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Hard money interest rates typically range from 9-13%+ annually. Where your rate lands within that range — or above it — depends on specific factors: your borrower profile, the deal characteristics, the lender's programs, and current market conditions. Understanding what drives the rate tells you where you have leverage and where you do not.
Hard money lenders charge more than banks and conventional mortgage lenders for real reasons:
Speed premium: Hard money lenders close in 7-21 days. Banks take 30-60 days or more. The operational infrastructure to close this fast costs money.
Risk premium: Hard money funds deals conventional lenders will not — distressed properties, borrowers without W-2 income, renovation projects with uncertain outcomes. Higher risk warrants higher return.
Short-term capital deployment: Hard money lenders pay more to source capital than banks because they are raising non-bank private capital. Those costs flow through to the borrower rate.
Lender return expectations: Hard money lenders are private capital businesses with return requirements higher than deposit-funded banks.
The rates are what they are. The relevant question is whether the deal still works at those rates — not whether the rate is objectively high.
Borrower experience: Lenders price inexperience as risk. An investor with 10 completed deals gets a better rate than one with 0. Experience demonstrates execution ability and reduces the lender's risk of a failed project.
Credit score: Higher FICO scores unlock better programs at most lenders. A 720 credit score versus a 640 is a meaningful difference in rate at many lenders.
Lower LTC: Borrowers who bring more equity to the deal — and therefore ask for a smaller percentage of the project cost — represent lower risk. Lower risk = lower rate. If you are funding 70% LTC versus 90% LTC, you are likely to see a rate difference.
Loan size: Larger loans often come with modestly lower rates because the lender's fixed overhead cost per deal is spread over a larger balance. A $600,000 loan may price slightly better than a $150,000 loan with the same borrower.
Repeat borrower status: Lenders who know you from prior deals have empirical evidence of your execution. That evidence justifies better terms. First deals are always priced higher than the fifth deal with the same lender.
Strong deal quality: A deal with an extremely conservative ARV, high equity cushion, and a liquid, experienced borrower is lower risk than the same borrower on a thin-margin deal. Lenders do factor deal quality into pricing.
First-time or limited-experience borrower: No track record = more uncertainty = higher rate.
Low credit score: A 620 FICO is at or near the floor for most lenders. Borrowers near the minimum pay more for it.
High LTC: Asking for 90% LTC is asking the lender to take more risk. More risk = higher rate, or a hard cap on leverage rather than a rate adjustment.
Complex property type: Multifamily, mixed-use, and commercial properties are riskier underwriting situations than single-family residential. Rates reflect this.
Small loan size: Smaller loans require the same operational overhead as larger ones. Lenders make less on them and may price the rate higher to compensate.
Difficult geography: States with judicial foreclosure, limited liquidity, or low lender activity are priced higher because the collateral is harder to recover in a default scenario.
Market conditions: When capital is tight, rates go up. When capital is abundant, competition among lenders drives rates down. The rate environment is not constant.
Rate is one input in total financing cost — not the only one. A lender offering 10% with 3 points on a Dutch interest structure may cost more in total than a lender offering 11% with 1.5 points on a full-boat interest structure, depending on the loan size and hold period.
Model the total cost: interest paid over the projected hold period plus points plus draw fees plus any other charges. Compare total cost, not rate alone.
On a short-term deal — 6 months, $300,000 loan — a 1% rate difference is approximately $1,500. A 1-point difference in origination is $3,000. On a deal with $50,000+ of projected profit, neither is the deciding variable. Speed, reliability, and getting to the closing table matter more than being 50 basis points below market.
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