The order matters more than the list. Because the loan is interest-only, the exit is not a formality at the end: it is the repayment, so it is underwritten first and the sponsor is read against it. An exit that is real, funded and dated is the single thing that decides most files.
What sets the price.
Five lines, described in words. This site publishes no rate, because this firm arranges financing and does not set price.
The carry
Payments during the term are interest-only, so the monthly number tracks the rate and the balance rather than an amortization schedule. A larger loan or a longer hold raises the carry even when the rate has not moved.
Points
An origination fee expressed in points and paid once, usually at closing. Over a hold measured in months, points weigh on the total cost of capital far more heavily than they would if the same charge were spread across a thirty-year loan.
Fees and third-party costs
Valuation, title, escrow, legal, and any inspection the draws require. These are not the lender's price, but they are part of the cash a borrower needs at close, and they belong in the arithmetic beside the rate.
The extension
Most short-term loans carry a right to extend for a fee if the exit slips. It is worth negotiating while the term sheet is being written rather than in the last month of the term.
The prepay
Some lenders set a minimum interest period before the loan can be retired. A lower rate carrying one can cost more than a higher rate you are free to pay off the week the sale closes.
What moves the rate is consistent across lenders: how much of the value or the cost the loan covers, what the asset is and where it sits, how long the money is out, how solid and how documented the exit is, and the track record of the sponsor. Read the lines together, because a lower rate carrying a minimum interest period can cost more than a higher one you can retire the week the sale closes, and points paid once over a hold measured in months weigh far more heavily than the same charge spread over thirty years.
Once a lender has quoted you, the hard money loan calculator turns that rate into a monthly carry, a total cost of capital, and the cash you need at close. It runs in the browser, submits nothing, and is not a quote.
Hard money vs. a bank loan.
The two are different instruments, not cheaper and dearer versions of one instrument. A bank prices years of amortizing debt against your income; hard money prices months of debt against a property and a plan to exit it. Every practical difference follows from that.
| Hard money | A bank loan | |
|---|---|---|
| Underwriting basis | The property and the plan: what it is worth now, what it will be worth finished, and what specifically repays the loan | The borrower: tax returns, employment history, debt-to-income |
| Speed | Weeks rather than months, once the file is complete; title and valuation set the pace, not the lender | Months, set by verification, appraisal and credit committee cycles |
| Term | Months, set by the plan | Years, set by the product |
| What it is used for | A purchase that cannot wait, a renovation, a build, or a position held until a permanent loan fits | A stabilized property held by a borrower with the income file and the time |
| Who qualifies | An entity buying or improving investment property for a business purpose | A consumer or a business that clears the lender's income and credit thresholds |
The honest corollary: if you have the income file and the deal can wait for a bank’s calendar, bank money is cheaper and you should use it. Hard money is for the deal that cannot wait, the property that does not qualify yet, or the file where the asset is the story rather than the income. NexWin Capital Corp. arranges business-purpose loans through licensed lending partners and does not set rate or terms.
The capital,
and the broker.
Hard money is written by private and specialty lenders: funds, family offices and individual investors rather than depository banks. Private money is the same capital under a different name, and in practice the two words describe the same set of firms.
They are not interchangeable with one another. Lenders differ in the asset types they will fund, the leverage they will go to, the hold periods they will write and the counties they will lend in, and those edges are not always published where a borrower can read them. That is the whole reason a search for a lender is harder than it looks.
NexWin Capital Corp. arranges hard money and private capital for California real estate. It takes the scenario once, matches it to the lenders whose terms actually fit, brings back a term sheet, and stays on the file through closing. Because it arranges rather than lends, it does not set the rate or the terms: those come from the lender, on a term sheet written against your specific deal.
For who writes this paper in California, county by county, and what a broker changes about the search, see hard money lenders in California.
Where hard money is used.
Three shapes account for most of it. The bounds under each are that program’s published ranges, read from the same data its own page renders.
Buying and renovating
A property bought to be improved and resold, where the loan is sized against the after-repair value and the rehab money is released in draws.
The purchase-and-rehab program NexWin Capital Corp. arranges is published at $100K – $3M over 6 – 18 mo, at up to 75% of after-repair value, with rehab funded up to 100%.
Bridging a position
A purchase that will not wait, or a loan coming due before a bank can act, repaid later by a sale or a permanent refinance.
The bridge program is published at $250K – $20M over 6 – 24 mo, at up to 75% of value, with a typical close of ~14 business days for qualified scenarios with a complete file.
Building from the ground up
A build financed in stages, where money is released as work completes and is inspected rather than in a lump sum at closing.
The ground-up construction program is published at $250K – $10M+ over 12 – 24 mo, at up to 85% of cost, with a second ceiling of up to 70% against the finished value.
Those are typical ranges for qualified scenarios with a complete file, not an offer, quote or commitment to lend. Every deal is priced by its own term sheet, and no date is quoted until the scenario has been read.
Hard money questions, answered.
What is a hard money loan?
