When you’re moving fast to close a real estate deal, it’s tempting to breeze through the paperwork. But when it comes to hard money loans, the fine print matters—a lot. A few overlooked clauses could cost you thousands in fees, penalties, or lost opportunities.

At Lending Bee, we believe in full transparency, and we want you to go into every deal with your eyes wide open. Whether you’re a first-time borrower or a seasoned investor, here’s what you need to know about hard money loan terms so you can protect your investments and avoid getting burned.

1. Interest Rates: Know What You’re Paying (and How)

Hard money loans typically come with higher interest rates than traditional loans—no surprise there. But what matters is how those interest payments are structured.

✔ Are payments monthly interest-only with a balloon at the end?

✔ Is there an upfront interest reserve?

✔ Are you paying points on top of interest?

Tip: Always get a clear breakdown of your total cost of capital—not just the rate on paper.

2. Loan Term: Don’t Assume You Have Time to Spare

Most hard money loans are short-term, typically 6 to 24 months. That means you need a rock-solid exit strategy, whether that’s refinancing, selling, or cashing out another project.

✔ Know your maturity date.

✔ Ask if extensions are possible—and under what terms.

✔ Understand what happens if the loan goes past due.

Watch out for: Big penalties or automatic rate hikes if you go over your term.

3. Points and Origination Fees: Read the Front and Back Pages

It’s standard for hard money lenders to charge origination fees (aka “points”), usually 1–3% of the loan amount. But make sure you’re not getting hit with hidden fees in the back half of the agreement.

✔ Ask for a full fee sheet before you sign.

✔ Watch for admin, processing, or junk fees that sneak in.

✔ Clarify whether points are paid upfront or rolled into the loan.

Smart move: Add it all up before signing so you know your true cost.

4. Prepayment Penalties: A Trap for the Unaware

Let’s say your project wraps up early and you’re ready to repay the loan. Great, right? Not always. Some lenders charge a fee if you pay off the loan before a certain period.

✔ Ask if there’s a prepayment penalty, minimum interest period, or lock-in.

✔ If there is one, find out how it’s calculated.

At Lending Bee, we’re upfront about this from day one—no surprises.

5. Extension Terms: Don’t Wait Until the Last Minute

If your project takes longer than expected (and let’s be honest, it often does), you may need to extend your loan.

✔ Ask how much notice you need to give.

✔ Clarify what fees or rate increases come with an extension.

✔ Get it in writing before signing your original loan docs.

Pro tip: Build in buffer time so you’re not forced into a last-minute scramble.

6. Default Clauses: Know the Triggers

Defaulting on a hard money loan isn’t just about missing payments. Some agreements include technical defaults that have nothing to do with late checks.

✔ Can transferring the property trigger default?

✔ What if your insurance lapses or taxes aren’t paid?

✔ Are there clauses tied to project milestones or permits?

Read carefully. You don’t want to be blindsided by a default clause you didn’t know existed.

7. Rehab Draw Schedules: Plan for Cash Flow

If your loan includes rehab funds, make sure you understand how those draws are released.

✔ What documentation is needed to request a draw?

✔ How long does it take to get reimbursed?

✔ Is there an inspection or third-party approval process?

Important: Poor planning here can grind a project to a halt while you wait for funding.

8. Exit Strategy Requirements: Have a Game Plan

Most hard money lenders want to know how you’ll pay the loan back before they fund the deal.

✔ Do you plan to refinance or sell?

✔ Is your long-term lender lined up?

✔ Is your project timeline realistic?

Be ready to talk through your strategy in detail—and have documentation to back it up.

9. Recourse vs. Non-Recourse: Who’s on the Hook?

Some hard money loans are recourse loans, meaning if the deal goes south, the lender can come after your personal assets. Others are non-recourse, where only the collateral is at risk.

✔ Ask up front: Is this loan recourse or non-recourse?

✔ Know what you’re personally liable for—and what you’re not.

Note: Lending Bee always spells this out in plain language so there’s no confusion.

Protect Yourself Before You Sign

Understanding your hard money loan terms isn’t about being paranoid—it’s about being smart. When you know what to look for, you protect your project, your profits, and your peace of mind.

At Lending Bee, we believe that transparency builds trust. We walk you through every part of the loan agreement so you’re never left in the dark.

Ready to fund your next deal the smart way? Contact Lending Bee and let’s talk about your goals—and how we can help you get there without the fine-print surprises.