What to Expect: A Practical Guide to Hard Money Loan Rates and Fees in California
Hard money loans are short-term, asset-backed loans that deliver fast capital for real estate investors who need speed and flexibility instead of lengthy bank underwriting. This guide explains how California hard money lenders set interest rates and fees, which factors most affect pricing, and how to evaluate total cost and timeline risk for purchase, rehab, and commercial deals. You’ll see typical first- and second-mortgage ranges, line-item closing costs, program differences (purchase, fix & flip, bailout, seconds, commercial, DSCR, and P&L approvals), and clear steps from application to funding. Our aim is practical: give you the numbers and process details so you can model returns and pick the right program for time-sensitive opportunities. We include comparison tables and concise lists so rate, fee, and process trade-offs are easy to scan when planning a deal.
Typical Hard Money Loan Interest Rates in California
Rates for California hard money loans depend on lien position, loan purpose, and loan-to-value. First mortgages generally sit at the lower end of private-lender pricing, while subordinate liens carry higher spreads to reflect added risk. Recent market observations show first-mortgage rates commonly clustering from the high single digits into the low double digits; second liens and bridge positions typically run several points higher. Lenders compress rates for strong ARV-backed flips and increase spreads for riskier bailouts or subordinate positions. The compact table below summarizes these position-based market ranges and common LTV expectations for quick reference.
This table compares market ranges for first and second positions and shows common LTV bands used by private lenders.
| Loan Position | Typical Interest Rate Range | Typical Average LTV |
|---|---|---|
| First mortgage (purchase/bridge) | 8.5% – 12.0% | Up to 65%–75% |
| Second mortgage / subordinate lien | 11.0% – 15.0% | 50%–70% (combined) |
| High-LTV select deals (case-by-case) | 13.0% – 16.0% | Up to 80%–90% combined |
That position-based view shows how lien priority and combined leverage drive pricing: higher combined LTVs and subordinate positions push rates up. Knowing lien order and combined LTV is the first step toward estimating an exact price for a specific asset and exit plan.
Note from Fidelity Funding: the market ranges above align with what private hard money lenders report. Fidelity Funding generally prices first- and second-mortgage loans in line with these dynamics, while focusing on fast approvals and in-house underwriting. Our programs prioritize property equity over borrower credit and offer high-LTV options on select deals — factors that influence the rate a borrower ultimately receives. In short, we compete on speed and flexible structuring rather than on being the lowest-rate lender.
Factors That Influence Hard Money Loan Rates in California
Hard money rates reflect several interacting risk factors: loan-to-value, property type and condition, borrower experience, loan term, and how clear the exit strategy is. Lenders charge more when exits are uncertain or properties are distressed, and they typically lower spreads for experienced investors with repeat business and solid ARV workups. Market volatility and the broader interest-rate environment also affect margin expectations, so identical collateral can carry different rates across cycles. These underwriting levers combine to produce the final offer and explain why two similar loans can have notably different costs.
Which brings us to LTV — one of the most direct pricing levers in hard money underwriting.
How Loan-to-Value Ratios Affect Interest Rates
Loan-to-value (LTV) compares the loan amount to current value or, for rehab deals, after-repair value (ARV). It’s a primary driver of pricing. Lower LTV tiers (for example, <=60% of value) usually land in the lowest rate brackets because the equity cushion reduces loss severity. Mid tiers (60–75%) sit in a middle band, and higher tiers (75%+) push rates up and may trigger stricter covenants. For ARV-based fix-and-flip loans, lenders size the loan to projected ARV and often limit draws until rehab milestones are met, which affects effective cost if the lender requires more oversight. Mapping LTV tiers to expected rates helps investors model financing cost and required margins on rehab projects.
Common Hard Money Loan Fees and Closing Costs in California
Hard money loans combine points, lender fees, and third-party closing costs — together they determine effective cost beyond the headline rate. Lenders typically charge origination points plus underwriting and document-prep fees; title, escrow, recording, appraisal, and wire fees are passed through as third-party costs. Fees may be paid at closing or financed into the loan, and when amortized over a short hold (6–12 months) they can materially raise the effective annual cost. The table below lists typical fee ranges so you can build accurate pro forma financing expenses.
