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How Can a Hard Money Loan Help with Home Renovation

by Vinisius Jr

Renovations are an excellent way to boost your property’s value, curb appeal, and attract newer tenants. However, it can be expensive to fund when considering major remodeling, like adding a pool to your property, changing your flooring, or opting for more contemporary kitchen cabinets.

Savvy investors can finance these necessary changes in several ways, including taking a personal mortgage. But how can a hard money loan help with home renovations? What are the requirements to qualify? This article has got you covered. Read till the end of this post to get all these answers and more. Let’s get started:

What is a Hard Money Loan

A hard money loan is an equity-oriented loan secured against the property the borrower wants to purchase. Traditional lending institutions like banks don’t offer customers these loans, so investors looking to harness this financing option must seek qualified and reputable private lenders. If you need professional assistance, hard money lenders in Baltimore can guide you on financing your renovation to maximize ROI

Requirements of a Hard Money Loan

Financial Strength

Although private lenders are often more than willing to foot your total renovation costs or provide up to 85% capital to purchase a new property, they still need to evaluate your financial strength before proceeding. This measure helps them assess your repayment capacity, which is the borrower’s ability to cover monthly loan installments, taxes, fees, or insurance premiums. As a result, you’ll have to back your financial strength with evidence of a monetary resource that can cover these expenses.

Credit Score 

While traditional loans are more likely to give you a rejection when your credit score is too low, private lenders are a lot more lenient. However, that doesn’t mean they’re ready to risk their neck for investors with abysmal scores. Getting approval for any loan will be challenging if you have a credit history riddled with debts and bankruptcy. Instead of lowering your credit score with another rejection, pay your bills on time and clear your debts before applying. Also, research tips in choosing a hard money lender to find which ones have the best rates for people with bad credit.

Real Estate Experience

Private lenders also make decisions based on the borrower’s real estate experience. Making a rental or fix-and-flip profitable in the typically short loan time frame requires much knowledge. Thus, it might be hard to get approval if you have limited experience with such a project or no feasible exit strategy.

How Can a Hard Money Loan Help with Home Renovation?

You Can Complete Your Renovation Faster

One of the primary advantages of hard money loans is that they have a fast approval time. Conventional loans can take several days or weeks, while you could close a hard money loan and get your funds within 3 – 5 days. Thus, that speed can help you get started on your projects, complete them in good time, and list them ahead of the competition.

It’ll Cover the Entire Cost

A significant drawback to other loaning options is that they often cover only a percentage of the loan. If you’re an investor with limited funds, this arrangement might not work for you, especially when undertaking an expensive project. Hard money loans resolve this issue by allowing homeowners to take out 100% of their total renovation costs. This feature can prevent delays and enable you to continue your project as planned.

You Don’t Have to Worry About Your Credit Score

Another benefit of opting for a hard money loan is that you don’t have to worry about your credit score. On the other hand, traditional loans significantly emphasize vetting your credit history and are more likely only to accept your application if it meets their high standards. Ironically, a rejection could further tank your credit ratings, leaving you worse off than you started. But hard money loans are more concerned about the collateral you have to offer, and as long as your scores aren’t terrible, approval is almost 100% certain.

You Have More Flexibility

Finally, hard money loans offer investors more flexibility with their renovations. Since strict regulations don’t bind private lenders, you can easily negotiate a better payment structure, rate, or down payment. Besides getting a better deal on the loan terms, you can also choose to spend the money on unconventional properties. For example, if you decide to fix up a boarding house for immigrants or an eccentric toy-story-themed AirBnB, you won’t have a problem. You’re good to go as long as you can show your lender you have enough equity.


Hard money loans are an excellent way to fund your renovations because they are quick, offer more flexibility, and can support the entire cost. However, to get approval, consider that private lenders will assess your credit score, financial strength, and real estate experience. If you need help choosing the right remodeling project to maximize ROI or selecting the right lender, consult an expert property manager who can help.

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