Hard Money vs Bank Loan: Which Is Right for Your Hawaiʻi Deal?
Banks and hard money lenders solve different problems. A bank offers the lowest cost of capital for a stabilized property and a borrower with documented income. A hard money lender offers speed, flexibility and certainty of close for deals a bank cannot or will not fund.
In Hawaiʻi the gap is wider than on the mainland. Leasehold, lava zones, ag land, older construction and thin comps all push deals outside bank guidelines.
| Factor | Hard Money | Bank Loan |
|---|---|---|
| Time to close | Days to 15 business days | 30 to 60 days |
| Qualification | Property and exit plan | Credit, income, DTI, reserves |
| Interest rate | About 12% per year (1% per month) | Roughly 6.5% to 8% per year |
| Leverage | Up to 75% ARV | 75% to 80% of purchase price |
| Rehab funding | Yes, in draws | Rarely |
| Leasehold | Yes | Limited |
| Term | 6 to 24 months | 15 to 30 years |
| Prepayment | No penalty | Varies |
Choose hard money when
- You need to close in under 30 days
- The property needs work
- The property is leasehold, ag or in a lava zone
- You cannot or prefer not to document income
Choose bank loan when
- The property is stabilized and rented
- You plan to hold for years
- You have time and documented income
- Lowest rate is the priority
Our verdict
Use hard money to acquire, renovate or bridge. Use a bank to hold. Most successful Hawaiʻi investors use both, in that order.