Hard Money Construction Loans
Ground-up residential construction financing for real estate investors. Draw-based funding, fast closings and flexible exits. We connect investors with hard money construction lenders in our network so you can break ground without waiting on a bank.
Loan Parameters
Construction loan at a glance
Programs vary by capital source. Final terms disclosed at offer.
What is a hard money construction loan?
A hard money construction loan is a hard money loan, one of the short-term loans real estate investors use for asset-based financing that funds the ground-up build of a new residential property. Unlike a traditional bank construction loan, which requires extensive income documentation and can take months to close, this type of loan program is underwritten primarily on the projected value of the property once complete and the borrower's total project cost. The private lenders in our network move in 10 to 21 days, which lets investors active in real estate investing secure a lot and start construction without the delays associated with traditional lenders.
The loan is structured as a short-term mortgage, typically 12 to 24 months, with the full construction budget held in a controlled escrow account. Funds are not disbursed in a lump sum the way they are on most traditional loans. Instead, the borrower draws money in stages as construction milestones are completed and verified by a third-party inspector. This draw schedule protects both the private lender and the borrower by tying fund releases to real, verified progress on the new construction project. The budget itself is typically split into hard costs (labor, materials, site work and utilities) and soft costs (permits, architectural plans, builder's risk insurance and financing fees), and both categories need to be accounted for before the loan closes.
Hard money loans for construction are designed for real estate investors, not owner-occupants. They carry higher interest rates than a conventional loan from a bank because the private lender is taking on construction risk in addition to credit risk. The trade-off is speed, flexibility and qualification criteria focused on the deal and the value of the property rather than the borrower's personal income. Buckle Up Capital does not lend directly. We help investors get funded by connecting them with private lending sources through our network of hard money lenders that specialize in residential new construction.
How hard money construction loans work
Loan closes on the land or lot. The full construction budget is held in a controlled escrow account, not disbursed upfront. You draw funds as each phase of the build is completed.
Your contractor completes a phase of work (foundation, framing, rough mechanicals, etc.) and submits a draw request with supporting invoices.
A third-party inspector visits the site and verifies that the completed work matches the draw request. This protects the lender and keeps your contractor accountable.
Once the inspection clears, funds are released to the borrower or directly to the contractor within a few business days. The cycle repeats for each phase.
At project completion, the loan exits via a sale of the finished home or a refinance into a longer-term mortgage such as a DSCR loan.
Interest on a hard money construction loan typically accrues only on the drawn balance, not the full committed loan amount. This is one of the features of private lending that sets this loan program apart from a traditional mortgage, where interest usually accrues on the full balance from day one. Your interest cost in the early months of construction, when only the land and foundation work have been funded, is lower than it will be at project completion when the full budget is drawn. Understanding this structure helps investors model accurate carrying costs before they commit to a construction project.
The construction budget must be detailed and itemized before the loan closes. Lenders in our network require a line-item budget covering every phase of the build, along with proof that permits are in hand or in process. A change order mid-construction is possible but requires lender approval and an updated draw schedule, so keep site work, utilities and material costs realistic from the start. Building in a contingency reserve of 10 to 15 percent of the hard construction cost is standard practice and something we recommend to every borrower before submitting a file.
New construction loan programs
Ground-up construction loans
Finance the full cost of building a new residential home from scratch on a lot you already own or are purchasing simultaneously. The loan covers land (in some programs) plus hard construction costs. Ideal for investors who have secured a buildable lot and are ready to break ground.
Spec home construction financing
Build a speculative home without a signed buyer in place. The private lenders in our network that fund this hard money loan program understand the spec home build model and underwrite based on the projected completed value (after-repair value) of the finished property rather than requiring a presale contract. Spec builders and general contractors both use this new construction loans program to keep a pipeline of builds moving.
Tear-down and rebuild financing
Purchase a distressed or obsolete property, demolish it, and construct a new home in its place. The financing covers acquisition plus construction costs in a single loan. Common in infill markets where land is scarce and existing structures are past useful life.
Lot and construction combination loans
Some programs allow simultaneous vacant lot or raw land acquisition and construction financing in a single closing. Rather than purchasing the lot with cash and then applying for a separate construction loan, investors can close both in one transaction and reduce carry costs during site preparation.
What you need to qualify
Hard money loan qualification for a construction project is driven by the deal, not your tax returns, which is why this financing is a cornerstone of real estate investment for builders who want to move fast. Private lenders in our network focus on three numbers: the total project cost (land plus construction budget), the loan-to-cost ratio, and the projected value of the property once the home is complete. Your credit score matters, but a strong deal at 65 percent of completed value can often move forward even when the borrower's profile is not perfect, which is a sharp contrast to how a conventional loan is underwritten.
Experience counts. Borrowers who have completed prior residential construction projects get better rates and higher leverage. First-time builders can still qualify, typically with a larger down payment or a more experienced co-borrower or guarantor. We help you position the file before it reaches a private lender so that experience gaps do not kill a fundable deal.
