Flipping houses requires quick decisions and clear numbers. This calculator helps you estimate the total cost of a hard money loan so you can underwrite deals faster and avoid surprise expenses at closing.
What This Calculator Does
Hard money loans are short-term, asset-based loans used primarily by real estate investors. Unlike traditional mortgages, they focus on the property's value rather than the borrower's income. This tool estimates the total cost of borrowing by combining three main components:
- Interest: The cost of borrowing the principal amount for the loan term.
- Points: Upfront fees paid to the lender, typically expressed as a percentage of the loan amount.
- Fees: Additional costs such as origination, processing, or administrative fees.
The result is a hypothetical total cost in dollars. This helps you compare different loan offers or decide if a deal fits your budget before you apply.
How to Use the Calculator
Fill in the four fields below. Enter numbers only—no dollar signs or commas.
1. Loan Amount: The principal you are borrowing. This is usually a percentage of the after-repair value (ARV) or the purchase price, whichever is lower.
2. Interest Rate: The annual percentage rate (APR) charged by the lender. Hard money rates are typically higher than bank rates.
3. Points: The upfront fee percentage. One point equals 1% of the loan amount. Lenders may charge 2–5 points depending on risk and speed.
4. Months: The expected loan term. Most hard money loans range from 6 to 18 months. Exit the loan via sale, refinance, or payoff when the term ends.
Example
Loan Amount: $100,000
Interest Rate: 12%
Points: 3
Months: 6
Calculation Breakdown:
- Points: 3% of $100,000 = $3,000 (paid at closing)
- Interest: ($100,000 × 12% × 6 ÷ 12) = $6,000 (paid over the term)
- Fees: $0 (assuming no additional fees in this example)
- Total Estimated Cost: $3,000 + $6,000 = $9,000
Label: Example: The numbers above are hypothetical and for illustration only.
Input Definitions
Loan Amount
The total principal borrowed. Hard money lenders often lend up to 65–75% of the as-is value or 70–80% of the ARV, but terms vary by lender.
Interest Rate
The cost of capital per year. Rates fluctuate based on the lender, property type, and loan-to-value ratio. This calculator uses a simple interest assumption for the term entered.
Points
Upfront fees expressed as a percentage of the loan. One point = 1% of the loan amount. For example, 2 points on a $200,000 loan equals $4,000 due at closing. Points may be negotiable based on your experience and the deal size.
Months
The planned holding period. If you intend to refinance into a conventional loan after repairs, use the expected refinance timeline. If you plan to sell quickly, use your estimated renovation and sales timeline.
Reading the Result
The calculator returns a single dollar amount: the estimated total cost of the loan based on your inputs. This number includes points paid at closing and interest accrued over the months entered. It does not include property taxes, insurance, or rehab costs—those are separate expenses.
Use this number to:
- Compare two loan offers side-by-side.
- Determine if the projected profit margin of a flip supports the financing cost.
- Decide whether to negotiate points or seek a lower-rate lender.
Common Mistakes
- Forgetting to include points: Points are due at closing and can be a large upfront cost. Omitting them understates the true cost of the loan.
- Using the wrong term: Entering 3 months when you plan to hold for 12 will give you a misleadingly low interest number. Be realistic about your timeline.
- Ignoring additional fees: Some lenders charge origination, processing, or wire fees not captured here. Always ask for a full fee sheet.
- Assuming full ARV lending: Hard money loans are based on collateral value, not your purchase price alone. Verify the lender's maximum loan-to-value (LTV) before assuming the loan amount.
When to Talk to a Lender
This calculator provides an estimate. Actual terms vary by lender, property, and your experience level. Contact a hard money lender when:
- You have a specific property under contract and need exact figures.
- You want to discuss LTV ratios and how much you can borrow.
- You have questions about prepayment penalties or extension fees.
- You need a loan commitment letter for a deal.
A lender can provide a binding quote that includes all fees, rate locks, and timelines.
Frequently Asked Questions
Q: Do hard money loans always have interest-only payments?
A: Many hard money loans are structured as interest-only for the term, with the principal due at maturity. However, some lenders may allow partial amortization or different payment structures. Confirm the payment schedule with your lender.
Q: What is the typical loan term?
A: Terms typically range from 6 to 18 months. Some lenders offer extensions, often for an additional fee or higher rate. Plan your exit strategy within the original term if possible.
Q: Can I roll the points and fees into the loan?
A: Some lenders allow you to finance points and certain fees into the total loan amount, meaning you borrow more and pay interest on the higher balance. This increases your total cost and your final payoff amount. Ask your lender if this option is available.
Q: How is the interest calculated—simple or compound?
A: Most hard money loans use simple interest calculated on the outstanding balance. Some may use a precomputed interest method. The calculator above uses a simple interest assumption for the months entered.
Q: What happens if I need to extend the loan?
A: Extensions are possible but usually come with a fee or a rate increase. Discuss extension policies upfront so you can budget for the possibility.
Q: Are hard money loans tax-deductible?
A: Interest paid on a hard money loan used for investment real estate may be tax-deductible as a business expense. Consult a tax professional for your specific situation.
Q: What is the 70% rule I’ve heard about?
A: The 70% rule is a guideline some investors use to determine the maximum offer price for a flip. It suggests: Maximum Offer Price = (After-Repair Value × 70%) – Estimated Repair Costs. This rule helps ensure enough margin to cover financing, holding costs, and profit.
Start Calculating
Estimate your hard money loan costs quickly and get back to underwriting deals.
[Calculate Your Loan Cost]
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Disclaimer: This calculator provides estimates only and does not constitute financial, legal, or tax advice. Numbers shown are hypothetical. Actual loan terms, rates, and fees vary by lender and deal. Always consult with a qualified professional before making investment decisions. FlipRadar is a free tools and guides site for house flippers and small real-estate investors.