Use this line-item table to anticipate closing expenses and compare lenders apples-to-apples.
| Fee Type | Typical Cost / Range | Notes |
|---|---|---|
| Origination points | 1.0% – 3.5% of loan | Often stated as “points”; negotiable by relationship |
| Underwriting / processing fee | $500 – $3,000 (or 0.25%–1%) | Covers lender review and file prep |
| Appraisal / valuation | $500 – $2,000 | Depends on property type and complexity |
| Title & escrow | $1,000 – $3,500 | Third-party cost; varies by county and price |
| Recording / courier / wire | $50 – $300 | Small third-party items typically passed through |
Origination points and title/escrow items are often the largest upfront costs, so model whether fees are financed or paid out of pocket. That decision significantly affects short-term project economics. Always request a detailed closing cost worksheet to calculate effective cost over your intended hold.
Fees Borrowers Should Expect Beyond Origination Points
Besides origination points, expect appraisal/valuation, title and escrow fees, recording charges, doc-prep or legal fees, underwriting fees, and prepaid interest through the first payment date or sale. Valuation fees rise with commercial or mixed-use complexity; underwriting fees reflect lender time on nonstandard exits. Some fees are negotiable—repeat borrowers may see reduced document-prep fees, and smaller items are often rolled into the financed amount. Knowing which fees are financed versus paid up front is crucial for cash-flow planning and for calculating the true monthly cost of holding a rehab or bridge loan.
These fee details feed directly into the total loan expense that investors must translate into effective rates for project returns.
How Closing Costs Change the All-In Loan Expense
Closing costs raise the effective interest rate of a short-term loan because they’re either paid out of pocket or capitalized and amortized over a short term, magnifying monthly cost. For example, financing two points on a $200,000 loan plus $3,000 in third-party fees over 12 months meaningfully increases effective cost versus the headline rate, cutting net profit on a flip. Investors calculate an all-in effective rate by combining interest with amortized points and fees, then dividing by the average outstanding balance and term. Modeling multiple hold scenarios (6, 9, 12 months) shows how longer-than-expected holds inflate cost and where contingency buffers are needed.
Many investors run sensitivity analyses on hold time and financing structure before bidding on time-sensitive assets to make these trade-offs concrete.
Fidelity Funding’s Hard Money Programs and Typical Rates
Fidelity Funding offers a menu of private hard money programs for purchases, fix-and-flip projects, foreclosure bailouts, second trust deeds, commercial loans, DSCR-based rental financing, and P&L-based approvals. Each program is built around collateral strength and the exit plan, with typical LTVs, rate bands, terms, timelines, and document checklists that match the program’s purpose. The program comparison table below summarizes attributes to help you choose and prepare a clean submission. After the table, we briefly explain each program’s typical use and required documents to guide a smooth application.
Compare program attributes below to match financing to deal type.
| Program | Typical LTV | Typical Rate Range | Typical Term | Typical Timeline (days) | Key Required Documents |
|---|---|---|---|---|---|
| Purchase loan | Up to 65%–75% | 8.5% – 12.0% | 6–24 months | 7–21 days | Purchase contract, MLS, title report |
| Fix & flip financing | Up to 70% ARV | 9.0% – 14.0% | 6–12 months | 7–14 days | ARV analysis, contractor bids, photos |
| Foreclosure bailout | Case-dependent (lower LTV) | 11.0% – 15.0% | Short-term | 3–10 days (urgent) | Notice documents, proof of funds, title |
| Second trust deeds (seconds) | 50%–70% combined | 11.0% – 15.0% | 6–24 months | 7–21 days | Existing loan info, payoff statements |
| Commercial loans | 60%–70% | 9.0% – 13.0% | 12–36 months | 10–30 days | Rent roll, financials, lease abstracts |
| DSCR loans | Based on DSCR metrics | 8.5% – 12.0% | 12–36 months | 10–21 days | Income statements, rent roll, bank docs |
| P&L based approvals | Case-by-case | 9.0% – 13.0% | 6–24 months | 7–21 days | Profit & loss statements, bank statements |
Each program hinges on a different underwriting anchor: ARV for flips, DSCR for rentals, and collateral/exit clarity for bailouts and seconds. Submitting the precise documents above shortens underwriting cycles and reduces conditional approval items.
