What are typical hard money loan rates?

Rates vary by lender, by borrower and by deal, and any figure quoted before someone has seen the property is a headline rather than a price. What matters is that you get a written number for your specific deal before you commit to anything.

What are points on a hard money loan?

A point is 1% of the loan amount, charged at closing. Points are the cost of originating the loan and are paid whether you hold it for two months or ten, which is why they matter most on a short hold. The number is set per deal and appears on your term sheet.

Is a hard money loan more expensive than a bank loan?

Per year, yes, and by a wide margin. Per deal, often not, because you hold it for five months rather than thirty years. The comparison that matters is total cost against the profit the speed made possible.

What is the real cost of a hard money loan over six months?

Interest across the hold, plus points at closing, plus origination and legal, plus the carry: taxes, insurance and utilities. The worked example in this post shows how to total it for your own deal using your own quoted terms.

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What a hard money loan actually costs, in full

Rate is the number everyone asks about and rarely the largest cost. Here is the whole bill on a real deal, priced line by line.

July 10, 2026 · 6 min read

Every first conversation starts with the rate. It is almost never the largest line on the bill.

Rate is the cost of the money over time, and on a five month hold, time is the one variable you control. Points are charged whether the project takes four months or eleven. The carry runs regardless of whether anyone is working on the house. Investors who lose money on a funded deal rarely lose it on the interest rate. They lose it on the months.

Here is the whole bill.

The four costs

Cost	When it is charged	What moves it
Interest	Monthly, on the drawn balance	The rate, and how many months you hold
Points	Once, at closing	The loan size. Paid whether you hold two months or ten
Closing and legal	Once, at closing	Largely fixed, so it bites hardest on small loans
Carry	Monthly, whether or not work is happening	Taxes, insurance, utilities, and the calendar

1. Interest

Charged monthly on the outstanding balance. Pricing is set per borrower and per deal, and no honest lender can give you a number before seeing the property, the budget and the exit. The rate on your term sheet is the rate, and it is the only one worth planning around.

One structural detail matters more than the number: on a purchase and rehab loan the rehab portion is released in draws, so you are usually paying interest on what has actually been advanced rather than on the full facility from day one. Check that, because it is not universal. A lender charging interest on undrawn funds is charging you for money sitting in their account.

2. Points

A point is 1% of the loan amount, paid at closing. Like the rate, the number is set against your specific deal rather than published in advance.

Points are the cost of originating the loan, not of holding it. That has a consequence people miss: points are the reason a very short hold is proportionally expensive. Two points on a loan you repay in six weeks is an enormous annualised cost, even though the absolute number is small. If your strategy is a genuine quick turn, ask about the points before you ask about the rate.

3. Closing and legal

Title, recording, lender's legal, an appraisal or valuation, insurance binder. These are largely third party costs and largely fixed, which means they hurt proportionally more on a small loan. A $60,000 deal and a $400,000 deal pay broadly similar title and legal.

4. The carry

Taxes, insurance, utilities, and interest, every month, whether or not the project is moving.

This is the line that ends projects. It is not large per month. It is large because it compounds against a timeline that almost always runs longer than the one in the spreadsheet. Budget the carry for the schedule you would defend, not the one the contractor promised. Holding cost is the most reliably underestimated number in flipping, which is why it has its own post.

A worked example

The figures below are illustrative, chosen to show the arithmetic rather than to quote anybody's terms. Substitute the numbers from your own term sheet.

A $200,000 loan at an assumed 12% with two points, held six months.

Interest. $200,000 at 12% is $2,000 a month. Six months is $12,000, and less than that in practice if the rehab is drawn in stages rather than advanced at once.
Points. Two points on $200,000 is $4,000, paid at closing.
Closing and legal. Call it $3,000 to $5,000 depending on your state and the title work.
Carry. Taxes, insurance and utilities on a modest single family, perhaps $500 to $900 a month. Six months is $3,000 to $5,400.

Total finance and holding cost lands somewhere near $22,000 to $26,000 on a $200,000 loan over six months.

Now the part that decides whether that was expensive. If the deal clears $70,000, you paid roughly a third of the profit for the ability to buy it at all, and you would have paid something comparable to anyone. If the deal clears $28,000, the loan consumed nearly all of it, and the problem was never the rate. It was that the deal was too thin to carry any financing.

Where the real money is lost

Months, not basis points. On the example above, two extra months costs about $5,000 in interest and carry, while a two percentage point difference in rate across the whole six months costs about $2,000. Negotiating the rate hard and then running two months long is a losing trade. Speed is worth more than price on a short hold, and it is why closing in 5 to 14 days is a financial number rather than a convenience.

The exit nobody stress-tested. A flip that does not sell becomes a refinance, and a refinance you did not qualify for in advance becomes an extension at a worse rate. Price the exit before you borrow.

A rehab budget that was a wish. Every overrun is funded either from your pocket or from a longer hold. Both cost more than the loan did.

Comparing this honestly against a bank

Per year, hard money is far more expensive, and anyone who tells you otherwise is selling something. A conventional investment loan might be a third of the annual rate.

Per deal, the comparison usually inverts, for a reason that has nothing to do with pricing: the bank will not make the loan. Not on a house that will not pass an appraisal in its current condition, not in nine days, and not without two years of returns. The alternative to expensive capital is generally no capital, and a deal you could not buy returns nothing at all.

Where that logic stops working is on a deal with thin margin. Cheap money makes a marginal deal survivable. Expensive money does not. If the numbers only work at bank pricing, the honest answer is to wait for bank pricing, not to squeeze the lender.

What to ask any lender before you sign

Rate, and whether interest accrues on the full facility or only on funds drawn
Points, and when they are charged
All third party closing costs, itemised
Whether there is a prepayment penalty or a minimum interest period, because a minimum interest period is a prepayment penalty with a friendlier name. I do not charge one; exit whenever the deal is done
Extension terms and their cost, before you need them
Draw process, turnaround time, and who pays for inspections

The last two get skipped almost every time and are the ones you will actually live with.

Before you price a lender, price the deal

Run the numbers first. If the project does not clear once points, interest over a realistic hold, closing on both sides and selling costs are charged against it, no lender's rate fixes that. The deal calculators will show you where your own file lands, carry included.

When it does clear, send it over. Written terms inside 24 to 48 hours, with your actual number on them rather than a range.

Common questions

What are typical hard money loan rates?: Rates vary by lender, by borrower and by deal, and any figure quoted before someone has seen the property is a headline rather than a price. What matters is that you get a written number for your specific deal before you commit to anything.
What are points on a hard money loan?: A point is 1% of the loan amount, charged at closing. Points are the cost of originating the loan and are paid whether you hold it for two months or ten, which is why they matter most on a short hold. The number is set per deal and appears on your term sheet.
Is a hard money loan more expensive than a bank loan?: Per year, yes, and by a wide margin. Per deal, often not, because you hold it for five months rather than thirty years. The comparison that matters is total cost against the profit the speed made possible.
What is the real cost of a hard money loan over six months?: Interest across the hold, plus points at closing, plus origination and legal, plus the carry: taxes, insurance and utilities. The worked example in this post shows how to total it for your own deal using your own quoted terms.

Have a deal like this

Run your numbers.

The calculators charge the costs this piece describes: points, interest over the hold, closing on both sides, carry, and the cost to sell. It takes about a minute.

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