You’ve submitted your deal, had a quick conversation with a lender, and now a term sheet is sitting in your inbox. Before you sign anything — or reject it assuming it’s too expensive — you need to know how to actually read it. As hard money lenders in the Lake Norman area, one of the most common things we hear from investors is: “I didn’t fully understand what I was agreeing to.” This guide fixes that.

Term sheets aren’t standardized across the industry. Every hard money lender structures theirs differently, which makes comparison tricky if you don’t know the key components. Whether you’re funding a fix-and-flip in Mooresville, a BRRRR acquisition in Charlotte, or a ground-up build in Cornelius, these are the line items that matter.

Need cash for your next real estate deal? Contact us today and let’s talk about your project — we’ll have a term sheet in front of you fast.

What Is a Hard Money Loan Term Sheet?

A term sheet (sometimes called a letter of intent or LOI) is a non-binding summary of the proposed loan terms from a hard money lender. It’s not the final loan agreement — that comes later at closing in the form of a promissory note and deed of trust. But the term sheet is where you’ll first see the economics of the deal laid out, and it’s the document you should scrutinize most carefully before proceeding.

Most hard money lending term sheets are 1–3 pages. They’re designed to move fast, not to be exhaustive legal documents. Here’s what every investor in the Lake Norman, Huntersville, Davidson, or Charlotte area needs to know about each section.

The 10 Key Sections of a Hard Money Term Sheet

1. Loan Amount

This is the total amount the lender is offering to lend. On a fix-and-flip, it’s typically broken into two parts: the acquisition amount (funded at closing) and the rehab holdback (disbursed in draws as work is completed). Make sure you understand which is which — the headline number can look large but include funds you won’t see until construction milestones are hit.

2. Loan-to-Value (LTV) and/or Loan-to-Cost (LTC)

This tells you how the lender is sizing the loan relative to the property. LTV is usually expressed as a percentage of the as-is value or the after-repair value (ARV). LTC measures the loan against the total project cost (purchase price + rehab budget). A term sheet might say something like: “65% of ARV” or “80% LTC.” Understanding which basis the lender is using is critical — two lenders can quote the same percentage but arrive at very different loan amounts depending on which metric they use.

3. Interest Rate

Hard money lending rates are typically quoted as an annual rate but charged monthly on the outstanding balance. A 12% annual rate means roughly 1% per month. Some lenders charge interest on the full loan amount (including the rehab holdback that hasn’t been disbursed yet); others only charge on drawn funds. That distinction can meaningfully affect your carrying costs — ask explicitly.

4. Origination Points

Points are upfront fees charged as a percentage of the loan amount. One point = 1% of the loan. A $300,000 loan at 2 points = $6,000 in origination fees, paid at closing. Points are how hard money lenders earn their upfront compensation. Watch for whether points are charged on the total loan amount or just the funded portion — and don’t forget they factor into your deal’s overall return calculation.

5. Loan Term

Hard money loans are short-term by design — typically 6 to 24 months. The term sheet will specify the maturity date or duration. This is your deadline to execute your exit strategy (sell, refinance, or pay off). Make sure the term is realistic given your rehab timeline and market conditions in the Charlotte metro area. A 6-month loan on a heavy rehab in Mooresville is aggressive; a 12–18 month term gives you more runway.

6. Extension Options

What happens if your project runs over? Good term sheets will outline extension options — typically 1–3 months available for a fee (often 0.5–1 point per extension). This is a critical safety valve. If there are no extension provisions, ask about them before proceeding. Running out of runway with a hard money loan and no clear path to refinance or sell is a real problem.

7. Prepayment Terms

Some hard money lenders charge a prepayment penalty if you pay off the loan before a minimum interest period (often 3–6 months). Others have no prepayment penalty at all. If you’re doing a fast flip in Davidson or Huntersville and expect to close in 90 days, a lender with a 6-month minimum interest requirement means you’re paying for months you don’t use. Know this before you sign.

