"Hard money" and "fix and flip loan" get used interchangeably by most investors, but they're not the same thing. Knowing the difference saves you money and helps you choose the right product for the right deal.
What Is a Hard Money Loan?
Hard money refers to the source of capital — private investors or funds, not banks. The loan is secured by the asset (the real estate), not the borrower's creditworthiness. Hard money loans are short-term, asset-based, and move fast. They're called 'hard' because the loan is backed by hard assets, not soft factors like income or employment.
What Is a Fix & Flip Loan?
A fix & flip loan is a specific product designed for investors buying, renovating, and reselling a property. It includes a rehab budget component — meaning the lender funds not just the acquisition but also the renovation draws as work is completed. Most fix & flip loans are hard money loans, but not all hard money loans are fix & flip loans.
Key Structural Differences
Fix & flip loans disburse rehab funds in draws, verified by inspection at each milestone. Hard money bridge loans (non-rehab) fund the full amount at close — no draw schedule needed. If you're buying a turnkey rental with no renovation work, a hard money bridge loan is cleaner. If you're buying distressed and renovating, you want the draw structure of a fix & flip loan.
Which Is More Expensive?
Fix & flip loans carry slightly higher rates (9–12%) than pure bridge loans (8.5–10.5%) because of the added complexity of managing draw disbursements and inspection fees. However, the total cost of capital depends on your hold time. A 10% fix & flip loan held for 5 months costs far less than a 9% bridge loan held for 12 months.
Rule of thumb: 6-month flip = fix & flip product. Buy-and-hold acquisition bridge = hard money bridge. Don't use a draw product if you don't need rehab funds — you'll pay for infrastructure you're not using.
