Glossary › Glossary
The loan term is how long you have before a hard money loan matures — the date by which the full outstanding balance must be repaid or refinanced. Standard hard money loan terms are 12 to 18 months. At maturity, the loan does not simply continue — you must pay it off, refinance into permanent financing, or request a formal extension from the lender.
Hard money loans are short-term bridge financing. They are designed to carry a project from acquisition through completion and exit — not to serve as long-term financing. The loan term defines the window you have to execute your business plan.
For fix and flip investors, the term needs to cover the time from closing through renovation completion, listing, and sale. For ground-up construction, the term needs to cover the full build timeline plus enough runway to stabilize or sell before maturity.
When the term ends, the clock stops. The lender is owed the full outstanding principal. If you have not exited or refinanced by then, you are in default — and default triggers penalty interest, fees, and potentially foreclosure proceedings.
Different project types typically have different standard term ranges:
Fix and Flip: 12 months is the most common standard term. Some lenders offer 6-month terms for quick flips, and 18-month terms for larger or more complex rehabs.
Ground-Up Construction: 12-24 months depending on the scope of the build. Custom home builders on spec projects often need 18 months or more.
Bridge Loans: 6-24 months depending on the purpose — stabilizing a property, bridging to a permanent loan, or carrying an asset through a market event.
DSCR and Rental Loans: These are typically 30-year terms (or sometimes 5/1 or 7/1 ARMs), not short-term hard money.
Before signing a term sheet, you need to stress-test the term against your project timeline.
For fix and flip: Add up realistic timelines for each phase — permitting (if required), demo, rough work, inspections, finish work, professional photos, days on market, and closing. Then add 30-60 days of buffer. If that total exceeds the loan term, you are taking on execution risk that a single delay could cause a default.
For construction: Get your general contractor's honest timeline — not the optimistic one. Factor in inspection delays, material lead times, and weather. Then check whether the lender's term actually covers that realistic timeline.
Key questions to ask the lender:
At loan maturity, you have three paths:
1. Pay off the loan. If you have sold the property or have cash available, you pay the outstanding principal plus any accrued interest or fees and the loan is closed.
2. Refinance. If the project is complete but you are not ready to sell (or you are converting to a rental), you refinance into a DSCR loan or conventional mortgage. The hard money lender gets paid off from the proceeds of the new loan.
3. Request an extension. If the project is not complete or the property has not sold, you can request an extension from the lender. Extensions are not guaranteed — the lender must agree — and they come at a cost. See extension terms for how extensions are typically structured.
If none of these happen and you do not pay at maturity, the loan goes into default. Lenders vary in how quickly they move after default, but penalty interest typically begins immediately and the lender's remedies — including foreclosure — become available.
One detail many borrowers miss: the loan term defines when the loan is due, but interest accrual depends on the loan structure.
Some hard money loans charge interest on the full committed amount from day one — even if construction draws have not been taken yet. Others charge interest only on outstanding drawn balances, with interest accruing on new draw amounts as they are released.
For construction and rehab loans with draw schedules, interest-on-drawn-balance structures are significantly less expensive than full-balance interest. Confirm which structure applies before you close, because the difference in total interest cost over a 12-18 month term can be material.
Know the terms, then check a real deal. Verify your email and receive 5 free Credits for a residential lender search or one quote-request batch to as many as four lenders. No card required.
Try It Free →