A hard money refinance mortgage means using one of these private loans to replace or pay off a loan you already have. People usually turn to this only when a regular lender has turned down their application.
Common hard-money refinancing situations include:
- Very low credit scores, often from a recent bankruptcy or missed payments
- Income that’s hard to prove, or a recent job loss
- A balloon payment coming due — a large one-time payment your current loan requires
- Facing foreclosure, where a homeowner needs breathing room quickly
- An unusual property that regular lenders won’t finance, like raw land or a mixed-use building
In each case, a hard money refinance can buy time. But it’s important to be clear-eyed: it’s a costly, temporary bridge, not a solution by itself.
Why Equity Matters So Much with Hard Money Refinances
Here’s the single most important thing to understand about hard money: it’s all about equity. Equity is the part of your home you own. The simple math is:
What your home is worth − what you still owe = your equity.
Hard money lenders usually want you to have a large amount of equity — often much more than a bank requires. That’s because equity is their safety net. If you can’t repay, they need to be able to sell the home and get their money back. The more equity you have, the safer the loan is for them, and the more likely they are to say yes.
If you don’t have much equity, a hard money refinance usually isn’t available to you.
How much equity do you have? If you don’t have at least 35% equity, you probably won’t be able to get a hard-money refinance loan because hard money lenders want to make sure they can make money off your property if they have to foreclose. You’ll probably pay double-digit interest rates, but a hard money mortgage may be able to provide the breathing room you need to rebuild your credit and refinance again later on.
The Real Cost with Hard-Money Refinancing: Understand This Before You Sign
This is the part that deserves the most attention, because hard money is one of the most expensive ways to borrow.
- The cost of borrowing is high. Hard money loans charge far more than a regular mortgage. You’re paying a premium for speed and for a lender willing to take a risk a bank won’t.
- Extra fees are common. On top of the higher borrowing cost, there are often large upfront fees.
- The repayment time is short. Many hard money loans must be paid off in a short window — sometimes a year or two — not spread over decades like a normal mortgage.
- Your home is the guarantee. If you can’t repay, the lender can foreclose and take the property. That’s the whole basis of the loan.
Because of all this, a hard money refinance only makes sense when you have a clear exit plan — a realistic way to pay it off or replace it with a cheaper loan before the short term runs out. Without that plan, a hard money loan can make a hard situation worse.
The Smart Way to Think About It
The right way to use a hard money refinance is as a stepping stone, not a destination.
For example, someone facing foreclosure might use a hard money refinance loan to stop the immediate crisis, then spend the next year or two rebuilding their credit and stabilizing their income — with the plan of refinancing into a regular, lower-cost loan once they qualify. Used that way, hard money buys the time needed to get back on solid ground.
Before choosing hard money, though, it’s worth making sure you’ve explored every less-expensive option first, because they can save you a great deal of money:
- If your main problem is credit, there may be home equity options for lower credit scores that cost far less. There are lower rates and fees than hard money equity loans.)
- If your income is hard to document in the usual way — like self-employment — a non-QM loan may fit without the hard-money price tag.
- If you have equity and want to consolidate debt, compare a second mortgage or a HELOC for debt consolidation.
Hard money should generally be the option you reach for after these are ruled out — not before.
A Special Word on Foreclosure
If you’re considering a hard money refinance because you’re facing foreclosure, please read this carefully.
A hard money loan can pause an immediate foreclosure, but it replaces one urgent problem with an expensive new one. Before signing anything, it’s wise to talk with a HUD-approved housing counselor, who can help you understand all your options — including some you may not know about — at no cost. Many homeowners in trouble have more choices than they realize, and a counselor can help you avoid a costly loan you don’t actually need.
Be especially careful of anyone who pressures you to act immediately or promises to “save” your home for a large upfront fee. Legitimate help does not work that way.
A hard money mortgage refinance is a fast, flexible, and expensive tool funded by private investors, based mainly on your home’s equity rather than your credit. It can help borrowers who’ve been turned down elsewhere or who need to act quickly — but only as a short-term bridge with a clear plan to exit. Because it’s so costly and puts your home on the line, it should be a last resort, chosen after cheaper options are explored. If you’re in a tough spot, get advice from a trusted professional before you sign.