How Fix & Flip, Commercial, and DSCR Loans Differ in Rates and Terms
Fix-and-flip loans focus on ARV and the rehab plan, so rates and terms emphasize short-term liquidity and draw schedules tied to rehab milestones; lenders factor in construction oversight and often limit advance rates on rehab costs. Commercial loans evaluate income capacity, lease stability, and cap-rate sensitivity, which can lead to longer terms and different documentation like rent rolls and lease abstracts. DSCR loans underwrite to debt-service coverage ratios, so underwriters analyze historical and pro forma NOI and typically request operating statements and bank records to verify cash flow. Those different anchors explain overlapping rate ranges but materially different terms, covenants, and documentation across programs.
Program distinctions guide submission checklists and explain expected timeline variance, which we cover next.
Typical LTV Bands and Timelines by Program
LTV bands and timelines vary by program and deal quality, with select high-LTV offerings available on strong collateral when extra protections exist. Purchase loans often close within one to three weeks when contracts and title are clean; flips can fund in 7–14 days with completed ARV and contractor evidence. Foreclosure bailouts, priced for urgency, typically close fastest—sometimes in 3–10 days—though that speed usually comes with higher effective rates. Commercial and DSCR programs take a bit longer because of income verification, appraisals, and title complexity, generally in the 10–30 day window. Submit complete documentation and plan timelines conservatively to reduce conditions and accelerate clear-to-close status.
How the Hard Money Loan Approval Process Works at Fidelity Funding
The approval workflow follows consistent stages: initial deal submission, preliminary review, underwriting and valuation, conditional approval, document preparation, clear-to-close, and funding. At Fidelity Funding our in-house underwriting and equity-first focus streamline the process, and when documentation is complete many straightforward deals fund on a condensed timeline. The numbered steps below show the path a borrower should expect, the documents typically requested at each stage, and example turnaround times. Clear exit communication and complete supporting materials shorten underwriting cycles and reduce surprise conditions before closing.
- Submit deal and basic package: Send the purchase contract, photos, and key property details so we can pre-qualify and screen valuation risk.
- Preliminary review and pricing: We confirm loan fit, estimate LTV/ARV, and provide a tentative term sheet with points and rate ranges by position.
- In-house underwriting and appraisal order: Underwriting reviews comps, runs a valuation or orders an appraisal; additional docs like contractor bids or rent rolls may be requested.
- Conditional approval and document collection: We issue conditional approval with items to clear; borrower supplies title, insurance, and required closing paperwork.
- Clear-to-close and funding: Once conditions are cleared and title is acceptable, the loan moves to clear-to-close and funds; many clean files fund in 5–7 business days from clear-to-close.
A complete initial submission is the fastest route to funding. In-house underwriting reduces handoffs that otherwise delay private lending closings.
Application-to-Funding Checklist
A concise application-to-funding checklist helps borrowers anticipate requests and prioritize items to meet rapid timelines. Expect requests for property documents (photos, contracts), valuation support (comps, ARV for flips), borrower financials (bank statements, P&L where applicable), and title/insurance items. Timely delivery avoids rework and conditional approvals. Appraisals or broker price opinions are ordered by program and property type and can be the pacing item, while clear title typically gates funding. Having contractor bids, permits, and insurance at submission reduces cycle time and supports Fidelity Funding’s accelerated funding windows.
How Property Equity Affects Approval Speed
Property equity is the lender’s risk buffer and directly speeds approval when it’s clear and verifiable through comps or recent appraisals. High equity means fewer conditional reserves and less need to compensate for borrower credit, so underwriters request fewer diligence items. Low-equity or highly distressed collateral prompts more scrutiny, additional covenants, and sometimes longer appraisals or inspections, which extends timelines. In short: the clearer and larger the equity gap, the faster the path to clean funding.
High-quality submissions that highlight equity and a concrete exit plan are prioritized to shorten underwriting calendars.
