Hard-Money & Private Mortgage Lending

Data as of Aug 21, 2026.

Every tile above is a published series read from FRED, and none of them is a private-loan rate. The mortgage tiles are Freddie Mac primary market survey rates — what a conventional borrower is quoted — and the Treasury tile is a constant-maturity yield, the investment-basis series this site uses for the curve rather than a bill quoted on a discount basis. The high-yield tile is an ICE BofA index effective yield. The date shown is the newest observation among them.

A conventional mortgage asks 'can this person afford the payments for thirty years?'. A hard-money loan asks 'if this borrower disappears tomorrow, what is this building worth and how fast can it be sold?'. Everything else about the structure follows from that one change of question.

The borrower

Almost always an entity, not a person.

Business-purpose loans are typically made to an LLC or corporation that holds the property. That keeps the loan outside the consumer-mortgage rules and gives the lender an entity to foreclose against — but it also means the entity may have no assets beyond the property itself, which is why a personal guarantee usually comes with it.

The property (collateral)

The asset the lien attaches to, and the real source of repayment.

Single-family rehab, small multifamily, land, or a commercial building. Condition matters as much as location: a property that cannot be insured, occupied, or financed by the next buyer is a property the lender may end up owning. Environmental issues on commercial or industrial parcels can outlast the loan.

The valuation basis

As-is value, purchase price, cost, or after-repair value.

LTV measures the loan against today's as-is value. LTC measures it against total project cost. ARV — after-repair value — measures it against what the property is projected to be worth once the work is finished, which is an estimate, not a fact. Loans sized off ARV are sized off a forecast, and the cushion protecting the lender only exists if the forecast holds.

The advance rate

How much of that value the lender will actually fund.

The gap between the advance rate and the value is the equity cushion — the loss the collateral can absorb before the lender's principal is touched. It is the single most important number in the deal and the main input into the price. Rehab money is generally not advanced up front; it is held back and released in draws.

Points

An origination fee quoted as a count. One point = 1% of the loan amount.

Points are charged once, at closing, either paid in cash by the borrower or netted out of the funded amount. They are separate from the interest rate and they do not accrue — which is why a loan that pays off early returns a higher effective annualised amount to the lender than the note rate implies, and costs the borrower more than the note rate implies.

The term

Short and dated, with a hard maturity.

Private loans are written to a specific exit — a sale, a refinance into conventional debt, or a lease-up — and the term is set to that exit plus a margin. Extensions are usually available, priced in additional points, and are not automatic.

Interest-only payments

Monthly interest, no principal amortisation.

Because the term is short, amortising principal would barely move the balance. Some notes instead accrue interest and pay everything at payoff, and some fund an interest reserve out of the loan proceeds so the borrower is effectively paying themselves for the first months. An interest reserve hides non-payment: the loan looks current because the lender lent the borrower the money to stay current.

The balloon

The whole principal is due on one date.

There is no glide path. On the maturity date the entire balance comes due, and repayment depends on the exit actually happening. If the sale falls through or the refinance is declined, a performing loan becomes a defaulted one overnight without a single missed monthly payment.

Personal guarantee

A named individual promises repayment if the entity does not.

It converts a non-recourse claim on a property into a recourse claim on a person — but a guarantee is only worth the guarantor's collectible assets, and collecting on one means a separate lawsuit, a judgment, and then enforcement. Some states restrict deficiency judgments after a foreclosure.

Lien position

First position, second position, or somewhere in a stack.

Position is recorded, and it determines the order in which sale proceeds are paid. It is not a matter of opinion or of what the borrower says — it is what the title record shows.

This is the single thing that decides what a private loan is worth when it goes wrong. If the property is sold to settle the debts against it, the money pays the recorded claims in order, and whoever is second only sees anything if there is money left after the first is paid in full. What would mislead: two loans can carry the same rate on the same building and be entirely different instruments, because one is first in that queue and the other is not.

A private loan is not quoted as a single rate. It is a rate plus points paid at the start plus a set of fees, and the pieces are negotiated separately. The easy mistake: comparing the note rate on one deal with the note rate on another tells you very little, because the points and the term change what the whole thing actually pays.

Two numbers, not one

A private loan is quoted as a rate plus points — an annual interest rate on the note, and a one-time origination fee expressed as a count of points, each point being one percent of the loan amount. "Rate plus two points" means the rate for as long as the loan is outstanding, plus 2% of principal once, at closing.

A spread over prevailing mortgage rates

Private lenders anchor to what a conventional borrower is paying — the 30-year conforming rate is the usual reference, and it is on this page live from FRED — and quote a spread above it. The spread is the price of speed, of a property no conforming underwriter will touch in its current condition, and of a lender who is willing to underwrite the asset instead of two years of tax returns.

