1. What is a Hard Money Loan?

A hard money loan is a type of short-term financing secured by real property. These loans are typically issued by private investors or companies and have higher interest rates than conventional loans, but can be obtained faster and with less stringent qualifications.

2. How Does the Calculator Work?

The calculator uses the hard money loan formula:

Where:

• \( Principal \) — Original loan amount ($)
• \( Interest Rate \) — Annual interest rate (decimal)
• \( Term \) — Loan duration in years
• \( Fees \) — Additional loan fees ($)

Explanation: The formula calculates the total cost by adding the principal, interest (simple interest calculation), and any additional fees.

3. Understanding Loan Costs

Details: Hard money loans typically have higher costs than traditional loans but offer faster approval and more flexible terms. The total cost includes both the interest payments and any origination fees or other charges.

4. Using the Calculator

Tips: Enter the principal amount, interest rate (as a decimal, e.g., 0.12 for 12%), loan term in years, and any additional fees. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's typical interest for hard money loans?
A: Rates typically range from 8% to 15%, significantly higher than conventional mortgages.

Q2: What loan terms are common?
A: Most hard money loans are short-term, typically 1-3 years, though some may extend to 5 years.

Q3: What fees are typically included?
A: Common fees include origination fees (2-5 points), underwriting fees, and possibly prepayment penalties.

Q4: When are hard money loans used?
A: Often used for fix-and-flip projects, bridge loans, or when traditional financing isn't available.

Q5: How does this differ from compound interest?
A: This calculator uses simple interest. Some hard money loans may use compound interest, which would result in higher costs.