How to compare hard money loan offers for a house flip

Published and last reviewed July 24, 2026 · Written and reviewed by the Rehabfolio editorial team.

This guide is for new and growing residential investors comparing short-term, property-secured financing for a house flip. The Rehabfolio editorial team builds and reviews property analysis, financing, estimating, budgeting, draw, document, schedule, expense, and exit workflows in the Rehabfolio product. That product work gives the team first-hand experience tracing a financing assumption from an early deal screen through a project budget and payoff forecast. It does not make the team a lender, broker, attorney, accountant, tax adviser, insurance producer, appraiser, or state regulator.

This is educational information, not a loan recommendation or financial, legal, tax, accounting, insurance, appraisal, construction, or brokerage advice. “Hard money” is a market label, not a single standardized product. State law, licensing, usury rules, remedies, required disclosures, lien documents, entity structure, and consumer or business purpose can change the analysis. Obtain final terms in writing and consult licensed local professionals before committing funds or signing documents.

1. Understand what you are actually comparing

A hard money offer is not simply a rate attached to a loan amount. It is a bundle of promises, conditions, cash movements, deadlines, remedies, and operational rules. One lender may quote a lower rate but charge points on the entire commitment. Another may charge a higher rate only on money actually outstanding. One may reimburse renovation work after inspection. Another may advance part of the budget but require more equity at purchase. Those structures can produce different costs and very different cash pressure.

Start by separating a preliminary quote from a commitment. A conversation, online calculator, or one-page term sheet may be conditional. Identify what still depends on appraisal, title, entity review, experience, credit, liquidity, insurance, scope approval, contractor documents, or a lender committee. Ask which fees are refundable, which survive a denial, and what event makes the lender obligated to close.

Do not assume a flip loan will arrive with the same disclosures as a consumer home mortgage. The current Consumer Financial Protection Bureau regulation on exempt transactions states that credit primarily for a business or commercial purpose is generally exempt from Regulation Z, and organizational credit can be exempt regardless of purpose. The exact classification depends on the facts. A local attorney can explain which federal and state rules apply to your transaction.

Rate, points, and leverage answer different questions

• Interest rate: the stated annual rate applied to the balance defined in the note.
• Points: an upfront charge expressed as a percentage of a defined loan amount.
• Loan-to-cost: the lender's relationship between eligible project cost and financing, using its definitions.
• Loan-to-value: the relationship between financing and a value measure, which may be current value, purchase price, or supported after-repair value.
• Commitment: the maximum amount the lender may make available, often split between purchase funding and a renovation holdback.

A large commitment is not the same as cash available on day one. A high loan-to-cost ratio is not the same as a low cash requirement if fees, reserves, closing costs, and reimbursed draws must come from the borrower. Translate every percentage into a dollar amount and a date.

2. Put every offer on the same project baseline

You cannot compare offers fairly if each lender is using a different project. Freeze one version of the purchase, repair scope, schedule, exit, and reserve plan. Then map each offer onto it.

• Purchase price and acquisition closing date
• Verified acquisition and settlement costs
• Approved renovation scope, budget, contingency, and draw schedule
• Construction start, completion, listing, contract, and exit dates
• Supported as-is value and after-repair value
• Property taxes, insurance, utilities, association charges, and site care
• Sale or refinance costs and a realistic payoff date
• Available cash, minimum operating reserve, and maximum acceptable exposure

Build those inputs before financing changes the story. Use the first investment property analysis guide for the full cost stack, the repair-budget guide for a scope-based construction number, and the holding-cost guide for the acquisition-to-payoff timeline.

Scenario: Luis refuses to compare two different rehabs. Lender North approves a $72,000 cosmetic scope. Lender Harbor conditions its quote on a $96,000 scope that includes roof and electrical work identified during diligence. Luis does not label North cheaper. He first updates both offers to the same $96,000 verified scope. North then reduces its leverage and requests a new review. The comparison becomes slower, but it now describes one property and one plan.

Label the evidence behind every input

• Observed fact: a written term sheet, tax bill, policy quote, title estimate, contractor bid, inspection result, or bank balance.
• Calculation: arithmetic from visible inputs, such as interest on a projected monthly balance.
• Assumption: an unknown future amount or date, such as the second draw date or sale closing.
• Opinion: a reasoned judgment, such as whether a seven-day draw process is workable for the contractor schedule.

