1. What is a Hard Money Loan?

Hard money loans are short-term loans from private lenders based primarily on the value of the property being used as collateral, rather than the borrower's creditworthiness. They typically have higher interest rates and shorter terms than traditional mortgages.

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)
• \( n \) — Number of monthly payments (term in months)

Explanation: This formula accounts for both principal and interest payments over the life of the loan.

3. Understanding Loan Terms

Details: Hard money loans typically have terms from 6-36 months with interest rates ranging from 8-15%. Points (1-3% of loan amount) are often charged upfront.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 12 for 12%), and 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 the higher risk of these short-term, asset-based loans and faster approval process.

Q2: What is typical LTV for hard money loans?
A: Usually 50-70% of the property's current value (not purchase price) for most lenders.

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

Q4: What are typical loan fees?
A: Expect 2-5 points (1 point = 1% of loan amount) plus closing costs.

Q5: When are hard money loans used?
A: Common for fix-and-flip projects, bridge financing, or when traditional financing isn't available.