How a hard money loan works
A hard money loan is a short-term loan from a private lender, secured on property and sized mainly from the deal rather than the borrower's income. One lender's calculator notes terms are typically 6 to 24 months and that most lenders cap a loan at about 70% of the after-repair value, from 70% to 75% depending on the borrower and the project. Payments are usually interest-only, with the whole loan due at the end of the term as a balloon payment.
The cost is the interest plus points, which are a percentage of the loan paid at closing, and other fees. A lender's fix and flip guide says points are paid at closing and typically cannot be financed, so this calculator takes them off the cash you receive.
Worked example: a $250,000 loan at 11% for 12 months
Borrow $250,000 against a $400,000 property, which is a loan to value of 62.50%. The rate is 11%, the term 12 months, the points 2% and the closing fees $1,500. The points are $5,000.00, so you receive $243,500.00 at closing. The interest-only payment is $2,291.67 a month, the total interest is $27,500.00 and the $250,000 is due at the end.
The total cost of borrowing is $34,000.00, which is 13.60% of the loan and an average of $2,833.33 a month. Because the points and fees reduce the cash you receive, the APR is 13.80%, above the 11% rate. On a US page the APR is the nominal annualised rate.
Check published examples
Groundfloor's fix and flip guide works through a $140,000 loan at 12% with 2 points over 12 months: $16,800.00 of interest and $2,800.00 of points, $19,600.00 in total. This calculator gives the same figures. Ridge Street Capital's calculator shows $300,000 at 11% as $2,750.00 a month, and its 6-month example has $16,500.00 of interest; with 1.5% points ($4,500.00) the total cost of borrowing is $21,000.00 and the loan to a $550,000 value is 54.55%.
Ridge Street's calculator also shows an effective APR below the interest rate, which looks wrong for a loan that also charges an origination fee, so this page does not use it. Here the same 6-month loan has an APR of 14.12%.
Interest-only, amortizing or rolled-up
Interest-only keeps the payment low and leaves the balloon. Fully amortizing repays the loan over the term: the same $250,000 over 12 months is $22,095.41 a month, with $15,144.98 of interest and a total cost of $21,644.98, but the APR is higher at 16.02% because you hold the money for less time on average. Rolled-up interest means no monthly payment: the interest builds up on the loan at one twelfth of the rate each month and you pay $277,500.00 at the end, an APR of 13.14%.
An exit fee of 1.5% of the loan, paid with the final payment, adds $3,750.00 to the interest-only example and takes the total cost to $37,750.00 and the APR to 15.22%.
What this estimate leaves out
This is a planning estimate for a loan paid out in full at closing. It does not model rehab draws or interest charged only on funds drawn, extension fees, default rates, a prepayment minimum, holding costs or taxes, and it does not check what a lender will lend. Lenders may calculate interest on actual days, so the figures in your agreement are the ones that count.
For rehab draws, Dutch interest and the maximum loan on a renovation, use the fix and flip loan calculator .
Hard money loans in the UK
In the UK this kind of short-term, property-secured lending is usually called bridging finance, and it has its own calculators in pounds with UK terms. This page is for the US: dollars, points and the nominal APR.
For the UK, use the bridging loan calculator .
Inputs for the hard money loan calculator
How the loan is repaid
Interest-only with the loan due at the end, fully amortizing payments, or interest rolled up to the end.
Loan amount and property value
What the lender lends before points and fees, and the value it uses, which sets the loan to value.
Interest rate and term
The yearly rate from your term sheet, charged monthly, and the months you keep the loan.
Points
A percentage of the loan paid at closing. One point is 1%.
Closing and other fees
Fixed costs paid at closing, such as appraisal and document fees.
Exit fee
A percentage of the loan paid when you repay it.
CALCULATOR QUESTIONS
US hard money loan calculator questions
How do you calculate a hard money loan payment?
For an interest-only loan, multiply the loan by the yearly rate and divide by 12. $250,000 at 11% is $2,291.67 a month.
How much do points cost on a hard money loan?
Each point is 1% of the loan, paid at closing. Two points on $250,000 is $5,000.00, which comes off the cash you receive.
What is the APR on a hard money loan?
It is the yearly rate at which the payments repay the cash you actually receive after points and fees. The example loan has an 11% rate and a 13.80% APR.
What is the balloon payment?
On an interest-only loan it is the whole loan, due at the end of the term. In the example it is $250,000.00.
Is a hard money loan the same as a bridging loan?
They are similar short-term, property-secured loans. In the UK the product is usually called bridging finance, which has its own UK calculators.
Does the calculator cover rehab draws?
No. It assumes the loan is paid out at closing. For draws and interest only on money drawn, use the fix and flip loan calculator.