Hard money loans are typically the fastest route to financing rehabs or property flips. Hard money loans are usually approved based on the property’s value rather than the buyer’s qualifications. However, hard money is often more expensive than traditional financing. Our hard money loan calculator will help you determine how much hard money might cost.
If you are currently seeking hard money financing for your rehabs or fix-and-flip projects, visit LendingHome. It specializes in short-term lending for investors, have rates as low as 6.5% and a streamlined approval process. Get pre-qualified online in minutes.
How the Hard Money Loan Calculator Works
Hard money lenders supply short-term money, which is ideal for flipping, but it can be pricey. Therefore, examining the costs is important. The hard money loan calculator will show you not only the potential loan amount but equally important, the potential upfront costs, ongoing interest charges, and total costs of having the loan over the period you need it.
The hard money loan calculator will generate a figure based on whether your loan is pegged to the purchase price or after repair value (ARV). Depending on that, the calculator will help you determine if you need a down payment and if so, it will estimate that amount. If there’s a potential for cash coming to you at closing, that figure will be provided instead.
Additionally, points and interest are converted into dollar amounts from the percentages and other relevant figures you supply. Total costs, both upfront and ongoing, for using the hard money loan calculator are provided.
Hard Money Calculator Inputs
There are several figures you need to enter into the hard money calculator. These include the purchase price, after repair value (ARV), repair costs, the lender’s expected loan-to-value ratio, interest rate, loan term, and upfront points and fees.
Purchase Price
Put your actual purchase price for the property in this field. If you don’t have a purchase price, you can put in estimated, projected, or expected purchase price.
Repair Costs
Enter your estimated budget for repairs here. Repair costs include both the materials you need to buy for the repairs and any paid labor.
Estimated After Repair Value (ARV)
If you are doing a fix-and-flip, enter the number in this field for the estimated resale value of the property after you rehab it. ARV is the estimated market value of the property once repairs and renovations are completed.
Percent the Lender Will Fund
Use the calculator slider to select the percentage of the total loan amount you anticipate the lender will fund. You can choose between 50% to 100%.
Choose Funding Type
Click the correct button for whether your lender bases the loan amount on the purchase amount (LTV), the purchase cost plus repairs (LTC), or the after repair value (ARV).
Term of Loan
Hard money loans are typically short-term loans up to two years in length. Use the slider to pick a timeline anywhere from one to 24 months. This will be used to calculate the interest charges over the period you have the loan.
Interest Rate
Enter the anticipated interest rate you expect to pay for the funding. Private hard money lenders don’t charge the same mortgage rates as long-term mortgages offered through a bank. Hard money rates can range from 6.5%-18%, as compared to current mortgage rates which are currently in the 4% range.
Points and Loan Origination Fees
Hard money lenders sometimes charge more upfront than traditional mortgages, typically in the range of one to seven points. Points are a form of prepaid interest; each point represents 1% of the loan amount. Use the slider to select the number of points ranging from one to seven.
If you know that your lender might tack on other fees (such as appraisal or loan origination fees) place an estimate of these amounts in the last field below the points slider.
Hard Money Loan Calculator Outputs
The hard money calculator computes several figures. These include: the total amount borrowed, the down payment needed, cash back to the borrower at closing (if applicable), and dollar figures for upfront costs, ongoing costs, and the total cost of the loan.
Loan Amount
This figure represents the estimated amount of money you can borrow for the loan. It’s based on the information you supplied regarding purchase price, repairs, the after repair value, and whether the lender bases funding on the purchase costs, purchase cost plus repairs, or the after repair value.
Down Payment
If you specified that the funding is based on the purchase price, the hard money calculator will generate an estimated figure for any potential down payment based on the funding ratio you supplied. If the loan is funded on either purchase cost plus repairs or the ARV, the down payment may show as $0 because the amount of the loan may equal or exceed the purchase price.
Cash At Closing
There are instances where the amount approved will exceed the purchase price, particularly if the loan is funded based on the ARV. If so, the figure for any potential cash back at closing is provided.
