Calculate the total cost of a hard money loan including interest, origination points, and fees. Compare effective APR to conventional financing options.
Hard money loans are the fuel of house flipping. They provide fast funding (often within 7–14 days) based primarily on the property's value rather than the borrower's credit. But speed and accessibility come at a cost: interest rates of 10—14%, origination fees of 1–3 points, and various processing fees that can add up to $5,000–20,000 or more over the life of a short-term flip.
This calculator shows the full cost of a hard money loan: monthly interest payments, origination points in dollars, additional fees, and the total financing cost over your hold period. It also calculates the effective APR when all fees are included, which is often significantly higher than the stated interest rate.
Understanding the true cost of hard money is essential for accurately projecting flip profits. A 12% rate with 2 points on a $200,000 loan costs significantly more than most new flippers expect, and that cost comes directly out of your profit.
The stated interest rate on a hard money loan is misleading because it doesn't include points and fees. This calculator shows your all-in financing cost so you can accurately budget for the flip and compare costs between multiple lenders. Instant recalculation lets you compare scenarios side by side, so every buying, selling, or investment decision is grounded in solid financial analysis.
Monthly Interest = Loan Amount × Annual Rate / 12 Total Interest = Monthly Interest × Term (months) Origination Fee = Loan Amount × Points / 100 Total Cost = Total Interest + Origination Fee + Additional Fees Effective APR ≈ (Total Cost / Loan Amount) × (12 / Term) × 100
Result: Total financing cost = $17,500 | Effective APR = 17.5%
Monthly interest: $200,000 × 12% / 12 = $2,000. Over 6 months: $12,000. Origination: 2 points = $4,000. Additional fees: $1,500. Total cost: $17,500. Effective APR: ($17,500 / $200,000) × (12/6) × 100 = 17.5%, significantly higher than the stated 12%.
Hard money's speed and accessibility come at a premium. A 12% loan with 2 points over 6 months costs about 8.5% of the loan amount. On a $200,000 loan, that's $17,000+ in financing costs — money that comes directly out of your flip profit. Understanding this cost is essential for deal evaluation.
Don't just compare rates. A lender charging 10% with 3 points may cost more than one charging 13% with 1 point, depending on your hold period. The total cost formula is: (monthly interest × months) + (points × loan amount) + fees. Run this for each lender to find the cheapest option for your timeline.
The best way to reduce hard money costs is to minimize your hold time. Every month saved is one fewer month of interest. Additionally, bringing a larger down payment reduces the loan amount and total interest paid. Building a relationship with one lender can also lead to better rates and terms over time.
A hard money loan is a short-term, asset-based loan used primarily by real estate investors. Unlike conventional mortgages, approval is based on the property's value (collateral) rather than the borrower's income or credit score. They fund quickly but charge higher interest rates and fees.
An origination point equals 1% of the loan amount. If you borrow $200,000 and pay 2 points, that's $4,000 in upfront fees. Points are paid at closing and compensate the lender for processing the loan. They significantly increase the effective cost of borrowing.
Most hard money loans are interest-only, meaning you pay only interest each month with the principal due at the end (balloon payment). Interest is calculated as: loan amount × annual rate / 12. A $200,000 loan at 12% = $2,000/month in interest.
Rates typically range from 10—14% annually, depending on the lender, borrower experience, loan-to-value ratio, and property type. Experienced flippers with strong track records can sometimes negotiate rates as low as 8–9%. First-time flippers often pay the highest rates.
Hard money works best for short-term projects like flips. For rentals, the high interest rate makes long-term holding unprofitable. However, some investors use hard money to acquire and rehab a property, then refinance into a conventional loan (the BRRRR strategy) for long-term holding.
Hard money comes from lending companies with standardized terms, while private money comes from individual investors (family, friends, wealthy individuals). Private money is typically more flexible on terms and sometimes cheaper, but harder to find consistently. Hard money is more accessible but more expensive.