Priced off the advance rate

The lower the loan against value, the thicker the equity cushion ahead of the lender's principal, and the lower the quote. Leverage is the first input into the price, before anything about the borrower.

Priced off borrower experience

A borrower with a documented history of completed projects and clean payoffs is quoted differently from a first-time one. Many lenders formalise this into tiers keyed to the number of projects completed in the last few years.

Priced off the exit

A bridge loan against a property already under contract is a different instrument from a ground-up construction loan with a draw schedule and an uncertain refinance at the end, and it is quoted as one.

Priced off position

A second-position loan quotes above a first on the same property, because it is the tranche that gets wiped out first.

The costs that are not the rate

Underwriting and document fees, draw-inspection fees, extension fees quoted in points, servicing fees, a default rate that applies after a missed payment, and late charges after a grace period. The all-in cost to the borrower and the net return to the lender both sit some distance from the coupon on the note.

Term measured in months, not years

Private bridge and rehab loans are written to a dated exit and quoted in months, with extension options priced in additional points rather than granted automatically.

Interest-only, principal at maturity

Monthly interest with the full balance due on the maturity date is the standard shape. Accrual notes (nothing paid until payoff) and interest-reserve notes (the loan funds its own early payments) are common variants.

Sized off the lesser of two numbers

Loan amount is conventionally the lesser of a percentage of the purchase price and a percentage of an independent valuation, so a borrower cannot manufacture a larger loan by overpaying on paper.

Rehab funds held back and drawn

Construction or renovation money is not advanced at closing. It sits in a holdback and is released in draws after an inspection confirms the work was done, sometimes with a retainage held to completion.

Minimum interest / prepayment terms

Many notes specify a minimum number of months of interest, or a guaranteed interest amount, so that a loan paid off in weeks still returns something for the origination work. Others are freely prepayable.

A default rate written into the note

The note specifies an elevated rate that applies from the date of default, plus late charges after a stated grace period. Whether either is actually collectible depends on state law and on there being money left after the sale.

Business purpose, by design

The paperwork usually recites that the loan is for business or investment purposes and that the property is non-owner-occupied. That recital is what keeps the loan outside the consumer-mortgage regime — and it is a recital that has to be true.

A yield is a price. A note rate is a promise.

The yield on a listed bond or a BDC is derived from a price that thousands of participants agreed on this morning and that anyone can transact at. The rate on a private note is a contractual coupon: what the borrower has agreed to pay if the borrower performs. Those are different kinds of number and they are not comparable just because both are printed with a percent sign.

Nothing is priced, so nothing appears to move.

A private loan is carried at par until something forces a write-down. The steadiness is an artefact of the absence of a market, not evidence of low risk. A listed credit fund holding similar loans marks down in public; the same deterioration in a private note is invisible until the payment is missed.

There is no exit.

Capital is committed until the borrower repays. There is no bid, no partial sale, and no rebalancing. Selling a note privately means finding a buyer who will re-underwrite the borrower and the collateral, and accepting a discount for the privilege.

Principal sits on one asset.

One borrower, one property, one lien. There is no diversification inside the position, so the outcome is close to binary: the loan performs and returns the coupon, or it does not and returns whatever the collateral fetches.

Points change the arithmetic in both directions.

Origination points are earned once, at closing, so a loan repaid early produces a higher annualised figure than the note rate — and a loan that runs long dilutes them toward nothing.

Idle capital is part of the return.

Money between loans earns whatever cash earns. A note rate applies only to the months capital is actually deployed; the return on the whole pot depends on how long it sits waiting for the next deal that passes diligence.

Costs come off the top.

Servicing fees, legal fees, recording and title costs, any inspections the lender pays for, and the cost of the diligence on deals that were declined.

It is ordinary income.

Interest received is ordinary income to the lender, taxed at marginal rates, with none of the qualified-dividend or long-term-capital-gain treatment that applies elsewhere. Points received have their own timing rules. This is US federal treatment in general terms only — the specifics belong to a tax professional.

A default is not a loss, it is a project.

The loan stops being an income instrument and becomes an enforcement, a foreclosure, and possibly a renovation and a resale — measured in months of work and legal fees, with the realised return decided by the eventual sale price rather than by anything written on the note.

Type numbers you want to test and the boxes show what a loan on those terms would pay if everything went to plan. The last two figures are the interesting pair: one spreads the cash over the months the money is actually lent out, the other over the months it is waiting for the next borrower as well. The catch: every figure here assumes the borrower pays in full and on time. That assumption is the whole risk, and no arithmetic on this page prices it.