A short-term real estate loan secured by the property and underwritten on that property rather than on the borrower's income. Private and specialty lenders write it, not banks. The lender asks what the asset is worth now, what it will be worth when the work is done, how much of that value the loan covers, and what specifically repays it. Payments during the term are normally interest-only and the principal is repaid in one payment at the exit, which is why the term is counted in months rather than decades and the price sits above a thirty-year mortgage.
How does a hard money loan work?
In five steps. The file goes in with the property, the plan and the exit, alongside entity documents and insurance. A valuation sets the as-is number, and on a rehab an after-repair value tied to a specific scope of work. The lender returns a term sheet carrying rate, leverage, term, points, extension terms and prepay. Where there is work to fund, the money is released in draws as stages complete and are inspected rather than handed over at closing. At the end, the exit repays the principal in one payment, which is why a lender underwrites the exit before it underwrites the sponsor.
What does hard money mean in real estate?
It describes how a loan is underwritten and priced, not what it is called on a term sheet. Hard points at the hard asset: the property carries the credit decision, so what it is worth and what repays the loan are read before the borrower's income. The money is short-term and costs more than a thirty-year mortgage, because the term is short and the lender is carrying transition risk. A hard money lender is the private or specialty lender who writes that paper, and private money lender is the same job under a different name.
What sets the rate on a hard money loan?
No rate is published on this site, because NexWin Capital Corp. arranges financing through third-party lenders and does not set price. A rate printed here would be a guess about someone else's term sheet. What moves the number is consistent across lenders: how much of the value or the cost the loan covers, what the asset is and where it sits, how long the money is out, how solid and how documented the exit is, and the track record of the sponsor. Points, fees, extension terms and any minimum interest period sit beside the rate and change the total cost of capital, which is why a term sheet is read as a whole rather than by its headline number.
Can you get a hard money loan with bad credit?
Credit is not the first screen on these loans, and that is a real difference from a bank mortgage. A hard money file is read asset first: what the property is worth, how much of that value the loan covers, and what specifically repays it. The sponsor comes after that, and credit is one part of the sponsor picture rather than the gate. Where credit does show up is usually in leverage and price rather than in the yes or no. None of that is a promise. NexWin Capital Corp. arranges financing through third-party lenders and does not underwrite or set terms, so whether a specific file clears is the lender's decision on its own facts.
Are hard money loans different in California?
The instrument is the same. What is specific to California is who may arrange the loan and under which rulebook. NexWin Capital Corp. is licensed in California under the California Financing Law, administered by the DFPI, as License No. 60DBO-211586, with a public record on NMLS Consumer Access under NMLS ID 2743839. The programs on this site are business-purpose loans on investment property, written to entities, which is generally the category Regulation Z exempts. Interest limits, and the exemption a licensed broker arranges under, are a statute question that the California usury law page on this site answers with the official text.
What can a hard money loan be used for?
Business-purpose real estate, mostly in three shapes. Buying a property to renovate and resell, where the loan is sized against the after-repair value and the rehab money is released in draws. Bridging a position, where a purchase will not wait or a loan is coming due and a sale or a refinance repays it later. Building from the ground up, where money is released as stages complete and are inspected. It is not the loan for a home the borrower intends to live in: that is generally a consumer-purpose loan, and it is not what these programs are for.
Is this page an offer of credit?
No. The figures above are the published ranges of three programs, not an offer, quote, pre-approval or commitment to lend, and every deal is underwritten on its own facts. NexWin Capital Corp. arranges financing through third-party lenders and does not set rate or terms. Nothing here is legal or tax advice.
Where these rules come from.
Most hard money loans on investment property are written for business purpose, and that single fact decides which rulebook applies. Regulation Z, which implements the Truth in Lending Act, exempts “an extension of credit primarily for a business, commercial or agricultural purpose”, and credit extended to other than a natural person. Regulation X carries the same exemption into RESPA.
The CFPB’s official interpretations go further on rentals: credit to acquire, improve or maintain rental property that is not owner-occupied is deemed to be for business purposes, regardless of the number of housing units, unless the owner expects to occupy it more than fourteen days a year.
In practice, that is why one of these loans does not arrive with a Loan Estimate and a Closing Disclosure, and why the equity and the exit carry the underwriting instead of a debt-to-income calculation. Whether a specific loan is business-purpose is decided on the file by the lender and its counsel. A hard money loan on a home the borrower intends to live in is a different question, and it is not what these programs are for. NexWin Capital Corp. is licensed in California under the California Financing Law, administered by the DFPI, as License No. 60DBO-211586, with a public record on NMLS Consumer Access under NMLS ID 2743839; the disclosures carry the rest.
Why the market prices these loans rather than a statutory ceiling is a statute question: how California usury law treats broker-arranged loans quotes the official texts. The bridge side of this category is explained in full on what is a bridge loan, and residential transition loans places all three loans inside their category.
Sources: the CFPB on interest-only loans, balloon payments and the loan-to-value ratio; Regulation Z §1026.3 with its official interpretations; and Regulation X §1024.5.
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