Hard Money vs Bank Loan: Which Is Right for Your Deal?

Short answer: choose a bank loan when you have time and a finished, financeable property. Choose hard money when speed, property condition or rehab funding matter more than the lowest rate.

Speed

A bank loan often takes weeks because of full documentation and committee approvals. A hard money loan is built around the property and the deal, so many can close in as few as 10 days when the deal and documents are ready.

Cost

Bank loans usually carry lower rates. Hard money costs more because the lender takes on a faster, shorter and often higher-risk loan. Compare the full cost of the project, including what a faster closing can win you, not just the rate.

Property condition

Banks often will not lend on a property that needs major work. Hard money lenders routinely finance distressed properties and can include rehab funds that are released in draws.

Exit plan

A hard money loan is short term. Know how you will pay it off before you close, either by selling the property or by refinancing into a long term loan.

How to decide

Ask three questions: how fast do I need to close, what condition is the property in, and what is my exit? If speed or condition is the problem, hard money is the tool. If neither is, a bank loan may cost less.

Have a deal in mind? Send it to Investor Capital for a clear answer in about 24 hours, or read about our hard money loans.