Frequently Asked Questions on Hard Money Refinances
Who uses a hard money refinance?
People who’ve been turned down by regular lenders. Common reasons include very low credit scores after a bankruptcy, income that’s hard to prove, a job loss, a balloon payment coming due, an unusual property a bank won’t finance, or a homeowner facing foreclosure who needs quick breathing room. Real estate investors also use hard money for fast purchases or flips. In every case, it’s typically a short-term fix meant to bridge a gap until a cheaper, regular loan becomes possible.
How much equity do I need for a hard money refinance?
Usually a lot — often much more than a bank requires. Because the loan is based on the property, the lender needs a large equity cushion as protection in case they have to sell the home. Many hard money lenders want a substantial share of the home’s value kept as equity before they’ll lend. If you don’t have much equity built up, a hard money refinance generally won’t be an option, and you’d need to explore other paths instead.
Why are hard money loans so expensive?
You’re paying for speed, flexibility, and risk. Hard money lenders approve borrowers and situations that regular lenders avoid, and they fund quickly with less paperwork. To make that worthwhile, they charge far more than a normal mortgage, often add large upfront fees, and require repayment over a short period. The higher cost is the trade-off for getting money when no one else will lend. That’s why it’s wise to use hard money only briefly and exit into a cheaper loan as soon as you can.
Is a hard money mortgage refinance a good idea if I’m facing foreclosure?
It can pause an immediate foreclosure, but it replaces one urgent problem with an expensive new one, so approach it carefully. Before signing, talk with a HUD-approved housing counselor, who can explain all your options for free — including ones you may not know about. Many homeowners have more choices than they realize. Be very wary of anyone demanding a large upfront fee or pressuring you to act instantly, since legitimate help does not work that way.
Can I get a hard money refinance with bad credit?
Often yes, because hard money lenders focus on your property’s equity more than your credit score. That’s the main reason people with recent bankruptcies or missed payments turn to it. But bad credit combined with the loan’s high cost is a risky mix, so it’s worth first checking whether a lower-cost option fits your situation. Some home equity programs serve borrowers with weaker credit at far better terms than hard money, so compare before committing.
How do I find a hard money lender?
Hard money lenders are less common than banks and are often reached through brokers who connect borrowers with private investors. Because this market is less familiar to most people, it’s especially important to verify that any lender or broker is properly licensed at NMLS Consumer Access before sharing your information. Compare more than one offer, read every disclosure, and be cautious of anyone using high-pressure tactics. A matching service can also help you find vetted lenders rather than searching on your own.
What’s my exit plan supposed to be with a hard money loan?
Your exit plan is how you’ll pay off or replace the hard money loan before its short term ends — and you should have one before you sign. Common exits include selling the property, or rebuilding your credit and income over a year or two so you can refinance into a regular, lower-cost mortgage. Without a realistic exit, the loan’s high cost and short deadline can trap you. Think through your exit first; it’s the single most important part of using hard money responsibly.
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HEM is dedicated to assisting our clients in obtaining the private financing required to pursue their real estate ventures. Whether you aspire to enter the commercial real estate sector or embark on a home flipping venture, we will match you with proven hard money lenders to guide you through the refinancing process. We strive diligently to ensure you secure the necessary capital promptly to kickstart your real estate transaction.
References
Consumer Financial Protection Bureau. (2024). Struggling to pay your mortgage?
U.S. Department of Housing and Urban Development. (2024). Find a housing counselor.
Updated : HEM Editorial Team | July 2026 | Fact-Checked ✓
- Borrower s FICO scores are below 500 due to recent bankruptcy or bad credit;
- Income is unverifiable or borrower lost his/her job;
- Balloon payment on existing loan is due now;
- Foreclosure is imminent;
- Borrower is purchasing odd or non-conforming types of properties (land, mixed use, etc).
“These are temporary fix loans. That’s all they are–to help people get out of a bad situation,” says Kirk Johnson, a mortgage broker with Sierra Funding Corp. in Denver.