If you're evaluating a hard money loan for an investment property in California, understanding typical hard money loan terms before you sign is one of the most useful things you can do to protect your margins and your timeline.
Unlike a 30-year mortgage with fixed monthly payments, hard money loans are built around speed and risk, which means the loan-to-value ratio, interest rate, repayment structure, and length of the loan all look different from what you'd see at a traditional bank.
This guide breaks down the typical hard money loan terms California borrowers can expect, what drives them, and how to evaluate an offer before committing to a lender.
What "Loan Terms" Actually Cover
When people talk about hard money loan terms, they're referring to the full set of conditions a lender attaches to the loan:
How much you can borrow relative to the property's value
The interest rate
How long you have to repay
How payments are structured
What fees apply at closing, and
What happens if you pay the loan off early or late.
Because hard money loans are private financing secured by real estate rather than backed by a government-sponsored enterprise, these terms vary more between lenders than they do with conventional mortgages.
That makes it worth reviewing each of these hard money loan terms individually rather than focusing on the interest rate alone.
Typical Loan-to-Value (LTV) Ratio
Most hard money lenders cap their loan-to-value ratio between 60% and 75% of the property's current value, or the after-repair value (ARV) for fix-and-flip projects.
A lower LTV gives the lender more of a cushion if the property must be sold at a discount, so borrowers who bring more equity or a larger down payment often qualify for more favorable pricing on the rest of their terms.
For a closer look at down payment expectations and other qualification factors that affect LTV, see our breakdown of hard money loan requirements.
Typical Interest Rates
This is usually the term that gets the most attention, and for good reason. Hard money rates run well above conventional financing.
First-position hard money loans in California typically carry interest rates between 9.5% and 12%, while second-position loans run higher, generally in the 12% to 14% range.
For comparison, the average 30-year fixed conventional mortgage rate was 6.52% as of June 11, 2026, according to Freddie Mac's Primary Mortgage Market Survey.
That gap reflects the trade-off built into hard money lending: faster approvals, more flexible underwriting, and less weight placed on credit history all come at a cost. California borrowers often see somewhat tighter pricing than the national average simply because there are more private lenders competing for deals in the state.
For a full rundown of current pricing by loan type, our hard money loan rates guide goes deeper into how rates vary across bridge loans, fix-and-flip financing, and commercial deals.
Typical Loan Length (Term)
Most hard money loans run 6 to 24 months, with many fix-and-flip and bridge loans funded around the 12-month mark.
Lenders set shorter terms because the loan is meant to cover a specific, time-bound need, such as a renovation, a sale, or a transition into permanent financing, rather than long-term ownership.
Many lenders will extend the term for an additional fee if a project runs past schedule, but availability and pricing for extensions vary. It's worth confirming this option directly with your lender before closing rather than assuming it will be there if you need it.
Points and Origination Fees
Points are an upfront fee charged at closing, with one point equal to 1% of the loan amount. Typical hard money loan terms include 1 to 5 points, though 2 to 3 points is the most common range for California deals.
On a $400,000 loan at 2.5 points, that works out to $10,000 due at closing, on top of any underwriting or processing fees.
Comparing points alongside the interest rate matters, since a lower rate paired with high points can end up costing more over a short loan term than a slightly higher rate with fewer points.
Repayment Structure
Hard money loans are almost always structured as interest-only payments, with the full principal due as a balloon payment at the end of the term.
This keeps monthly costs lower during a renovation or hold period, but it also means borrowers need a defined plan for that balloon payment well before it's due.
For example, on a $400,000 loan at a 10.5% annual interest rate, the monthly interest-only payment would be calculated as:
($400,000 x 10.5%) / 12 = $3,500 per month
The full $400,000 principal would then be due at the end of the loan term, typically through a sale, refinance, or another source of funds.
Lien Position and Why It Affects Pricing
Lien position determines who gets repaid first if a property is sold or goes into foreclosure, and it has a direct effect on pricing.
Loans in first lien position sit ahead of any other debt on the property and typically carry the most favorable rates, since the lender's risk is lower.
Loans in second position, often used to supplement an existing loan, usually carry higher rates to offset that added risk.
If you're weighing a financing structure that involves more than one loan on the same property, our guide to first lien loans explains how lien position is determined and how it shapes the rest of your hard money loan terms.
Prepayment Penalties
Not every hard money lender charges a prepayment penalty, but some do, particularly if a loan is paid off within the first few months of the term.
Since lenders price their return around an expected loan period, an early payoff can cut into that return, which is part of why this is worth asking about directly rather than assuming it doesn't apply to your loan.
Exit Strategy Requirements
Because hard money loans are short-term by design, lenders will typically ask for a clear exit strategy as part of the hard money loan terms, even though it isn't a line item on a rate sheet.
Common exit strategies include:
Selling the property
Refinancing into a long-term loan, or
Using rental income to support a future refinance
A vague or unrealistic exit plan can affect approval just as much as the property's value does.
Hard Money vs. Conventional Loan Terms at a Glance
| Term | Hard Money Loan | Conventional Loan |
|---|---|---|
| Loan-to-Value | 60% to 75% | Often 80% or higher |
| Interest Rate (2026) | 9.5% to 14% | Around 6.5% (30-year fixed) |
| Loan Length | 6 to 24 months | 15 to 30 years |
| Approval Basis | Property value and exit strategy | Credit, income, and debt-to-income ratio |
| Funding Speed | Days | Weeks to months |
Once you understand the typical hard money loan terms for your market, the next step is comparing actual offers. Our guide on how to get a hard money loan walks through the full process, from selecting a lender to closing, in more detail.
Frequently Asked Questions
What is the average term length for a hard money loan?
Most hard money loans run between 6 and 24 months, with 12 months being a common length for fix-and-flip and bridge financing.
Are hard money loan terms negotiable?
Some lenders will negotiate rate, points, or term length, particularly for experienced investors with a strong track record or larger loan amounts. Terms are generally less standardized than with conventional financing, so it's worth asking.
Do all hard money loans have prepayment penalties?
No. Prepayment penalties vary by lender and by loan. Confirm this detail before signing, especially if you expect to repay the loan ahead of schedule.
How do I know if a hard money loan's terms make sense for my project?
Compare the full cost of the loan, interest plus points plus fees, against your projected returns and timeline. A loan with a slightly higher rate but lower fees, or a longer term that better matches your project, may end up being the more cost-effective option.
Every lender structures terms a little differently, so the most reliable way to know what to expect is to ask directly. Get a free quote from SDC Capital to see real numbers for your project, or call 424-304-1072 to talk through typical hard money loan terms with our team.