Hard money lenders typically charge 8% to 15% annual interest, 1 to 4 origination points at closing, and several thousand dollars in underwriting, appraisal, title, and administrative fees. So when you ask how much hard money lenders charge, the honest answer has three parts: a rate, a set of points, and a stack of closing costs, all sitting on top of a down payment that usually runs 25% to 40% of the purchase price. Pricing varies more widely than with conventional mortgages because hard money loans made for business or investment purposes are exempt from many federal disclosure rules that standardize traditional mortgage quotes.1eCFR. 12 CFR 1026.3 – Exempt Transactions
Interest Rates and Loan Term
First-position hard money loans generally carry annual rates of 8% to 15%. Second-position loans, where another lender holds the primary claim on the property, run steeper, often 12% to 14% or higher. Rates are usually fixed for the life of the loan, so the monthly payment does not move.
Terms are short. Most hard money loans run six months to two years, because the money is meant as bridge financing or renovation capital, not long-term debt. You pay interest only for the months the loan is outstanding. On a $300,000 loan at 12%, each month of interest runs about $3,000.
Because the federal Truth in Lending Act disclosures do not apply to business-purpose loans, you will not receive the standardized rate comparison that traditional mortgage borrowers get. Read every rate and fee term in the loan agreement yourself.
Origination Points
After interest, points are the biggest line item. One point equals 1% of the loan amount. Most hard money lenders charge 1 to 4 points, and 2 to 3 is the most common range. On a $300,000 loan, 3 points is a $9,000 origination fee due at closing.
Points are paid at the closing table, either out of pocket or subtracted from the loan proceeds before you receive the funds. Either way, they are non-refundable. If a mortgage broker connected you with the lender, that broker may add another point as their fee, so ask upfront whether any intermediary charges apply on top of the lender’s quoted points.
Cash You Need to Bring: Down Payment and LTV
Hard money lenders require significant equity in the property. Most cap the loan at 60% to 75% of the current appraised value, so you need to bring 25% to 40% of the purchase price. Some lenders will lend up to 70% to 80% of the after-repair value (ARV) on renovation projects, but even then, you usually need cash to bridge the gap between the purchase price and the loan amount.
The equity cushion protects the lender if the project fails and the property has to be sold quickly. On a $400,000 purchase with a 70% loan-to-value cap, the maximum loan is $280,000, leaving you responsible for $120,000 plus closing costs and any renovation funds the loan does not cover. Add the down payment to the points and fees when you calculate how much cash you actually need to close.
Closing and Administrative Fees
Expect several thousand dollars in charges beyond interest and points. These cover the lender’s internal work and third-party services needed to evaluate and finalize the loan.
- Underwriting fee: $500 to $1,500 for the lender’s review of the property, project plan, and borrower background.
- Document preparation fee: $300 to $600 for the promissory note, deed of trust, and related closing documents.
- Appraisal: $400 to $900. Complex or multi-unit properties can push this higher.
- Draw inspection fees: $150 to $300 per inspection on construction or renovation projects, where the lender verifies work before releasing the next round of funds.
- Credit report fee: $30 to $100 per applicant.
- Flood certification and tax service fees: $15 to $50 each.
- Lender’s title insurance: several hundred to a few thousand dollars, depending on loan amount and location.
Some of these are due at application, others at closing. Ask for a complete fee schedule before you apply. Commercial deals may also require a Phase I Environmental Site Assessment, which adds cost and time.2United States Environmental Protection Agency. Assessing Brownfield Sites Fact Sheet
How Monthly Payments Work
Most hard money loans are interest-only. Each month you pay only the interest that accrued on the outstanding balance, and none of the payment reduces principal. At the end of the term, the full original balance comes due as a single balloon payment, which you satisfy by selling the property, refinancing into a conventional loan, or using other funds.
Some lenders offer a capitalized-interest option with no monthly payment. The accrued interest is added to the loan balance each month, and you repay the original principal plus all accumulated interest at maturity. That structure preserves cash during renovation but raises the payoff amount.
Costs That Hit Later: Extensions, Guaranteed Interest, and Default
Extension Fees
Projects run long. If yours passes the original maturity date, most lenders will extend the loan rather than push you straight into default. Extension fees usually run 0.5% to 1.5% of the outstanding balance per period, typically one to three months. On a $300,000 balance, a 1% extension fee is $3,000 for extra time. Not every lender offers extensions, so confirm the option before signing.
Guaranteed Interest and Prepayment
Many hard money contracts include a guaranteed-interest clause requiring you to pay a minimum of three to six months of interest even if you pay the loan off sooner. Sell the property in two months on a loan with a six-month minimum, and you still owe six months of interest. This can noticeably reduce profit on a fast flip, so build it into your deal analysis before closing.
Late Payments and Default Rates
Late payments typically trigger a penalty of 5% to 10% of the missed monthly payment after a grace period of 10 to 15 days. If the loan reaches maturity without full repayment and no extension is granted, a default interest rate of roughly 18% to 25% annually may apply until the balance clears. At those rates, delay gets expensive fast, and the lender can start foreclosure to recover through a sale of the property.
What Moves the Price You Are Quoted
Lenders set rates and points based on a handful of concrete risk factors. Knowing them helps you anticipate a quote or negotiate a better one.
- Loan-to-value ratio: lower LTV means less risk and better pricing. Dropping from 75% to 65% can noticeably reduce your rate and points.
- After-repair value: on renovations, a projected resale value that comfortably exceeds the loan amount earns more favorable terms.
- Investor experience: a borrower with documented completed flips generally gets better pricing than a first-time investor.
- Property type: single-family residential tends to price lower than commercial, industrial, or mixed-use, because single-family homes are easier to sell quickly in a foreclosure.
- Liquidity and reserves: lenders want to see cash on hand for interest payments and construction overruns. Thin reserves push rates up.
- Subordinate financing: another lender holding a junior lien adds risk for the primary hard money lender and raises the price.
Credit scores matter less here than in conventional lending, but they are not ignored. Most hard money lenders pull credit as part of underwriting and may set a minimum. A low score does not necessarily disqualify you, but it can mean higher rates or larger reserve requirements.
Before you commit, add every piece together in one number: down payment, points, closing fees, expected monthly interest for the full term, any guaranteed-interest minimum, and a realistic buffer for extension fees. That total, measured against your exit plan, is what a hard money loan actually costs.