What is a hard money loan?
A hard money loan is short-term, asset-based real estate financing. The lender underwrites primarily to the property — its current value, its projected after-repair value (ARV), and your plan for the asset — rather than to your personal income, debt-to-income ratio, or credit score. Loans are typically 6 to 18 months, secured by a first-position deed of trust, and structured as business-purpose lending on non-owner-occupied real estate.
Hard money trades cost for speed and flexibility. You will pay materially more than conventional financing, but you can close in a week or two on properties that no conventional lender will touch.
When hard money makes sense
Hard money is a tool, not a strategy. It works in specific situations:
- Fix and flip. Buy distressed, renovate, sell within 6–12 months. The interest cost is just another line item in the project budget.
- BRRRR seasoning. Acquire and renovate, place a tenant, then refinance to long-term conventional or DSCR debt after the seasoning period. See our BRRRR strategy guide for the full play.
- Rapid acquisition. A deal needs to close in 10 days and conventional financing cannot get there. Hard money buys the deal, then you refinance.
- Properties no bank will lend on. Severe deferred maintenance, partial demos, non-warrantable condos, properties without a CO — conventional underwriting will reject these. Hard money will lend on them.
It does not make sense for a long-term hold strategy where the math does not work at hard money rates. It does not make sense for a marginal deal where the only way the numbers pencil is if the rehab and refinance go perfectly. Build margin for things going sideways.
Typical Colorado hard money terms
Pricing varies by lender, by deal quality, and by market cycle, but the typical Colorado range for an investor-quality fix-and-flip or BRRRR loan looks roughly like this (rates and terms as of 2026):
| Term | Typical Colorado range |
|---|---|
| Interest rate | 9% – 14% |
| Origination points | 2 – 4 points |
| Loan-to-cost (LTC) | up to 85–90% of purchase + rehab |
| Loan-to-ARV | typically capped at 65–75% of ARV |
| Term length | 6 – 18 months |
| Prepayment penalty | varies — some none, some 1–3 months of interest |
| Appraisal / BPO fee | $500 – $1,200 |
| Doc / processing fee | $500 – $1,500 |
Most Colorado hard money loans are interest-only with a balloon at maturity. Some lenders will hold back rehab funds in draws against permit milestones or inspection sign-offs — budget the carry on those draws, since interest accrues from the day the draw funds.
Hard money vs. conventional vs. DSCR
Each financing tool has a use case. Pick the wrong one and the deal becomes harder than it needed to be.
| Feature | Hard money | Conventional | DSCR |
|---|---|---|---|
| Underwriting basis | Property + ARV | Borrower income + DTI | Property cash flow |
| Typical rate (current Colorado market) | 9% – 14% | Investor 30yr fixed at market | Investor 30yr at slight premium |
| Points | 2 – 4 | 0 – 1 | 0.5 – 2 |
| Close time | 7 – 14 days | 30 – 45 days | 21 – 35 days |
| Loan term | 6 – 18 months | 15 / 20 / 30 years | 30 years (often) |
| Best for | Acquisition + rehab | Long-term hold, qualifying borrower | Long-term hold, qualifying property |
| Property condition tolerance | Very high | Move-in ready required | Generally rent-ready |
The most common BRRRR play in Colorado uses hard money to acquire and rehab, then DSCR to refinance once the property is leased and seasoned. Hard money covers the messy middle; DSCR delivers long-term stability.
What hard money lenders look at
Hard money is asset-based, but that does not mean lenders rubber-stamp deals. They are concerned with three things:
- The property. Current as-is value, projected ARV, location, condition, and exit-market liquidity. Lenders will pull comps and order an appraisal or BPO.
- The exit strategy. How are you paying them back at maturity? Sale at retail? Refinance to a DSCR loan? They want a credible, written exit plan.
- The borrower’s skin in the game. Cash-to-close at signing, rehab reserves, and experience. Most lenders want at least 10–15% of total project cost in actual cash from the borrower — not a second mortgage.
Credit score and income matter less than they do for conventional, but they are not ignored. A 580 FICO and no investment track record will get worse pricing than a 720 FICO with three closed flips under the same lender.
How to vet a Colorado hard money lender
Hard money is a lightly regulated corner of finance compared to conventional mortgage lending. The market is full of legitimate operators and a smaller number of bad actors. A few minutes of diligence pays for itself.
- Licensing. Check the lender against the Colorado Division of Real Estate (within the Department of Regulatory Agencies, “DORA”) for mortgage company and originator licensing. Business-purpose loans on non-owner-occupied property have different licensing rules than consumer loans, but a real lender will be licensed somewhere relevant.
- BBB and online reviews. Not perfect signal, but useful. Multiple recent complaints with consistent themes (fee surprises, draw delays, foreclosure-happy behavior) is a meaningful negative.
