Hard Money vs Construction/Rehab Loan

[Kevin Alvarado]

Hey everyone,

I have my builder and lot ready. Permits and plans are in review. I am browsing for a loan to get the financing side of this project taken care of.

I am wondering which one of the two loans (hard money vs construction/rehab) would be recommended and what are the differences? 


How does a construction/rehab of 9.9% with 2.5 points sound? I received an offer but am unsure if I am making the right move by going forward with this type of loan. I don’t know if they are basically similar. This is not from a bank, this is from a broker.

Thank you! Any opinions appreciative.

[Erik Estrada]

Quote from @Kevin Alvarado:

Hey everyone,

I have my builder and lot ready. Permits and plans are in review. I am browsing for a loan to get the financing side of this project taken care of.

I am wondering which one of the two loans (hard money vs construction/rehab) would be recommended and what are the differences? 


How does a construction/rehab of 9.9% with 2.5 points sound? I received an offer but am unsure if I am making the right move by going forward with this type of loan. I don’t know if they are basically similar. This is not from a bank, this is from a broker.

Thank you! Any opinions appreciative.

 If you are building on an empty lot, you would need to do a ground up construction loan. 

If there is a structure on the lot and it needs rehab work, then you may look into hard money financing. 

The main difference between the two is leverage and experience requirements. 

On a ground up you may do up to 75% of the land value or purchase price, whichever is lower, and have 100% of the construction held back. The max Loan to ARV is around 70%.

You must have prior ground up experience to qualify in most cases. 

On a hard money loan, most lenders can do up to 90% of the purchase, 100% of the rehab financed. The max loan to ARV is 75%

You do not need to be experienced to qualify, however there will be an LTV reduction