Can I Get a Hard Money Loan for 100% Financing

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By Luke Babich Updated October 21, 2021


If you’re struggling to come up with capital for a real estate investment, a hard money loan could be your new best friend. Sometimes, you may fund your entire project using a hard money loan, but keep in mind it comes with a price. Find out more in this brief overview.

Can I Get a Hard Money Loan for 100% Financing

Is it possible to get started in real estate investing with no money? The surprising answer is yes!

Real estate can be expensive to buy, whether you’re investing in a two-bedroom home or a multi-family apartment building. But you don’t need a lot of money to flip properties for profit.

If you have little capital, you may be able to use a hard money loan for 100% financing. This breaks down the single biggest barrier to real estate investing so you can move forward to a potentially lucrative career.

Let’s dive into how you can use hard money loans to fund your real estate deals and how much it may cost you.

What’s a Hard Money Loan?

Though often considered a last resort loan, a hard money loan might be your only ticket into real estate investing. By definition, a hard money loan is a short-term loan that’s usually easier and faster to get than a mortgage or other financing.

Rather than the base the loan decision on things like credit score or credit history, the lender’s decision is based on the value of the property you’re financing. The lender takes the property as collateral in case the borrower can’t pay it back, so the lender wants a safe bet that they’ll get their money back if they have to sell the property.

Traditional lenders like banks and credit unions do not offer hard money loans, so investors will need to seek private lenders for the loan. The loans are riskier, which also means they come with a higher interest rate than traditional loans.

The trade off is that the borrower has access to money without the typical loan hurdles. If your credit isn’t perfect or you find a good investment property and need to act fast, a hard money loan could be your best option.

Can you get a hard money loan for 100% financing?

Learn more about hard money loans for investing.

What Properties Will Qualify for 100% Financing?

Real estate investors are prime customers of hard money lenders, especially those that are new to the career. It’s tough to get started with no money and paying a little extra in interest could justify the opportunity.

The main thing to remember is that hard money loan decisions are based on the property’s value. As an investor, you need to carefully calculate what your property may be worth once you finish the repairs and upgrades.

That said, the type of property isn’t as much of a concern as its value. If the ARV is more than what you need to purchase the property and fix it up, you could get 100% financing. Let’s look at an example:

Lender X will offer to lend up to 70% of a property’s After Repair Value (ARV). You find a home for $100,000 and think it will have an ARV of $200,000 when you’re finished. The breakdown of your costs are:

Purchase Price: $100,000

Repairs: $24,000

Cost of the Loan: $15,000

You will need $139,000 to flip the property and bring its value up to $200,000. 70% of the ARV will be $140,000, so there’s a good chance you could get 100% financing for the deal (all you need is $139,000).

There are a lot of other figures that factor into a property’s total cost. Don’t forget to account for things like real estate agent fees (buying and selling), real estate transfer taxes, homeowners insurance, and other expenses that will affect your bottom line.

How Much Does a Hard Money Loan Cost?

The biggest downside of using a hard money loan is the higher interest. Where a typical mortgage might cost you 3%-5%, a hard money loan can reach into a double digit rate. As of January 2019, interest rates for hard money loans range from 7.5% up to 15% or more.

The convenience and speed of the loan comes at a high cost, so make sure you can afford to take on this loan versus other financing options and still make a decent profit.

Let Clever Help You Explore Your Financing Options!

Is a hard money loan your best bet for 100% financing? It’s an expensive way to fund your investment projects, but sometimes it makes sense to pay more.

Real estate investors should explore their options to strike the right balance of getting funding at an affordable price.

Need help getting started? Let Clever be your guide and save you money in the process!

Clever Partner Agents are top-rated, experienced real estate agents that work with real estate investors regularly. If you’re buying a property, working with a Partner Agent may qualify you for Clever Cash Back, which you can put toward your project. And when you’re ready to sell for a profit, Clever can help you boost your return. Our Partner Agents work for a flat-rate commission so you don’t overspend on real estate agent fees.

Connect with Clever today to find a local agent near you and see how you can save money on your investment ventures!

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