Real Estate Tips |7 min read

How to Negotiate Hard Money Loan Terms: A Guide for Investors

Hard money loans are a fast, flexible, and convenient option for investors looking to fund their next investment quickly. They differ from traditional loans in several ways, but one of the main benefits of hard money loans is that you often work with individual investors or investment companies. As a result, you can negotiate hard money loan terms to benefit your specific needs. To learn more about hard money loans and how to negotiate with lenders, just keep reading. 


Contents of This Article: 

Standard Terms for Hard Money Loans

Hard money loans are short-term, non-conforming loans that investors use to secure real estate instead of traditional loans. That said, loan terms may vary depending on the lender and the borrower’s needs. However, some of the common hard money loan terms you may encounter include the following: 


  • Loan Amount- This is the amount of money the lender is willing to loan, which is generally based on the value of the property used as collateral.
  • Interest Rate- Since there’s more risk for the lender, hard money loans often have higher interest rates than traditional loans. For instance, interest rates generally range from 8% to 15% or higher, depending on the lender.
  • Loan Term- Hard money loans are short-term loans, usually ranging from a few months to a few years.
  • Points- Points are fees that a borrower pays upfront to the lender for providing the loan. They generally range from 2% to 10% of the loan amount.
  • Fees- Depending on your lender, hard money loans usually come with additional costs, like origination fees, underwriting fees, and prepayment penalties.
  • Collateral- Hard money loans are secured by collateral, which is the real estate you’re looking to buy. Usually, lenders require an appraisal to determine the value of the property and the loan amount.

Can You Negotiate Hard Money Loan Terms?

Hard money loans are different from traditional loans. Banks and traditional lenders aren’t as flexible as individual investors who give private real estate loans in Maryland. As such, you can typically negotiate the terms of your hard money loan on a case-by-case basis. 


For instance, you can negotiate your interest rate, down payment amount, the length of your loan, and more. First, however, knowing how to negotiate hard money loan terms and when to do so is essential. To learn more about the process, read along as we review how to negotiate and when it’s appropriate to do so. 

How to Negotiate Hard Money Loan Terms

Despite their name, working with hard money lenders is often easier and more convenient than working with traditional lenders. This is because most hard money lenders focus on bringing flexibility and transparency to their business deals and often work with you on your investment instead of for you. As such, they’re usually pretty flexible, meaning you can negotiate hard money loan terms that suit you. Here are a few negotiation tips for investors looking for their next hard money loan. 

  1. Shop Around for Lenders
  2. Be Prepared to Negotiate
  3. Negotiate Thoughtfully
  4. Understand Your Obligations
  5. Communicate With Your Lender

Shop Around for Lenders

The first step to getting a hard money loan is shopping around to compare rates and terms from different lenders. That way, you can find a flexible and willing lender to work alongside you throughout your investment. You can often research lenders beforehand and find their starting terms on their business websites. From there, you can call and ask for references. Additionally, it doesn’t hurt to call a lender with your loan request or email an application before setting up a meeting. 

Be Prepared to Negotiate


Once you’ve researched and found flexible lenders, you’ll want a clear plan for using the funds and repaying the loan. Provide documentation of your financial history, credit score, and any other assets you may have. This information will give your lender a clear idea of your experience in the real estate industry. The more experience you have, the more willing they may be to negotiate. 

Negotiate Thoughtfully

To negotiate pricing and loan terms, lenders must see that your transaction is worth their risk. So, before asking them to lower their interest rate or offer favorable terms for you, you’ll have to prove your project’s value and the viability of your business plan. After all, they’re the decision maker, so it’s important to know what you’re talking about and back up any claims about the property’s value with real numbers. Then, once you’ve given them all the information they may need or want, you can thoughtfully negotiate with them. 

Understand Your Obligations

No matter what type of loan you go with for your investment, it’s crucial to understand your obligations. So, before signing any agreements, ensure you know the terms and conditions of the loan. If you have any questions or feel that there’s a misunderstanding, ask your hard money lender for clarification. Additionally, it’s important to understand the risks associated with your hard money loan. For example, although you may have negotiated on the interest rate and fees, they may still be higher than they would be for a traditional loan. 

Communicate With Your Lender


Finally, communication is key in any professional relationship. It’s important to regularly communicate with your lender to ensure you’re both on the same page throughout the entire process. For instance, you’ll want to give your lender regular updates on your real estate investment progress, especially if you plan to fix and flip a property. After all, regular communication can help build a professional relationship that can help you secure a loan with them in the future. 

When to Negotiate Your Terms and When Not To

It’s important to recognize when to negotiate hard money loan terms and when it’s not appropriate or feasible. For example, here are some instances where you may want to negotiate your loan terms with your lender. 

  • You Have Good Credit- If you have good credit or other assets you can use as collateral, you may have a better chance of negotiating more favorable terms.
  • Your Lender is Motivated- If your lender is eager to process the loan, they may be more willing to negotiate terms that are favorable to you.
  • You Have Several Loan Options- If you have several different loan options, you can compare rates and terms to find the best deal. That way, you can negotiate with lenders to get the most favorable terms.


On the other hand, there may be situations where it’s not feasible to negotiate the terms of your hard money loan. For instance, you may want to avoid negotiating if the following circumstances apply to you:

  • You Have Poor Credit- If you have poor credit or limited assets, negotiating favorable terms may be more challenging. However, you can usually still get a hard money loan, even with bad credit.
  • The Lender Has Strict Criteria- Some hard money lenders have strict criteria for approving loans and may not be willing to negotiate at all.
  • You Need the Loan Quickly- If you need fast financing, you may not have time to negotiate terms and may need to accept the lender’s terms as they are.

Find a Local Lender to Work With Today

Recognizing and learning how to negotiate hard money loan terms is important. Many investors seek hard money loans for fast and convenient financing to meet their investment goals. Whether you want to finance a new construction build or a fix-and-flip investment, finding the right lender with favorable terms is crucial. 

If you’re looking for a local hard money lender to work with today, consider Maryland Hard Money Lenders. Our team of professionals have years of experience working with several types of real estate and investors. To learn more about our loan application and the lending process, contact Maryland Hard Money Lenders today. 

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