Hard Money Extensions, Default Terms and the Exit: Planning for When the Deal Runs Long
Experienced investors price the entry and stress-test the exit. On hard money, the terms that cost the most usually show up when a project runs long: extensions, default provisions and the refinance rules on the way out.
Extensions
- Many loans offer one or two extensions of 3–6 months, commonly for a fee of around 0.5–1 point each.
- Extensions are often conditional: loan current, no default, progress on the business plan, and sometimes an updated valuation or a paydown.
- Get the conditions in the loan documents, not just the term sheet. An extension that requires lender approval isn't really an option.
Default Terms
- Default interest: a higher rate, often several points above the note rate, can apply after maturity or a missed payment.
- Late fees are typically a percentage of the missed payment.
- Minimum interest or prepayment: some loans charge a minimum number of months of interest even if you pay off early.
- Cross-default: with some lenders, a default on one loan can affect your other loans with them.
The Refinance Exit
If the plan is to refinance into a DSCR loan, check the refinance lender's rules before you buy:
- Seasoning: many DSCR lenders require you to own the property for a period (often 3–12 months) before they'll use the new appraised value instead of your cost.
- Cash-out limits: cash-out LTV is usually lower than rate-and-term LTV.
- Leases: a signed lease at market rent and the rent the lender will count determine your DSCR.
Build the exit with time to spare. If the refinance needs six months of seasoning, a 12-month bridge loan gives you room; a 6-month loan doesn't.
Related: How Hard Money Loans Are Sized · Rates and Fees
Terms vary by lender and are set in the loan documents. This is general information, not legal advice.
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