Read this list as the job description for the bad case, because there is nobody to sell the loan to. The steps below are notices, waiting periods, court procedure and eventually a building somebody has to insure, heat and sell. Where this misleads: thinking of a default as a year with no interest. It is a legal process with its own costs and its own timetable, and the timetable is set by the state the property sits in, not by the lender.

1. Missed payment and grace periodA late charge attaches after the grace period written into the note. Most workouts start here, informally, with a borrower explaining a delay.
2. Notice of defaultA formal, statutory notice in the form and timing the state requires, usually recorded. Getting the notice wrong restarts the clock, which is the main argument for a professional servicer.
3. Cure periodA window in which the borrower can bring the loan current. Its length is set by statute and by the note, not by the lender's patience.
4. AccelerationThe lender calls the entire balance due, not just the missed payments, under the acceleration clause in the note.
5. ForeclosureNon-judicial trustee sale in deed-of-trust states; a court proceeding in mortgage states. Timelines differ enormously by state and are routinely extended by contested filings.
6. Bankruptcy stayIf the borrower files, an automatic stay halts enforcement until the lender obtains relief from the bankruptcy court. This can add months and legal cost regardless of how strong the lien is.
7. Sale, and any redemption periodThe property is sold at auction. Several states give the borrower a statutory period afterwards to redeem it, during which the outcome is still not final.
8. The lender owns a buildingIf nobody bids above the debt, the lender takes the property back. Property taxes, insurance, utilities, securing it, finishing the renovation, listing and selling it are now the lender's costs and the lender's time.
9. The realised return is computed backwardsPrincipal, accrued interest, default interest, legal fees and carrying costs are set against the net sale proceeds and the elapsed time. The note rate has no part in that calculation.

• The valuation was optimistic. ARV is a forecast; if the finished property does not appraise or sell where the file assumed, the equity cushion the loan was sized against never existed.
• The renovation stalled. Budget overruns, permit delays or a contractor walking off leave a half-finished building that is worth less than either the as-is or the after-repair number.
• The exit closed and the loan did not. A refinance the borrower cannot qualify for, or a sale that falls out of contract, turns a current loan into a maturity default with no warning from the payment history.
• The lien was not where the file said it was. Unrecorded liens, tax arrears, mechanic's liens with relation-back priority, or a recording that happened after disbursement.
• The insurance was wrong for the property. A vacant, under-renovation building on a standard homeowner's policy can leave a total loss uncovered.
• The paperwork was consumer paperwork in disguise. A loan that is really for a personal, family or household purpose, or against an owner-occupied dwelling, pulls in the consumer mortgage rules regardless of what the recital says.
• The rate exceeded the state usury cap. Usury caps and their business-purpose exemptions vary by state, and the penalties for exceeding one can include losing the interest entirely.
• The lender was not licensed to make the loan. Several states require a licence to make loans secured by real property, with narrow exemptions.
• Money was pooled from other people. Taking capital from passive investors to fund loans is generally an offering of securities, with registration or exemption, disclosure and investor-qualification requirements attached.
• It was funded from a self-directed IRA without checking the rules. Lending to or benefiting a disqualified person is a prohibited transaction, and leverage inside the structure raises unrelated-business-income questions.
• Concentration. Several loans to the same sponsor, or several properties in one submarket, look like a portfolio and behave like a single position.

Business purpose vs consumer purpose

Loans for a personal, family or household purpose, and most loans secured by an owner-occupied dwelling, fall under the federal consumer-mortgage regime — disclosure rules, ability-to-repay requirements and loan-originator licensing. Private lenders generally stay on the business-purpose side, and the purpose has to be real, not just recited.

State lending licences

Whether a private party may make a loan secured by real property, and how many, is a state question. Some states require a licence for any such loan; others exempt a small number of business-purpose loans per year.

Usury caps

Every state sets a maximum lawful rate, with different caps and different exemptions for business-purpose or entity borrowers. Points and fees may or may not count toward the cap depending on the state.

Pooling capital is a securities question

One person lending their own money is a loan. Several people funding loans through a fund, a fractionalised note or a platform is generally a security, typically offered under a private-placement exemption and often limited to accredited investors.

Retirement accounts

Notes can be held inside a self-directed IRA, which brings prohibited-transaction rules on disqualified persons and, where the account borrows, unrelated-business or debt-financed income considerations.

Foreclosure law is local

Judicial versus non-judicial process, notice content and timing, deficiency judgments and redemption periods are all set by the state where the property sits — not where the lender lives.

This page describes how private mortgage lending is structured and documented. It is not legal, tax or investment advice, it does not quote current market pricing, and it is not a recommendation to make or take a loan. Loan documents, licensing, usury limits and foreclosure procedure are governed by the law of the state where the property sits and must be confirmed with counsel there.