Hard Money Loan Calculator
Figure out the true cost of a hard money loan, points and all.
Updated · By Teodor-Cristian Lutoiu
The sticker rate on a hard money loan (10–13%) understates the true cost. Upfront points (2–4% of principal) on a short 12-month term push the effective APR to 13–18%. On a flip held under 6 months, the points fee often costs more than the entire year of interest would have.
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How hard money loans work
Hard money lenders aren't banks. They're private investors (individuals, funds, or specialty firms) lending against real estate, typically to real-estate investors doing fix-and-flips, bridge deals, or short-term holds. Three things define a hard money loan:
- Asset-based underwriting. The lender cares primarily about the property, not the borrower's credit or income. Approval depends on LTV (often 65-75% of ARV — After-Repair Value) and how confident they are they could sell the property themselves if you default.
- Interest-only with balloon. You pay monthly interest only, no principal, then repay the full principal (balloon) at the end of the term — usually 6 to 24 months.
- High rate plus points. APRs run 8-15% (and sometimes higher), plus 1-4 "points" charged upfront at origination. Points are a percent of the loan: 2 points on $200,000 is $4,000 at closing.
The reason investors still use hard money: it's fast (close in 5-10 days vs 30-45 for a bank) and flexible (funding rehab properties banks won't touch). You pay for that speed with the rate.
How to compare hard money quotes
Lenders quote the APR and the points separately, which makes cross-shopping tricky. The lowest APR with the highest points isn't always the best deal, especially on short terms.
This calculator combines both into a single number — true cost of capital — and annualizes it:
monthly_payment = loan_amount × (APR / 12)
upfront_points = loan_amount × (points / 100)
total_interest = monthly_payment × term_months
total_cost = total_interest + upfront_points
effective_apr = total_cost / loan_amount / (term_months / 12)
The shorter the term, the more points hurt your effective APR (you're paying the same upfront fee against a smaller interest-based denominator). On a 6-month loan, 3 points = 6% extra effective APR. On a 24-month loan, 3 points = 1.5%.
Formula
monthly_payment = loan_amount × (APR / 12)
upfront_points = loan_amount × (points / 100)
total_interest = monthly_payment × term_months
balloon_at_end = loan_amount // interest-only, principal due in full
total_cost = total_interest + upfront_points
effective_apr = total_cost / loan_amount ÷ (term_months / 12)
We assume pure interest-only structure, which is the default for fix-and-flip hard money. Some deals are partial-amortization or interest-reserve — if yours is different, run this for the ceiling cost and treat it as an upper bound.
Scenarios at a glance
$200,000 hard money loan at 11% interest, 12-month term, interest-only:
| Points | Upfront points cost | Monthly interest | Total 12-month cost | Effective APR |
|---|---|---|---|---|
| 2 points | $4,000 | $1,833 | $26,000 | 13.0% |
| 3 points | $6,000 | $1,833 | $28,000 | 14.0% |
| 4 points | $8,000 | $1,833 | $30,000 | 15.0% |
On a 6-month hold instead of 12, the $8,000 of points becomes ~16% annualized on top of the 11% rate — an effective APR near 27%.
Worked example
Priya buys a dated single-family home in Phoenix at auction for $250,000, planning a $50,000 rehab to list at $380,000. She doesn't have 12 months of tax returns because she just left a W-2 job, so a bank mortgage is out. She finds two hard money quotes:
| Lender | APR | Points | Term |
|---|---|---|---|
| Lender A | 10% | 3 points | 12 months |
| Lender B | 12% | 1 point | 12 months |
She plans to borrow $200,000. Using the calculator:
Lender A (10% APR, 3 points):
- Monthly payment: $1,667
- Points upfront: $6,000
- Total interest over 12 months: $20,000
- True cost: $26,000 → effective APR 13%
Lender B (12% APR, 1 point):
- Monthly payment: $2,000
- Points upfront: $2,000
- Total interest over 12 months: $24,000
- True cost: $26,000 → effective APR 13%
They're identical on true cost. The choice comes down to cash flow: Lender A is easier on monthly cash ($1,667 vs $2,000) but harder on closing cash ($6,000 vs $2,000). If Priya is cash-tight at closing, Lender B wins. If she'd rather minimize monthly drain during rehab, Lender A wins.
If the deal closes in 9 months instead of 12 — a successful flip — the math shifts. Priya pays fewer months of interest but full points either way, so the lender with fewer points (B) wins on actual cost.
FAQ
What does "points" mean in a hard money loan?
A point is 1% of the loan amount, paid upfront at closing. 2 points on $200,000 = $4,000. Lenders use points as a risk premium; riskier deals (higher ARV ratio, weaker borrower) get priced with more points.
Is hard money the same as a bridge loan?
Similar structure (short-term, interest-only, balloon), but bridge loans are usually from banks or credit unions at lower rates and are used for buyers who need funds before selling their current home. Hard money is specifically from private lenders, typically for investment properties.
How is hard money different from a DSCR loan?
DSCR (Debt Service Coverage Ratio) loans are for buy-and-hold rentals, underwritten on the property's rental income. Rates are lower (7-9%), terms are longer (usually 30-year amortization), and approval is faster than a bank but slower than hard money. Use hard money for short-term flips; use DSCR for long-term rentals.
Do I need a personal guarantee?
Almost always yes. Even when the loan is to your LLC, most hard money lenders require you to personally guarantee repayment. If the property goes to foreclosure and sells for less than the loan balance, you're on the hook for the deficiency.
What happens if I can't repay at the end of the term?
You pay extension fees (typically 1-2 points for a 3-6 month extension), refinance into another loan (hard or conventional), or sell the property. If you can't do any of those, the lender forecloses — and since they underwrote the deal expecting that as a real possibility, they're usually efficient about it.
Is hard money interest tax-deductible?
For an investment property, yes — interest is a business expense that offsets rental or flip income. Talk to a CPA to structure it correctly; deductibility depends on whether you're classified as a real estate professional or passive investor.
Last updated: April 23, 2026