Keep these labels visible in your deal analysis. A precise result can still be weak if it is built on an unsupported after-repair value, incomplete scope, or optimistic exit date.

3. Compare net proceeds and maximum cash required

Create a sources-and-uses schedule for each offer. “Loan amount” belongs on the sources side only when the money is actually available for that use and at that time.

List the sources

• Purchase funds sent at closing
• Renovation money advanced at closing
• Renovation holdback available through draws
• Interest reserve or lender-controlled reserve, if any
• Your cash contribution and any permitted partner capital

List the uses

• Purchase price and settlement charges
• Points, lender, broker, document, legal, appraisal, inspection, wire, and servicing charges
• Prepaid interest, tax or insurance escrows, and required reserves
• Renovation invoices paid before the first reimbursement
• Permits, deposits, utilities, insurance, and early holding expenses

Subtract lender-controlled money that cannot pay the closing table. Then calculate the borrower cash needed at closing, after closing, at each draw gap, and in a delay. The useful figure is not only “cash to close.” It is the highest cumulative cash exposure before reimbursements and sale proceeds arrive.

Scenario: Priya finds a $31,000 draw gap. Priya expects to bring $61,000 to acquisition. The lender funds renovation work only after inspection, and the first eligible draw combines demolition, rough plumbing, electrical, and framing. Contractor deposits plus materials require $31,000 before the draw. Priya adds that float to her liquidity test. A term sheet that looked like 90 percent financing is no longer treated as a 10 percent cash plan.

4. Calculate total financing cost in project dollars

The CFPB explains that APR is broader than an interest rate because it can reflect points, broker fees, and other charges. It also cautions that APR should not be the only comparison for loans with different structures. Review the CFPB explanation of rate versus APR as a concept, while remembering that your business-purpose transaction may not require the same consumer disclosures.

For a flip, build a dollar model from the actual documents:

Ask the lender to identify the interest basis. Is interest charged on the initial funded amount, outstanding principal, total commitment, or a minimum balance? When does each draw begin accruing? Is interest simple, compounded, prepaid, withheld, or paid monthly? Is there a minimum number of months, an early payoff fee, or an exit fee tied to principal or sale price?

Points also need a base. Two points on a $300,000 total commitment equal $6,000. Two points on a $210,000 initial advance equal $4,200. The label is identical, but the dollar charge is not.

Tax accounting is separate from underwriting cash flow. Current IRS Publication 551 states that charges for obtaining a business-property loan, including points and origination fees, generally are not added to property basis and may need to be capitalized and deducted over the loan period. Your activity, entity, disposition, loan term, and accounting facts matter. Preserve the closing statement, invoices, note, payoff, and draw ledger for a qualified tax professional.

5. Test the renovation draw process before closing

A workable draw process converts completed construction into available cash without breaking the project schedule. Ask for the draw policy, sample request, inspection checklist, and fee schedule before signing.

1. Funding direction: Does the lender reimburse completed work, advance for the next phase, or pay contractors directly?
2. Evidence: Which invoices, receipts, photos, permits, lien waivers, contractor forms, and inspections are required?
3. Timing: When is a request considered complete, how soon is inspection scheduled, and when are cleared funds released?
4. Line-item rules: Can unused money move between categories? Who approves a change order? What happens if actual cost exceeds the lender's budget?
5. Holdbacks: Does the lender retain a percentage until final completion, lien clearance, certificate, or sale?
6. Disputes: What appeal, cure, or reinspection process applies if work is judged incomplete?

Model the contractor's payment schedule against the lender's reimbursement schedule. A contractor may require a deposit and progress payment before the lender recognizes completed work. Suppliers may require payment before delivery. Inspections can miss weekends or holidays. Keep a construction float that does not consume the reserve for taxes, insurance, utilities, and loan payments.

Track approved budget, committed cost, paid cost, eligible draw amount, requested amount, funded amount, and unresolved difference separately. The budget and expense workflow is designed around those distinctions. Do not mark an invoice funded merely because it was included in a request.

