Hard Money vs. Conventional Loan for House Flipping

The Core Trade-Off

Factor	Hard Money	Conventional
Typical rate	9–13%	6–7.5%
Points at close	1–3 points	0–1 point
Time to close	7–14 days	30–45 days
Lends against	ARV (after-repair value)	As-is appraised value only
Property condition requirements	Flexible — distressed OK	Strict — must meet livability standards
Term length	6–18 months	15–30 years (early payoff usually fine)

The math almost never favors hard money on rate alone. It wins because speed and ARV-based lending let you close on distressed inventory a conventional lender won't touch, and get in and out before the higher rate accumulates much cost.

Financing Cost Calculator

Move the loan amount and holding period sliders to compare both financing costs side by side at your own numbers.

Illustrative only, using 2 points + 11%/yr for hard money and 0.5 points + 7%/yr for conventional. Remember: a distressed or non-livable property may not qualify for conventional financing at all, regardless of cost — see the trade-off table above.

Why Speed and ARV Lending Usually Win

A property that needs a new roof, has no working kitchen, or has code violations typically won't qualify for conventional financing at all — most conventional loans require the home to be habitable and pass an appraisal that assumes as-is condition. Hard money lenders look past that and underwrite against what the property will be worth after your renovation, which is the entire reason distressed inventory is available to flip in the first place.

Timeline matters just as much. A 7-14 day hard money close lets you compete with cash buyers on off-market and probate deals where a 30-45 day conventional contingency would lose the deal before it starts.

When Conventional Financing Actually Makes Sense

The property is already in livable, financeable condition and the "flip" is closer to a light cosmetic refresh than a full rehab.
You have a longer hold timeline in mind — a BRRRR-style buy-rehab-rent-refinance strategy rather than a fast resale.
You have strong reserves and prefer the much lower carrying cost over speed.

Modeling financing costs on your next flip? Run both scenarios in the profit calculator to see the real difference in net proceeds.

Open the Profit Calculator

Frequently Asked Questions

Can you use a conventional loan to flip a house?

Technically yes, but it's rarely practical. Conventional loans take 30-45 days to close, require the property to appraise and often to meet condition standards, and typically restrict how quickly you can resell without triggering owner-occupancy or seasoning issues, depending on the loan type.

Why is hard money so much more expensive?

Hard money lenders take on more risk (distressed properties, fast underwriting, short terms) and lend against the after-repair value rather than just the purchase price, so rates and points run several times higher than conventional financing to compensate for that risk and speed.

Is it better to flip with cash instead of financing?

Cash avoids financing costs entirely and can make your offer more competitive, but it ties up capital in one deal at a time. Many active flippers use hard money specifically to keep cash free for multiple simultaneous deals.

Do hard money lenders check credit?

Most weigh the deal (ARV, rehab scope, exit plan) more heavily than credit score, though some minimum credit and experience requirements are still common, especially for first-time flippers.