1. What is a Hard Money Loan?

A hard money loan is a type of short-term financing typically used in real estate transactions, where the loan is secured by the property itself. These loans are often provided by private investors or companies and have higher interest rates than traditional bank loans.

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 monthly payments (loan term in months)

Explanation: The formula calculates the fixed monthly payment required to fully amortize (pay off) the loan over its term, including both principal and interest.

3. Understanding Loan Payments

Details: Each payment consists of both interest and principal. Early in the loan, most of the payment goes toward interest. As the loan matures, more of each payment goes toward reducing the principal.

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: Hard money loans carry higher risk for lenders (shorter terms, less emphasis on borrower credit), so they charge higher interest rates to compensate.

Q2: What's typical for hard money loan terms?
A: Usually 6-24 months, with interest rates between 8-15% and loan-to-value ratios of 50-70%.

Q3: Are there prepayment penalties?
A: Many hard money loans have prepayment penalties - check your loan agreement as this calculator doesn't account for them.

Q4: What costs aren't included in this calculation?
A: This doesn't include origination fees, closing costs, or other lender fees which can be significant with hard money loans.

Q5: How accurate is this calculator?
A: It provides accurate monthly payments for fully amortizing loans, but actual loan terms may vary based on lender specifics.