6. Price the maturity date, extension path, and closing delay

The maturity date is not a renovation target. It is the contractual deadline for the debt. Your schedule must include acquisition, permits, construction, inspections, punch work, listing preparation, market exposure, buyer diligence, appraisal, financing, title, and final settlement.

Ask whether an extension is a borrower right, a lender option, or a new approval. Identify the notice deadline, conditions, documentation, fee, new rate, extension length, and whether the loan must be current with no default. A term sheet that says “extensions available” is not the same as a signed extension option.

Run at least three cases:

• Base case: the supported schedule, not the fastest possible schedule.
• Downside case: a specific permit, construction, inspection, appraisal, buyer, or title delay.
• Severe but survivable case: enough delay or cost pressure to test reserves, maturity, and the alternate exit.

Calculate the additional interest, property carrying costs, extension fee, legal or inspection charges, and cash reserve used in each case. Connect dates to project management so a delayed inspection or listing task changes the financing forecast.

Scenario: Maya chooses the longer runway. Maya compares a nine-month loan with one point and a twelve-month loan with two points. Her documented base hold is seven months, but the property needs a zoning confirmation and the likely buyer will use financing. The nine-month offer is cheaper in the base case. Its extension is discretionary and costs $5,000 before added interest. Maya selects the twelve-month offer because the downside case stays inside the original term and inside her cash reserve. That is her project-specific judgment, not a rule that longer or higher-fee loans are always better.

7. Read collateral, guarantees, covenants, and default remedies

The price of credit is only one part of risk. Read the note, mortgage or deed of trust, guaranty, assignment, security agreement, construction agreement, and any broker document together. Terms can interact.

• Which property and entity assets secure the debt?
• Is there a personal guaranty, completion guaranty, payment guaranty, or limited “bad act” guaranty?
• Can the lender cross-collateralize this loan with another property or obligation?
• Which events create default beyond missing a payment?
• What notice and cure periods apply?
• Can the lender stop draws, require additional equity, change control of funds, accelerate the balance, appoint a receiver, or pursue other remedies?
• What insurance, occupancy, construction, reporting, entity, and transfer covenants continue through payoff?

The Federal Trade Commission has warned that business-financing marketing can misstate the amount actually received and obscure collateral or personal guarantees. Its business-financing guidance emphasizes truthful disclosure of funding, cost, payments, collateral, and guarantees. Use that as a due-diligence prompt, not as proof that any particular lender is acceptable.

Scenario: Darnell discovers a second-property risk. Darnell plans to borrow through a project LLC. The draft documents also pledge another rental owned by an affiliated entity and require his personal guaranty. The term sheet mentioned “additional collateral if needed” but did not identify the rental. Darnell pauses, asks local counsel to review the document set, and requests a revised offer limited to the flip property. He compares again only after the collateral description is explicit.

8. Verify the lender, broker, wiring process, and final documents

Investigate who is offering, arranging, funding, servicing, and receiving money. Those roles may belong to different companies. Ask for legal names, physical address, responsible contact, license or registration information when applicable, complaint path, servicing contact, and final wire instructions through a verified channel.

The CFPB directs borrowers to NMLS Consumer Access and state regulators to check whether a mortgage company or professional is authorized where required. NMLS does not contain every license type for every state, and a business-purpose lender's requirements may differ. Ask the relevant state regulator or local counsel which licensing check applies.

The FTC advises businesses not to trust search rankings or unsolicited financing messages, not to provide confidential information before identifying who is receiving it, and not to treat an upfront payment as a guarantee of funding. Read its small-business financing verification guidance. Independently confirm any last-minute wire change using a known phone number. Do not send money from an email instruction alone.

Compare the final documents to the approved term sheet line by line. Check borrower, guarantor, property, principal, rate, default rate, point base, fees, funding split, draw rules, payment dates, maturity, extension, prepayment, exit fee, collateral, insurance, covenants, default, cure, remedies, governing law, and dispute terms. Record every difference and obtain a written resolution before signing.

The U.S. Small Business Administration's lender comparison checklist tells business borrowers to compare rates, terms, fees, prepayment penalties, grace periods, collateral, and when full repayment can be demanded. The page also states that SBA-backed loans cannot be used to flip a house. The checklist is useful here; the program is not presented as flip financing.

