1. What is a Hard Money Loan?

Hard money loans are short-term loans from private lenders based primarily on the property's value rather than the borrower's credit. They typically have higher interest rates and shorter terms than traditional loans, often used in real estate investing.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( M \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in months)

Explanation: The formula accounts for both principal and interest payments over the loan term.

3. Understanding Loan Payments

Details: Hard money loans typically have higher interest rates (10-15% or more) and shorter terms (6-36 months) compared to conventional loans. The monthly payment includes both principal and interest.

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: Why are hard money loan rates higher?
A: They compensate lenders for higher risk, faster funding, and shorter terms. They're often used when traditional financing isn't available.

Q2: What's typical for hard money loan terms?
A: Usually 6-36 months, with interest rates from 10-18%. Points (1-5% of loan amount) are also common.

Q3: Are payments interest-only?
A: Some are, but this calculator assumes fully amortizing payments (principal + interest). Check with your lender.

Q4: How accurate is this calculator?
A: It provides standard amortized payment estimates. Actual loans may have additional fees or different structures.

Q5: When are hard money loans used?
A: Common for fix-and-flip projects, bridge loans, or when quick closing is needed. Not typically for primary residences.