Investor Benefits of Hard Money Loans in California
Hard money gives investors speed, flexible underwriting that focuses on collateral and exit plans, and a range of programs for purchase, rehab, bridge, and rental strategies that conventional lenders often can’t serve quickly. These loans let investors act on time-sensitive purchases, finance acquisition and rehab in a single package, and secure short-term capital while preserving refinance or sale options as exits. Flexible structures — draw schedules for rehab, interest-only payments, and selective high-LTV programs on a case-by-case basis — let investors optimize leverage for higher project returns when modeled correctly. Below are the primary investor benefits and their practical implications for deal execution.
Key strategic benefits:
- Speed to close: Fast approvals and funding let you win competitive bids on urgent properties.
- Equity-first underwriting: Lenders emphasize collateral and exit plans over bureaucratic borrower credit metrics.
- Flexible structures: Rehab draws, bridge financing, and DSCR options align with different exit strategies.
- Short-term leverage: Enables acquisition and value-add execution before refinancing or sale.
These advantages translate into faster deal capture, predictable rehab financing, and the ability to bridge to long-term financing or sale — provided you model financing cost against projected returns.
How Hard Money Supports Fix & Flip and Investment Properties
For flips, hard money typically finances purchase and rehab based on ARV, with draw schedules that release funds as work is completed and inspected. Lenders underwrite to projected ARV and monitor rehab budgets to protect LTV at each draw, helping prevent over-borrowing and keeping borrower and lender incentives aligned. For rental or buy-and-hold properties, DSCR programs underwrite to income and provide bridge capital to stabilize assets before long-term lending or refinance. Exit strategy — sale, refinance, or paydown — is central to underwriting and determines term length and covenants, so a clear, documented exit improves approval odds and pricing.
These program mechanics let investors convert capital into completed, income-producing, or sale-ready assets efficiently.
Property Types That Typically Qualify
Hard money lenders commonly finance single-family homes, small multifamily properties, mixed-use buildings, and certain commercial spaces. Distressed or foreclosure properties often qualify where banks won’t lend. Raw land and large-scale commercial projects require specialized underwriting and may have different LTV and documentation needs. Properties with clear income streams or strong ARV comps are easier to underwrite. Distressed assets can qualify quickly if title is curable and the exit plan is credible — which is the purpose of bailout programs. Present compelling value evidence and a realistic exit to align the property with program parameters.
Program fit and documentation are the practical gates that determine if a specific asset will be funded.
Common Borrower Concerns About Hard Money Loans in California
Borrowers often worry about cost versus banks, the importance of credit, foreclosure risk on default, and the speed-versus-price trade-off for urgent financings. Hard money generally costs more than bank loans on a pure interest-rate basis, but for many investors the speed and flexibility outweigh the premium when weighed against the opportunity cost of losing a deal. Credit matters, but most private lenders prioritize property equity and the exit strategy; strong documentation and a clear repayment plan frequently mitigate imperfect credit. Below is a compact Q&A addressing the most frequent borrower concerns and what lenders typically require.
- How important is personal credit?: Credit is considered, but equity and a clear exit plan usually carry more weight. Repeat borrowers with a proven track record often receive better terms.
- Will a bailout loan stop a foreclosure?: Bailout loans are designed for urgent timelines and can close faster, but they typically come with higher rates and stricter documentation because of the urgency.
- How does speed affect price?: Faster funding often raises effective cost due to urgency premiums and higher points/fees. Weigh the cost of delay against the funding premium.
How Credit History Affects Approval
Credit history influences pricing and availability to a degree, but hard money underwriters prioritize collateral value and a credible exit over perfect credit scores. Lenders will pull credit and consider recent payment performance, especially for repeat borrowers, but a strong equity position and an executable sale or refinance strategy often allow approval despite imperfect credit. When credit is borderline, lenders may require additional reserves, higher points, or stronger covenants to offset borrower risk. Borrowers with weaker credit should strengthen the collateral story and exit documentation to secure the best terms possible.
Solid documentation and a clear exit plan typically reduce the emphasis placed on credit in final approval.