8. Draw Schedule and Process

On rehab or construction loans, the term sheet should outline how draws work. Who inspects the work? How long does draw funding take after a request? Are there limits on the number of draws? In the Lake Norman market, where contractor timelines can vary, a lender who takes two weeks per draw inspection can stall your entire project. Fast draw processing is one of the biggest practical advantages of working with a local hard money lending team.

9. Personal Guarantee

Most hard money lenders require a personal guarantee even when lending to an LLC. The term sheet will note whether it’s a full recourse or limited recourse guarantee. This means if the property doesn’t cover the loan balance at sale, the lender can come after personal assets. Don’t let this be a surprise at closing — it will be in the promissory note regardless, so better to understand it upfront.

10. Conditions and Due Diligence Requirements

The final section of a term sheet typically lists what the lender needs before closing: title commitment, property inspection or BPO, insurance binder, LLC formation documents, executed purchase contract, and sometimes a draw schedule and scope of work. The fewer surprises here, the faster you’ll close. Experienced hard money lending teams in the Charlotte metro area can typically close in 7–10 business days once they have clean documentation.

Ready to fund your next investment? Reach out to our team — we can close in as little as 7–10 days and we’ll walk you through every line of the term sheet before you commit.

Red Flags to Watch For in a Term Sheet

Not all term sheets are created equal. A few things that should give you pause:

• No extension options. Every project can run long. A lender that offers zero extensions is setting you up for a forced sale or default.
• Interest charged on undisbursed rehab funds. You shouldn’t pay for money you haven’t received yet — or at minimum, understand if this is the case and price it into your deal.
• Vague draw language. If the term sheet says “draws at lender’s discretion” with no timeline, you have no leverage if the lender goes slow.
• Points hidden in processing fees. Some lenders advertise low origination points but tack on underwriting, processing, or document prep fees that add up to the same thing. Compare all-in cost, not just the headline rate.

Comparing Term Sheets from Multiple Hard Money Lenders

When comparing offers from multiple Mooresville hard money lenders or Charlotte hard money lenders, build a simple spreadsheet: loan amount, effective LTV, interest rate, points, term, total cost of capital over your expected hold period. The cheapest rate doesn’t always mean the lowest total cost — a lender with slightly higher rates but faster draws and no prepayment penalty can save you more money than a low-rate lender who adds friction at every step.

Relationship and reliability matter too. A lender who consistently closes on time, funds draws quickly, and works with you on extensions is worth more than a marginally cheaper one who slows you down when you need to move fast.

Frequently Asked Questions

Is a hard money loan term sheet legally binding?

No. A term sheet is non-binding and simply outlines proposed loan terms. The binding legal documents are the promissory note and deed of trust executed at closing. That said, once you accept a term sheet and pay any application or appraisal fees, those fees are typically non-refundable.

How long is a hard money term sheet valid?

Most term sheets expire within 7–30 days. Because hard money lending terms are tied to current market conditions and deal specifics, lenders typically won’t hold a rate open-ended. If your deal timeline shifts significantly, expect to get a refreshed term sheet.

Can I negotiate the terms on a hard money loan term sheet?

Yes — especially on rate, points, and extension terms. Experienced investors with strong track records and clean deals often have more negotiating leverage. In the Lake Norman and Charlotte market, lenders want to fund good deals with reliable borrowers. If your numbers are strong, don’t hesitate to ask.

What’s the difference between a term sheet and a commitment letter?

A term sheet is informal and non-binding. A commitment letter is a more formal document — still not the final loan agreement, but it signals that the lender has completed underwriting and is formally committing to fund, subject to closing conditions. Some hard money lenders skip straight from term sheet to closing; others issue a formal commitment in between.

How do I know if hard money lending is right for my deal?

Hard money lending makes sense when you need speed, flexibility, or when a property doesn’t qualify for conventional financing due to condition or deal structure. If you’re buying a distressed property in Cornelius, doing a value-add project in Davidson, or need to close in 10 days on a competitive deal in Huntersville — hard money is likely your best tool. A good lender will tell you honestly if it makes sense for your situation.

Need fast capital for a deal? Fill out our contact form and we’ll get back to you within 24 hours. We’re local Lake Norman private money lenders who know this market inside and out — and we’re here to help you close.