Hard money lenders in California: usury, licensing, foreclosure speed and costs
For a lender or an investor, one fact frames everything in California: california hard money is a licensed, broker-dominated industry by necessity — the usury exemption depends on it — and lenders accept that a non-judicial sale takes four to eight months and leaves no deficiency claim against a residential borrower.
| Foreclosure process | Non-judicial |
|---|---|
| Typical time to sale | 4 to 8 months from first notice or filing |
| Post-sale redemption | There is no post-sale redemption after a non-judicial trustee sale in California. |
| Deficiency judgment | Barred after the usual sale |
| Usury | California’s constitution caps interest at 10% on loans for personal or household purposes and at the higher of 10% or 5% above the Federal Reserve discount rate for other loans — but loans made or arranged by a licensed real estate broker and secured by real property are exempt, as are loans by California Financing Law licensees. |
| Transfer tax | California counties charge a documentary transfer tax of $1.10 per $1,000 (0.11%); charter cities such as Los Angeles, San Francisco, Oakland and San Jose add city transfer taxes that can exceed 1% and rise sharply on high-value sales. |
| Median home price (approx.) | $790,000 · property tax about 0.71% |
Can a lender charge 12% in California? Usury and business-purpose exemptions
California’s constitution caps interest at 10% on loans for personal or household purposes and at the higher of 10% or 5% above the Federal Reserve discount rate for other loans — but loans made or arranged by a licensed real estate broker and secured by real property are exempt, as are loans by California Financing Law licensees. That exemption is why almost all California hard money is broker-arranged or CFL-originated.
This summarizes publicly available statutes and common practice; it is not legal advice, and the rules change. Lenders and borrowers should verify with counsel in the state.
Licensing requirements for lenders and brokers
Most California hard money lenders operate under a Department of Real Estate broker license (arranging loans) or a California Financing Law license from the Department of Financial Protection and Innovation; lending without either risks usury exposure and penalties. Business-purpose loans on owner-occupied homes also trigger additional disclosure rules. Verify a lender or originator on NMLS Consumer Access, and read how to vet a lender.
How fast a lender gets the property back in California
In California the lender’s path after a default is non-judicial. California foreclosures are overwhelmingly non-judicial trustee sales under a deed of trust. Before recording a notice of default, the servicer must contact the borrower (or try diligently) to discuss options and wait 30 days; after recording, it must wait at least three months before recording a notice of sale, which sets a sale date at least 20 days later. The practical minimum is about four months; six to eight is more typical. Budget 4 to 8 months from the first formal step to the sale — the number that explains much of the state’s hard money pricing.
There is no post-sale redemption after a non-judicial trustee sale in California. After a judicial foreclosure, the borrower may redeem within one year (three months if the sale proceeds covered the debt), which is one reason lenders almost never choose the judicial route for homes.
California bars any deficiency judgment after a non-judicial trustee sale (Code of Civil Procedure 580d). Separately, purchase-money loans on owner-occupied one-to-four unit dwellings are non-recourse even in a judicial foreclosure (580b), and since 2013 that protection extends to refinances of purchase-money debt to the extent no cash was taken out. Short sales of one-to-four unit homes are also protected (580e). See what happens when a hard money loan defaults and the California foreclosure process for the complete timeline.
Costs on the way in and out
California counties charge a documentary transfer tax of $1.10 per $1,000 (0.11%); charter cities such as Los Angeles, San Francisco, Oakland and San Jose add city transfer taxes that can exceed 1% and rise sharply on high-value sales. Who pays is negotiated and varies by region. Entry and exit costs are fixed; holding costs run with time. In California, property tax at roughly 0.71% of value (about $5,609 a year on $790,000) is the largest recurring one after interest.
Closing costs are driven by price: 1% to 2% is typical for the government and title portion in most counties, but Los Angeles and Bay Area city taxes, plus high escrow and title fees, can push total buyer costs toward 2% to 3% before prepaids.
Where investors are active in California
Los Angeles, the Inland Empire (Riverside, San Bernardino), Sacramento, the Central Valley (Fresno, Bakersfield, Stockton) and San Diego are the deepest flip markets by volume; Bay Area flips are fewer but larger in dollar terms. California’s ADU laws have created a distinct value-add niche for investors adding units.
Market notes describe where activity concentrates, not where profits are guaranteed; margins change with rates, inventory and competition. Underwrite each deal on its own comps.
Frequently asked questions
Is hard money lending legal in California?
Yes. California’s constitution caps interest at 10% on loans for personal or household purposes and at the higher of 10% or 5% above the Federal Reserve discount rate for other loans — but loans made or arranged by a licensed real estate broker and secured by real property are exempt, as are loans by California Financing Law licensees. Most California hard money lenders operate under a Department of Real Estate broker license (arranging loans) or a California Financing Law license from the Department of Financial Protection and Innovation; lending without either risks usury exposure and penalties.
How fast can a hard money lender foreclose in California?
4 to 8 months is the usual range from first notice to sale; California uses a non-judicial process. There is no post-sale redemption after a non-judicial trustee sale in California.
What does a typical hard money loan cost in California?
Rates of 9% to 14% and 1 to 4 points are the national range. As an illustration only: $671,500 borrowed at 11% with 2 points for nine months is about $68,825 in interest and points, plus fees and carrying costs. See rates, points and LTV.
Hard money guides
- Hard money for land and commercial property: lower leverage, longer exits
- How to find and vet hard money lenders: sources, questions, red flags
- What is a hard money loan? Asset-based lending explained
- Hard money vs conventional loan: speed, cost, and which deal needs which
Same state, other questions: first-time home buyer programs in California · foreclosure in California.