- References from active borrowers. Ask for two or three current borrowers you can call. A real lender will provide them.
- Term sheet transparency. Get the full fee schedule in writing before paying any application or appraisal fee. Hidden “closing administration” or “loan servicing setup” line items that appear at closing are a warning.
- Prepayment terms. Read the prepayment clause carefully. A flip that closes in 4 months should not get hit with a 6-month interest penalty.
- Default / cure provisions. Understand exactly what triggers default, how long the cure period is, and what the lender’s remedies look like. Colorado deeds of trust foreclose through the public trustee and the timeline can be fast.
Red flags
If you see any of these, walk away
- Demands for large upfront fees ($2K+) before a term sheet is signed.
- Refusal to provide a clear fee schedule or to put fees in writing.
- No skin-in-the-game requirement (lender is willing to fund 100% on a borrower with no track record — usually a setup for predatory terms).
- Vague exit-strategy review (lender doesn’t care how you pay them back).
- Pressure to close in 48 hours without time to review documents.
- Verbal-only term changes between term sheet and final docs.
- No clear company address, no phone, or principal whose name you can’t find anywhere online.
Refinancing out of hard money
The single biggest risk on a hard money loan is the exit. Plan it before you sign.
- Sale exit (flip). Time the rehab so the listing hits the market with 3–6 months of loan term remaining. If the property doesn’t sell in that window, you need a fallback — usually a DSCR refinance to convert the flip into a rental.
- Refinance exit (BRRRR). Get a pre-approval from your takeout lender (DSCR, portfolio bank, or conventional) before closing the hard money loan. Confirm the seasoning requirement and that the borrower profile will qualify at takeout.
- Extension. Most Colorado hard money lenders will extend 1–6 months for additional points and fees. It is expensive but it is an option.
If the refinance is going to be tight, talk to the hard money lender early. A good lender would rather extend on workable terms than foreclose.
Colorado-specific notes
A few Colorado quirks worth knowing:
- No statutory usury cap on commercial real-estate loans. Colorado does not impose a general usury cap on commercial or business-purpose loans, so hard money pricing is whatever the market bears. Consumer loans on owner-occupied property are a different regulatory animal.
- Public-trustee foreclosure. Colorado uses a public-trustee deed-of-trust foreclosure process that is generally faster than judicial foreclosure states. Hard money lenders know this. Read the deed-of-trust carefully before signing.
- Business-purpose lending. Most hard money in Colorado is structured as business-purpose lending and is therefore not subject to the federal Truth in Lending Act (TILA) or RESPA. Disclosures look different than on a primary-residence mortgage. That is normal for the asset class, but it means you don’t get the same consumer protections.
- Title insurance and lender requirements. Colorado is a deed-of-trust state and uses public-trustee foreclosure; lenders will require an ALTA loan policy and most will require a separate inspection or BPO from their list of approved vendors.
Related reading
- The BRRRR Strategy in Colorado
- How to Evaluate Investment Properties
- Join the Buyers List
- How EZ Investments works for sellers
Frequently asked questions
What credit score do hard money lenders require in Colorado?
Hard money is fundamentally asset-based, not credit-based. Many Colorado hard money lenders will lend with credit scores well below conventional thresholds — some have no minimum, others use 600 or 620 as a floor. They care more about the property’s value, your exit strategy, and your skin in the game than your FICO. That said, better credit can earn slightly better rates with some lenders.
Can I get hard money for a primary residence?
Generally no, and you usually do not want to. Most Colorado hard money lenders only lend on business-purpose, non-owner-occupied real estate. Owner-occupied consumer loans trigger federal and state consumer-protection rules (TILA, RESPA, Colorado state lending licensing) that hard money lenders typically are not set up to comply with. If you need short-term financing on a primary residence, look at a HELOC or a bridge loan from a conventional lender.
How fast can a hard money loan close?
Often 7 to 14 days from application to funding, sometimes faster on a repeat deal with the same lender. Speed is the core value proposition of hard money. The bottleneck is typically the appraisal or BPO, title clearance, and insurance — not the underwriting itself.
Do hard money lenders need an appraisal?
Most do, in some form. Smaller and faster lenders may use a broker price opinion (BPO) or an interior inspection by their own scope team rather than a full appraisal. Larger lenders that sell loans to capital partners typically require a full appraisal. The cost runs roughly $500 to $1,200 and is paid by the borrower at closing.
What happens if I cannot refinance out of a hard money loan?
Options narrow fast. You can ask for an extension (usually 1 to 6 months at additional points and fees), sell the property, refinance to a DSCR or portfolio lender even at unfavorable terms, or as a last resort hand the keys back. Plan the exit before you take the loan — confirm refinance eligibility with a takeout lender before closing the hard money loan.