How Hard Money Loans Work

This hard money loan calculator models the standard structure: an interest-only monthly payment at the stated rate, an upfront points fee, and the full principal due as a balloon at maturity. Borrowers typically refinance or sell the property before the term ends.

Why the Cost Adds Up Fast

At 10% with 3 points, a $250,000, 12-month loan costs $32,500 — a 13% cost of capital for the year. Because the term is short, points dominate: they amortize over only 12 months rather than 30 years.

When It Makes Sense

Hard money suits flips and bridge situations where speed outweighs cost. Run the numbers before committing: the exit must cover the interest, points, and rehab budget, or the spread disappears.