$
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mo
Most hard money loans are 6–24 months
pts
1 point = 1% of loan amount
$
Appraisal, processing, legal fees
Monthly Payment
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⚠️ For informational purposes only. Hard money loan terms vary significantly by lender. Always review the full loan agreement and consult a financial advisor before borrowing.
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How Hard Money Loans Work
Hard money loans are short-term, asset-backed loans secured by real estate. Unlike conventional mortgages, lenders focus on the property's value rather than the borrower's credit score, making them popular with real estate investors who need fast capital for fix-and-flip projects or bridge financing.
Interest-Only Payment Formula
Monthly Payment = Loan Amount × (Annual Rate ÷ 12)
Example: $200,000 loan at 12% annual rate:
$200,000 × (0.12 ÷ 12) = $200,000 × 0.01 = $2,000/month
Points fee: $200,000 × 2% = $4,000 upfront
Total cost over 12 months: $24,000 interest + $4,000 points = $28,000
$200,000 × (0.12 ÷ 12) = $200,000 × 0.01 = $2,000/month
Points fee: $200,000 × 2% = $4,000 upfront
Total cost over 12 months: $24,000 interest + $4,000 points = $28,000
Typical Hard Money Loan Terms
- Interest rate: 8%–15% per year (vs 6–7% for conventional)
- Origination points: 1–4 points upfront
- Loan term: 6–24 months
- LTV: Up to 65–75% of property value or ARV
- Funding speed: 3–14 days (vs 30–60 days for conventional)
💡 Fix-and-Flip Tip: Factor your hard money loan costs into your ARV profit calculation. If you're buying at $150K, spending $50K on rehab, and selling at $280K, your hard money costs need to fit within the spread — typically targeting a 70% ARV rule to stay profitable.
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Frequently Asked Questions
What is a hard money loan?
A hard money loan is a short-term, asset-based loan secured by real estate. Unlike conventional loans, approval is based on the property value rather than the borrower's credit score. They are commonly used by real estate investors for fix-and-flip projects, bridge financing, or when traditional financing is too slow.
What are typical hard money loan rates?
Hard money interest rates typically range from 8% to 15% per year — significantly higher than conventional mortgages. Rates depend on the lender, loan-to-value ratio, borrower experience, and property type. Most hard money loans also charge 1–4 origination points upfront.
How are hard money loan payments calculated?
Most hard money loans are interest-only: monthly payment = loan amount × annual rate ÷ 12. A $200,000 loan at 12% = $2,000/month. The full principal is repaid in a balloon payment at the end of the loan term.
What is LTV in hard money lending?
LTV (Loan-to-Value) is the loan amount divided by the property value. Most hard money lenders cap LTV at 65–75% of the property's as-is or after-repair value (ARV). Lower LTV means less risk for the lender and often results in better rates.
What are points on a hard money loan?
Points are upfront origination fees, expressed as a percentage of the loan. One point = 1% of the loan amount. A $200,000 loan with 2 points costs $4,000 upfront. Most hard money lenders charge 1–4 points per loan, paid at closing.