Refinancing Your Hard Money Loan to a Conventional Loan

You’ve worked diligently and are finally ready to put that rehabbed property on the real estate market. Unfortunately, you’re having trouble finding a buyer right away, and your loan is close to maturing. 

You are looking at your long-term options and have decided to keep the real estate investment property as a rental for a steady income stream. You need a long-term loan solution, but what can you do?

What are your options for refinancing with private lenders? Can you refinance a hard money loan? Learning about financing out of hard money loans is essential for making tough decisions. 

We’ve put together this guide to help you understand how to refinance hard money loans. We want to help you understand the benefits and what you can expect from the process.

Why You Should Refinance Hard Money Loans 

Sometimes, this financing option is only offered by private lenders. These loans are highly attractive for real estate investors. The terms are typically more relaxed, and the process is lightning fast. 

Some loans are even renewable, especially in construction. 

There are many reasons real estate investors choose hard money cash-out refinance options, including the following. 

  • You could obtain financing from private lenders that offer long-term options, so you are less stressed over selling your property quickly. 
  • You may be able to obtain a better interest rate. 
  • You may be able to obtain better terms.


single family home just renovated
Single Fam
47 Days 
residential home being renovated
Fix and Flip
Austin, TX
69 Days
new residential home being built
Akron, OH
39 Days

Questions You Should Ask Before Deciding Between an Extension or Refinance

As mentioned above, some hard money loans are extendable. Consider these questions before deciding between your options. 


How Long Do You Need?

One of your first considerations should be how long you need the financing. Most hard money lenders will only extend these loans for three to six months.

If you need more long-term options to rehab your real estate investment property or sell it, a loan extension may not be right for you. If your project is delayed and you need more time, you may be better off considering a refinance hard money loan to conventional loan option. 

If your cash flow has suddenly improved, you may be in a position to receive better financing with improved terms without higher interest rates that better meet your financial goals. First, try to speak with your hard money lender and leverage an extension with better terms. 

Do You Require a Cashing-Out Option?

Do you have substantial capital in the real estate investment property? Has the value of your investment properties significantly increased from the original purchase price? If so, you may be a good candidate for a cash-out refinance hard money loan.

It’s important to note that this investment strategy is sometimes difficult to obtain because a hard money lender will see this type of loan as much riskier. Similar to a traditional mortgage, hard money lenders may require bank statements, income verification, previous tax returns, proof of loan proceeds, and higher interest rate requirements.

Will Your Lender Offer a Hard Money Loan Extension?

You need to find out if your lender is one of the hard money refinance lenders. Because you’ve established a solid reputation with your current lender, you’re more likely to be approved to refinance out of hard money loan contracts. 

How Do You Qualify for a Refinance?

When seeking hard money refinance loans (permanent financing- usually amortized over a 30 year period), you need to learn how to qualify. In most cases, you will need to gather documents, seek appraisals, and wait patiently for the underwriting process. The following are some of the things the lender will require. 

  • Bank statements
  • Tax returns from several years
  • Photo ID
  • Paystubs
  • Income verification

This process could take up to 60 days, and you may wait that long only to find out you’ve been denied. Seeking a hard money to conventional loan is sometimes time consuming. 

Before learning how to refinance a hard money loan, you need to evaluate two things. How is your credit score? What is your debt-to-income ratio? If either of these is poor, it might be difficult for a traditional lender to refinance your loan. 

You also need to carefully evaluate your long-term loans or rental loans. Do they have a prepayment penalty? What is the loan-to-value ratio? You will still be required to pay the prepayment penalty even if you refinance out of this type of loan. This is something you should consider. 


residential property being fixed to sell
Fix and Flip
43 Days
residential home
2nd Mortg
49 Days
multi family building purchase
Multi Fam
64 Days

Tips for Refinancing a Hard Money Loan

Once you learn about refinancing out of a hard money loan, there are some tips you should be aware of to help you make the right decision. We’ve provided the following tips to help ensure you are prepared. 

Optimize Your Credit Score

Since traditional banks will check your credit history, they expect it to be as high as possible. If your credit is not where it needs to be, your first priority should be improving it. 

You should always make sure your hard money loan payments are made on time. Although the lender will not report to the credit bureau, late payments could cause problems with financing approval from traditional banks and result in higher interest rates.

When you apply for refinancing, the financer will ask for a payoff from your previous lender. The payoff will show if you have made late payments. A late payment record will likely cause the new lender to deny your request. 

Prepare the Rental Property

Before you pursue new financing, you must finish rehabbing your rental property. Most lenders will not consider financing loans on a property still under construction. Get the property ready to become a rental property before starting the process. 

Allow Us to Help You With Your Real Estate Needs

If your credit score and property are up to par, you may want to consider refinancing options with a traditional lender. If you are like many real estate investors, you may find you are not qualified. 

We invite you to contact one of our lender partners today about your options. There are multiple alternatives for refinancing or extending a hard money loan, and it may result in a lower interest rate or more flexible terms. They will be happy to answer any questions you may have and help you through the entire process.