Hard money vs conventional loan: speed, cost, and which deal needs which

The two loans answer different questions. Conventional asks “can this borrower pay for 30 years?” Hard money asks “is this property worth more than the loan, and what is the exit?”

Side by side

	Hard money	Conventional
Decision based on	Property value, ARV, exit plan	Credit, income, DTI, assets
Time to close	3–15 days	30–45 days
Term	6–24 months, interest-only, balloon	15–30 years, amortizing
Rate (indicative)	9%–14%	Market rate (often 5%–8% in recent years)
Points and fees	1–4 points plus fees	0–1 point plus fees
Down payment / LTV	10%–30% of cost; 65%–75% of ARV	3%–25% depending on occupancy
Property condition	Any — distressed is the point	Must be habitable; appraisal conditions
Occupancy	Non-owner-occupied (business purpose)	Primary, second home or investment
Rehab funds	Often included, disbursed by draws	Not included (except renovation loans)
Prepayment	Sometimes minimum interest periods	No penalty
Regulation	State usury and licensing; exempt from most consumer rules	Full federal consumer protection

Deals that need hard money

A house with a failed roof, no kitchen, or code violations — conventional appraisers will condition the loan on repairs the seller will not make.
An auction or estate sale with a 10-day close.
A competitive offer where “cash-like” certainty wins over a financed offer.
A borrower whose tax returns understate income, or who already has ten financed properties.
A bridge between buying the next property and selling the current one.

Deals that should be conventional

Anything you will hold for years. A stabilized rental, a primary residence, a property in good condition with a normal timeline. Paying hard money rates for more than a year on a property that qualifies for a 30-year loan is simply a mistake; conventional and DSCR loans exist for the hold.

The sequence most investors use

Hard money to buy and renovate, then a conventional or DSCR refinance to hold (the BRRRR method), or a sale to a retail buyer who uses a conventional loan. The hard money lender underwrites the exit as carefully as the entry because its loan is repaid by it.

Frequently asked questions

Can I use hard money to buy my own home?

Consumer-purpose hard money on an owner-occupied home is subject to full federal mortgage rules (ability-to-repay, high-cost loan limits) and is rarely offered. It exists for very short bridges but is expensive and heavily regulated.

Is hard money faster because it is less careful?

It is faster because it underwrites fewer things: the property, the borrower’s experience and the exit, rather than two years of income history. Good lenders are very careful about those three.

Can I refinance a hard money loan into a conventional one?

Yes — that is the standard exit. Watch the seasoning rules: a conventional cash-out refinance generally requires six months of ownership, and the appraisal will set the new loan amount. See BRRRR refinance.