Real Estate Tips |6 min read

When and How to Refinance a Hard Money Loan

When you sign up for a hard money loan, most borrowers know that they’ll have to repay it within a few months or years. After all, they’re short-term, non-conforming real estate loans that help investors who either don’t qualify for traditional financing, want to fix and flip a property, or simply want to secure a deal quickly. That said, if you reach the end of your loan term and aren’t finished with your fix-and-flip or aren’t ready to sell the property, you may need to refinance your loan. Today, we’ll review how to refinance a hard money loan and different options for borrowers to explore. 


Contents of This Article: 

Can You Refinance a Hard Money Loan?

Yes, you can refinance a hard money loan with either a traditional lender or another hard money lender. That said, many borrowers choose to refinance their hard money loans with traditional lenders to secure long-term financing. 


Hard money loans are excellent for investors who want to quickly secure a real estate deal. However, unlike traditional mortgage loans that range from 15 to 30 years, they’re short-term real estate loans, usually ranging from a few months to a few years. This makes them ideal for short-term projects.

For instance, if you’re looking to fix and flip a property, you may use a hard money loan, whereas a traditional loan may work better for a rental investment property. However, if you’ve fulfilled your need for a hard money loan, want to live at the property, or plan to rent it out, you’ll need to refinance with a bank or traditional lender. 

That said, it may be harder for some borrowers to refinance if they don’t qualify for traditional financing. That’s why some choose to refinance with another hard money loan. Next, we’ll go over how to qualify for loan refinancing. 

How to Qualify for Loan Refinancing

Not everyone can refinance a hard money loan with a traditional loan. After all, many borrowers choose to use hard money because they don’t qualify for conventional mortgage loans in the first place. As such, refinancing your current hard money loan with another hard money loan may be beneficial if you:

  • Don’t qualify for traditional financing
  • Can’t wait several weeks for a traditional bank to approve your loan
  • Want to adjust your interest rate or term length
  • Want to keep the property, or aren’t ready to sell it yet
  • Need more funding for your fix-and-flip project
  • Need to avoid foreclosures
  • Have another investment opportunity you want to secure quickly

While it may be easier for most borrowers to refinance their hard money loans with another hard money loan, if you’re looking for long-term financing, you may want to refinance your hard money loan with a traditional mortgage loan. 

Refinancing With a Traditional Loan

Refinancing with a traditional mortgage loan involves meeting the eligibility criteria set by the lender. Generally, you’ll need to provide documentation of your current income, job history, credit score, history, and more. Unfortunately, if you don’t meet the new loan’s requirements, you may get denied. 

That said, if you’re looking to refinance with a traditional loan, here are some of the steps you may want to take to qualify. 

  • Evaluate Your Finances- Look at your current financial position and the overall debt you have. Why did you use a hard money loan in the first place? Will a traditional mortgage loan align with your financial goals?


  • Improve Your Credit- If you have a less-than-desirable credit score, work on improving it. A higher credit score can help you get more competitive interest rates and better loan terms with a traditional lender.
  • Build Equity in the Property- Increase your equity in the property by making improvements or enhancing the value. This can positively impact the loan-to-value (LTV) ratio, making your refinancing application more attractive to traditional lenders.
  • Research Different Lenders- If you want to find the best rates and increase your chances of approval, explore different lenders and their qualifications. Look for lenders experienced in refinancing hard money loans or those open to working with borrowers in unique financial situations.
  • Get Pre-Approved- Consider applying for pre-approval with one or more traditional lenders. Pre-approval can give you a broad idea of the loan amount you may qualify for and demonstrate that you’re serious about refinancing your loan.

Tips for Refinancing Your Hard Money Loan

Refinancing a hard money loan can be a strategic move if you need more time for your investment plan. However, it requires careful planning and consideration due to the unique characteristics of hard money loans. Here are some tips to help you navigate the process, whether you decide on another hard money loan or switch to traditional financing. 

  1. Understand Current Loan Terms
  2. Shop Around for Competitive Rates
  3. Prepare Financial Documentation
  4. Calculate the Costs vs. Benefits
  5. Develop a Clear Exit Strategy

Understand Current Loan Terms

Review the terms of your existing loan, including interest rates, loan duration, and any prepayment penalties. If you’re not at the end of your loan term, you may endure some fees or penalties for refinancing. Either way, understanding your current terms can help you evaluate the pros and cons of a new loan. 

Shop Around for Competitive Rates

Look for lenders who have experience with refinancing hard money loans. It’s important to find someone who will understand your situation and have experience with hard money loans. Additionally, explore different lenders to compare their interest rates, fees, and terms. After all, different lenders may have varying requirements and offerings, so it’s crucial to find the best fit for your financial situation. 


Prepare Financial Documentation

Be ready to provide proof of income, tax returns, and other financial documentation. Most hard money lenders will just want to see your updated plan, progress, and exit strategy. However, traditional lenders will likely want to thoroughly review your financial stability before approving a loan refinance.

Calculate the Costs vs. Benefits

Evaluate the costs associated with refinancing a hard money loan. Look at the closing costs, application fees, and potential penalties for early repayment of the hard money loan. Then, compare these costs with the potential benefits of lower interest rates or better terms. 

Develop a Clear Exit Strategy

If you’re looking at refinancing with another hard money loan, it’s crucial to clearly explain your exit strategy to your lender. Whether it involves selling the property, securing long-term financing, or another plan, lenders need assurance that you have a plan for repaying the new loan. Hard money lenders especially will need to see that you have a plan for repaying the loan within the allotted time frame. 

Start By Finding a Local Lender Today

If you’re looking to refinance a hard money loan, finding a reliable lender to work with is one of the first steps. Finding the right lender can help you get the terms and rates that align with your investment goals. Additionally, the right lender will help you stay on track with your fix-and-flip project and ensure you have the funds you need to complete it.

Want to explore a hard money loan in for your next investment in Maryland? Look no further than Maryland Hard Money Lenders. Our team of experienced real estate professionals can help you get the funding you need quickly and efficiently. Contact us to learn more about our lending process, and fill out our initial loan application today!

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