Cash at closing doesn’t include points and loan fees. Generally, these are subtracted from any excess cash and the borrower is given the balance. It’s also important to note that even if the lender bases the loan on the ARV and the amount is more than what’s needed to purchase the property, the lender may still require a down payment.
For example, if a lender funds a loan based on 90% of the LTC plus 100% of the repairs, even though the loan figure could compute to more than the property’s purchase price, the lender is still seeking a 10% down payment from the borrower.
Upfront Fees
The hard money loan calculator will generate a total dollar figure based on the points and other fees you indicated.
Ongoing Interest Costs
The hard money calculator will compute the total interest you will pay based on the interest rate and holding period you indicated.
Total Costs of the Hard Money Loan
This figure will be the estimated total of the upfront costs and ongoing going costs. It represents the total amount the hard money funding will cost you. Don’t forget to subtract the costs of hard money, along with your other costs, from your anticipated selling price as you calculate potential profits.
Where to Find Calculator Inputs
Before we explain the importance of outputs of our hard money calculator, there are a few pieces of information you may want to gather so you’ll be ready to enter your data. You may want to research a few hard money lenders to gather information on interest rates, loan terms, and fees.
Additional information to gather includes:
- Maximum and minimum loan dollar amounts
- Percent the lender is willing to loan to borrowers
- Interest rates
- Loan origination fees
- Loan term
- Anticipated renovation costs
Additional Terminology You May Encounter
Hard money lenders will loan a percentage of the appraised value called the loan-to-value (LTV). Alternatively, some will base the loan on the after repair value (ARV). Loan-to-value (LTV) is the amount the lender is willing to loan a borrower to buy a property relative to a property’s appraised value.
Three ways lenders consider the loan amount include:
- After-repair-value (ARV): The future value of the property after repairs
- Loan-to-value (LTV): A percentage of the appraised value
- Loan-to-cost (LTC): The loan amount divided by the total project cost (includes purchase price, renovation costs, and other actual costs to acquire and rehab the property)
Hard Money Loan Application Information
Whether you’re in the business of flipping houses or renovating a rental which you’ll eventually refinance with a permanent mortgage, when you apply for a hard money loan or other private financing you will typically need to provide the lender with some information.
Some information the lender will need includes:
- Information about the property: Location, type of building, square footage, lot size, condition
- Purchase price: A signed purchase & sale agreement is best, but if you are in the preliminary stages, you can supply an offer price
- Project budget: If you need a rehab loan, provide lenders with a budget and contractors’ bids. If you plan on DIY, the lender might ask for information on past projects to demonstrate your capabilities
- Timeline for rehab: The lender will want to know how long you anticipate the project will take
- After repair value (ARV): Get a comparative market analysis of the estimated after repair value for the property
While hard money loans are typically based on a property’s value or potential value, borrowers should be prepared to supply personal financial information and sign personal guarantees—especially if they’re new customers.
Personal information you may be asked for includes:
- Credit score: Each lender will expect a minimum credit score. They may pull a hard credit report. Credit scores can start as low as 550, but expect higher rates and possibly fees
- Income verification: Normally this will be verified with the last two W-2’s or most recent tax returns
- Personal financial information: Bank balances, investment accounts, and other personal financial data
- Information on the business entity: If the property is being bought through an entity like an LLC, be prepared to supply financials and information for the company
Bottom Line
Hard money lenders offer one of the fastest routes to financing rehab projects or house flips. Hard money loans are usually approved based on the property’s value. Being short-term financing, hard money can carry expensive upfront points, fees, and interest. The costs should be evaluated based on the profitability of the project. The hard money loan calculator will help you ballpark those costs so you can factor them into the deal.
For more information on hard money financing for investors, check out LendingHome. It currently offers up to 90% LTC or 80% of ARV. Approval is quick and easy with rates as low as 7% and as little as 1.5 points. Get a rate online in just a few minutes.