9. Work a complete two-offer house flip example

Samira is buying a dated house for $260,000 with a verified $90,000 renovation budget. Her supported base schedule is seven months from acquisition through sale payoff. The numbers below are teaching assumptions, not market rates or recommendations.

The same project facts

Offer Alder

• $297,500 maximum commitment, including $208,000 at acquisition and up to $89,500 of reimbursed renovation funds
• 12 percent annual interest on projected outstanding principal
• 2 points on the full $297,500 commitment, or $5,950
• $1,650 of fixed lender charges and $175 for each of five draws
• 12-month initial term, subject to the final documents

Samira models an average outstanding balance of $244,000 during the seven-month base case. This is a calculation from her expected draw dates, not a lender promise.

Offer Birch

• $280,000 maximum commitment, including $195,000 at acquisition and up to $85,000 of renovation funds
• 13.25 percent annual interest charged on the full commitment under the quoted structure
• 1 point on $280,000, or $2,800
• $2,300 of fixed lender charges and no separate draw fee
• 9-month initial term with a quoted $5,000 extension charge, subject to approval and final documents

Birch has fewer points and no draw fee, but its base financing cost is about $1,187 higher under the stated interest method. Alder is not automatically better. Samira still needs to compare cash required, draw speed, inspection rules, collateral, guarantees, default terms, certainty of closing, and the accuracy of each quote.

Compare the cash peak and downside case

Alder funds more at acquisition but reimburses renovation work after inspection. Samira estimates $52,000 of purchase equity, $12,475 of points and lender plus non-lender closing charges, and a $20,000 early construction float. Her estimated initial and near-term exposure is $84,475 before holding reserves and contingency.

Birch requires $65,000 of purchase equity, $9,600 of points and lender plus non-lender closing charges, $5,000 of renovation cost not included in the commitment, and a $10,000 early construction float. That is $89,600 before holding reserves and contingency.

Then Samira tests a three-month delay. Alder remains within its initial 12-month term and adds roughly $8,925 of interest if the full $297,500 is outstanding for those months. Birch reaches month ten, adding roughly $9,275 of interest plus the quoted $5,000 extension charge if the lender approves it. Property taxes, insurance, utilities, maintenance, and sale effects must be added to both using the holding-cost model.

Decision record. Alder is cheaper and uses less initial cash in these modeled cases. Samira's opinion is that its five-to-seven-day draw process is workable only if her contractor accepts the payment sequence and she keeps a separate construction float. She does not select it until counsel reviews the guaranty and the lender confirms the point base, draw timing, and 12-month maturity in final documents.

10. Use a repeatable hard money comparison workflow

1. Freeze one verified purchase, scope, budget, schedule, value, exit, and reserve baseline.
2. Collect written term sheets, fee schedules, draw policies, sample documents, and outstanding conditions.
3. Normalize every defined term, especially loan amount, commitment, point base, interest basis, and eligible cost.
4. Build sources and uses for closing, renovation, holding, and payoff.
5. Calculate base-case interest, points, fixed charges, draw fees, and other triggered costs in dollars.
6. Find the maximum cumulative cash exposure before reimbursements and exit proceeds.
7. Map contractor billing to inspection, draw-request, and funding dates.
8. Run base, downside, and severe but survivable maturity cases.
9. Review collateral, guarantees, covenants, default, cure, remedies, and extension rights with qualified local counsel.
10. Verify licensing or registration where applicable, legal identity, contacts, servicing, and wire instructions.
11. Reconcile final documents to the selected written terms before signing.
12. After closing, replace assumptions with actual draws, payments, expenses, schedule dates, and payoff figures.

Use the maximum-offer guide to keep financing inside the complete deal rather than treating borrowed money as a discount. If software or a provider-neutral AI assistant extracts terms or calculates scenarios, preserve the source page, formula, and human approval. The responsible AI underwriting guide explains why generated summaries should never replace signed documents or professional review.

The strongest comparison is auditable. Another person should be able to see which figures came from a lender, which came from the property, which were calculated, which remain assumptions, and why the selected risk fits the investor's available cash and project plan.