Foreclosure Bailout Loans and Typical Rates
Foreclosure bailout loans are urgent, short-term financings intended to stop a foreclosure sale, cure arrears, or buy time to execute a refinance or sale. They’re priced to reflect the accelerated timeline and elevated legal/title complexity. Because these loans respond to immediate distress, they often fund faster than standard programs — sometimes within a few days when title and payoff figures are available — but they also carry higher interest rates and fees to compensate the lender for urgency and legal risk. Borrowers pursuing a bailout should expect rapid documentation requests, quick underwriting decisions, and pricing that reflects the speed and risk premium; planning the exit concurrently is essential to avoid high carry costs.
Having clear payoff figures and title documents in hand will materially speed bailout underwriting and can limit added premiums when time is tight.
What to Expect Next
If you’re evaluating a time-sensitive California real estate deal, prepare a clean submission: the purchase contract, photos, AVM or comps, contractor scopes for rehabs, and bank or P&L documents where required. For program-specific guidance or to submit a deal for pre-review, send a deal packet, call the Fidelity Funding team, or complete the online application on our website. Our in-house underwriting aims to provide fast pre-qualification and conditional approvals. Fidelity Funding emphasizes speed, equity-first underwriting, and flexible structuring — qualities that help investors move from contract to clear-to-close quickly when documentation is complete. Use the program comparison and fee tables above to model effective cost and pick the program that matches your exit plan before submitting materials.
- Prepare: Gather the contract, photos, ARV or rent roll, contractor bids, and financials.
- Submit: Send a concise packet for pre-qualification to get a preliminary rate and term estimate.
- Execute: Clear conditions quickly and move to close; expect expedited funding windows for clean files.
Following these steps shortens timelines and improves pricing outcomes by reducing surprises during underwriting.
Frequently Asked Questions
What is the difference between hard money loans and traditional bank loans?
Hard money loans differ from traditional bank loans mainly in underwriting and speed. Banks focus on credit scores, income verification, and longer approval cycles. Hard money lenders focus on collateral value and the exit strategy, which enables faster decisions — often within days — making hard money suitable for time-sensitive transactions. The trade-off is higher interest rates and fees compared with conventional loans.
Can I use a hard money loan for properties that need significant repairs?
Yes. Hard money is well-suited for properties that need substantial repairs — commonly called fix-and-flip projects. Lenders use after-repair value (ARV) to determine loan sizing so you can finance purchase and renovation in one package. A solid rehab plan and accurate budget are essential to secure favorable terms and ensure the project fits the lender’s underwriting criteria.
What types of properties are eligible for hard money loans?
Hard money lenders finance single-family homes, small multifamily units, mixed-use buildings, and certain commercial properties. Distressed properties and foreclosures that traditional lenders avoid are often eligible. Eligibility depends on equity position and your exit strategy; lenders evaluate potential value and income-generating capacity to determine fit.
How quickly can I expect to receive funding from a hard money lender?
Funding speed varies, but many hard money lenders can close within a few days to a couple of weeks, depending on deal complexity and documentation completeness. Straightforward transactions with clear equity and a solid exit plan can fund in 3 to 10 days. More complex deals may need extra time for underwriting and appraisal, so prepare documents in advance.
Are there any prepayment penalties associated with hard money loans?
Prepayment penalties vary by lender and loan terms. Some lenders impose penalties for early payoff; others do not. Review the loan agreement carefully and discuss any prepayment terms before signing. Knowing these terms helps you plan your exit — especially if you expect to refinance or sell the property quickly.
What should I include in my loan application to improve my chances of approval?
Include a complete loan package that outlines the property, your investment strategy, and financials. Key items: purchase contract, property photos, a detailed rehab plan with budget estimates, and relevant financial statements. A clear exit strategy and timeline for sale or refinance increase lender confidence and improve approval odds.
How do hard money lenders assess the risk of a loan?
Lenders assess risk primarily through collateral value and the borrower’s exit strategy. They examine LTV, property condition, and market factors to estimate recovery potential in default. Borrower experience and track record matter too. A well-documented repayment plan reduces perceived risk and can lead to more favorable terms.
Conclusion
Knowing how hard money works in California helps investors make informed financing choices that prioritize speed and flexibility. With quick approvals, equity-focused underwriting, and a range of programs, investors can act on time-sensitive opportunities and optimize project returns. For tailored financing that fits your strategy, reach out to our team for personalized guidance. Start the conversation and move your deals forward with confidence.
