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Mortgage Payment Formula:
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A hard money mortgage is a type of short-term loan secured by real property, typically issued by private lenders rather than traditional banks. These loans often have higher interest rates but can be obtained more quickly and with less stringent credit requirements.
The calculator uses the standard mortgage payment formula:
Where:
Explanation: This formula accounts for both principal and interest payments, with the interest portion being higher at the beginning of the loan term.
Monthly Payment: The amount you'll pay each month, combining principal and interest.
Total Payment: The sum of all payments over the life of the loan.
Total Interest: The total amount of interest paid over the loan term.
Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 12.5 for 12.5%), and loan term in years. All values must be positive numbers.
Q1: Why are hard money loan rates higher?
A: Hard money loans carry more risk for lenders (shorter terms, less emphasis on borrower credit), so they charge higher rates to compensate.
Q2: Are there prepayment penalties?
A: Many hard money loans have prepayment penalties - check your specific loan terms as this calculator doesn't account for them.
Q3: What about points and fees?
A: Hard money loans often include origination points (1-3% of loan amount) and other fees that aren't reflected in this basic payment calculation.
Q4: How does amortization work?
A: Early payments are mostly interest, with the principal portion increasing over time (though hard money loans often have interest-only periods).
Q5: What's a typical hard money loan term?
A: Usually 1-5 years, often with balloon payments at the end rather than full amortization.