1. What is a Hard Money Loan?

A hard money loan is a type of asset-based loan financing through which a borrower receives funds secured by real property. These loans typically have higher interest rates than conventional loans and are primarily used for short-term financing.

2. How the Payment is Calculated

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Number of monthly payments

Explanation: This formula calculates the fixed monthly payment required to fully amortize the loan over its term, including both principal and interest.

3. Understanding Loan Terms

Details: Hard money loans typically have shorter terms (6-36 months) and higher interest rates (8-15%) compared to traditional mortgages. The loan-to-value ratio is usually 50-70% of the property's value.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 12 for 12%), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's typical for hard money loan terms?
A: Terms usually range from 6-36 months with interest rates between 8-15%, and points (fees) of 2-5% of the loan amount.

Q2: How does this differ from a traditional mortgage?
A: Hard money loans are asset-based (not credit-based), have shorter terms, higher rates, and are typically used by real estate investors.

Q3: Are there prepayment penalties?
A: Many hard money loans have prepayment penalties, especially if paid off within the first 6-12 months.

Q4: What costs aren't included in this calculation?
A: This doesn't include origination fees, closing costs, or any required escrow payments for taxes/insurance.

Q5: How accurate is this calculator?
A: It provides the base monthly payment calculation. Actual payments may vary based on specific loan terms and fees.