Unlike a conventional loan or traditional bank loans for construction, most hard money lenders in our network do not require income verification, W-2s or tax returns. The value of the property and the project secures the loan. A detailed construction budget, a licensed contractor and a realistic exit strategy are the three most important things you bring to the table.
Credit Score
620 minimum. Stronger rates available above 680.
Down Payment
15 to 25% of total project cost (land plus construction budget).
Completed Value LTV
Hard money lenders typically lend up to 70% of the after-repair value of the finished home.
Construction Budget
Detailed scope of work and itemized budget required before closing.
Contractor Approval
Licensed general contractor with residential experience. First-time builders accepted on some programs with a stronger sponsor.
Builder's Risk Insurance
Active builder's risk policy covering the property during construction, required at closing and through project completion.
Reserves
3 to 6 months of interest payments held in reserve at closing.
Experience
Prior residential construction experience preferred. First-time builders can qualify with a larger down payment or experienced co-borrower.
Entity
LLC or corporation preferred. Most hard money construction lenders require a business entity borrower.
Interest rates and loan terms
Hard money loan rates on a construction project start around 9.99 to 12 percent as of the current market. Rates are higher than traditional loans for the same reason that all private money carries a premium: the private lender closes faster, asks fewer income questions and takes on a construction project in which the collateral is not yet built. Borrowers pay for that flexibility in the rate compared with traditional bank loans.
Loan terms run 12 to 24 months, which covers the construction phase and gives the borrower a runway to either sell the finished home or arrange a refinance. Many private lenders that fund hard money construction loans also charge origination points of 1 to 3 percent of the loan amount, which affects your total cost of capital and should be factored into your deal model alongside monthly interest payments.
The most important number is not the rate in isolation. It is the total cost of the loan relative to the profit margin on the finished home. A construction project with a strong margin can absorb a 11 percent hard money rate and still produce a solid return. We run your deal through multiple lenders in our network to find the most competitive combination of rate, leverage and construction expertise for your specific project.
Rate Factors
What moves your construction loan rate
Rates are indicative and subject to market conditions. Final rate disclosed at term sheet.
Hard money vs conventional construction loans
A conventional loan for construction from a bank or credit union requires full personal income documentation, a strong debt-to-income ratio and often a presale or builder approval process that can take 30 to 90 days or longer. Traditional lenders also tend to fund only experienced builders with a track record on the specific property type they are financing, and traditional bank loans generally price off the borrower's income and credit rather than the deal itself. For a real estate investor trying to move quickly on a lot or scale a construction pipeline, those timelines create serious competitive disadvantages.
A hard money loan for construction trades a lower interest rate for speed and flexibility. Where traditional lenders focus on income and credit, the private lenders in our network focus on the value of the property and the strength of the project itself. They close in 10 to 21 days, accept first-time builders on some programs, and work with investors purchasing in an LLC. For an investor who found a well-priced lot and wants to control the timeline, the rate premium on a hard money loan is often the right tradeoff given the profit opportunity on the finished home, and it is one of the main reasons this financing helps investors move faster than a bank ever could.
A traditional mortgage or conventional construction loan also typically requires the borrower to own the lot free and clear before applying for financing. Many private lending programs in our network allow a simultaneous land acquisition and construction closing, which lets the investor finance the entire project cost in a single transaction rather than tying up personal capital in a lot purchase and then waiting on traditional loans and a separate construction draw process to open.
Sell or refinance: your exit options
Every hard money construction loan needs a clear exit strategy before it closes. Private lenders in our network expect to see a plan for how the short-term financing on a new construction project will be repaid. The two standard exits for residential new construction investors are selling the finished home and refinancing into a long-term mortgage.
Selling the finished home is the most common exit for spec builders. The loan is repaid at closing from the sale proceeds. The margin between the total project cost (land, construction, financing costs and closing costs) and the final sale price is the investor's return. A realistic pre-construction market analysis that supports the projected sale price is something we help you build before the deal is submitted to a lender.
Refinancing into a long-term rental mortgage is the right exit for investors who want to hold the completed home as a rental. The most straightforward refinance path is a DSCR loan because it qualifies on the rental income the property generates rather than on the borrower's personal income or tax returns. Investors building in markets with strong rental demand can lease the finished home, then refinance the hard money construction loan into a 30-year DSCR mortgage. Colorado investors may also find our Colorado DSCR loans guide useful for understanding the refinance path after construction.
Working on a commercial construction project rather than a residential new build? See our commercial construction loans page for ground-up and renovation financing on income-producing commercial properties.
Hard money construction loan questions
All loans facilitated by Buckle Up Capital are for business and commercial purpose only. Buckle Up Capital is a broker, not a lender. Loans are placed with lenders in our network. Rates and terms vary by capital source and are not a commitment to lend.
Ready to fund your next new build?
Submit your construction project and we will match it with hard money construction lenders in our network. No credit pull. No commitment. Term sheet in 24 to 48 hours.