1. What is a Hard Money Loan?

Hard money loans are short-term loans secured by real estate, typically used by investors for fix-and-flip projects or bridge financing. They have higher interest rates than traditional mortgages but faster approval times and more flexible terms.

2. How the Payment Calculation Works

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)

3. Understanding the Formula

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

The formula accounts for the time value of money, with earlier payments weighted more toward interest and later payments more toward principal.

4. Using the Calculator

Tips:

• Enter the total loan amount (principal)
• Input the annual interest rate (typical hard money rates range from 8-15%)
• Specify the loan term in months (hard money loans typically range 6-24 months)

5. Frequently Asked Questions (FAQ)

Q1: How do hard money loans differ from traditional mortgages?
A: Hard money loans are asset-based (focusing on property value rather than borrower credit), shorter-term, and have higher interest rates than conventional mortgages.

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

Q3: Are payments interest-only or amortizing?
A: This calculator shows fully amortizing payments. Some hard money loans may be interest-only with balloon payments.

Q4: What additional costs should I consider?
A: Hard money loans often have origination fees (2-5 points), closing costs, and possibly prepayment penalties.

Q5: When is a hard money loan appropriate?
A: Best for short-term financing needs like property rehabilitation, bridge loans, or when speed is more important than interest rate.