Hard money loans are usually 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 typically 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. They specialize in short-term lending for investors, have rates as low as 7.5% 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, ideal for flipping but it can be pricey. So, examining the costs is important. The hard money loan calculator will show you not only the potential loan amount but just as 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 repaired value. Depending on that, the calculator will help you know if you need a down payment and will estimate that amount. Or, if there’s a potential for cash 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. Totals costs, both upfront and ongoing for using the hard money loan are provided.
Hard Money Calculator Inputs
There are several figures you must enter into the hard money calculator. These include purchase price, after repaired value, repair costs, the lender’s expected loan to value ratio, interest rate, 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.
After Repaired 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.
Repair Costs
Enter your estimated budget for repairs here.
Loan to Value (LTV)
As with any lender, hard money lenders will loan a portion of what’s needed. That is usually expressed as a percentage of the purchase price, or alternatively the after repaired value (ARV). For example, a company might lend 90% or the purchase price. Another might lend 70% of the after repaired value.
Use the slider to select the percentage of the value the lender will fund. You can choose between 50% to 100%.
Is the Loan Based on Loan to Cost (LTC) or After Repaired Value (ARV)?
Click the correct button for whether your lender bases the loan amount on the purchase cost (called loan-to-cost or LTC), the purchase cost plus repairs, or the after repaired value (ARV).
Term of Loan
Hard money loans are short-term, usually months. Use the slider to pick a timeline anywhere from 1 month 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. Remember, hard money lenders don’t charge prevailing mortgage rates like you get with long-term mortgages. Hard money rates can be as high as 12%-18% as compared to current mortgage rates which are in the 4% range.
Points and Loan Origination Fees
Hard money lenders usually charge fairly hefty points compared to traditional mortgages, typically in the range of 1-7 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 1-7.
Also, if you know that your lender might tack on other fees (such as appraisal or loan origination fees) place an estimate of those amounts in the field below the points slider.
Hard Money Loan Calculator Outputs
The hard money calculator computes several figures for you. They are: the amount of funding; down payment needed (if any) or cash back at closing (if any); and, dollar figures for upfront costs, ongoing costs, and total expense of the loan.
Loan Amount
This figure represents the estimated amount of money you can obtain for the loan. It’s based on the information you supplied regarding purchase price, repairs, and after repaired value and whether the lender bases funding on loan-to-cost (LTC), cost plus repairs, or after repaired value (ARV).
Down Payment
If you specified that the funding is based on the purchase price (LTC) 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 either on either LTC plus repairs or 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 in which the amount approved will exceed the purchase price. That’s particularly the case if the loan is funded based on the after repaired value. If so, the figure for any potential cash back at closing is provided.
Any figure for cash at closing does not take into consideration points and loan fees. Generally, those will be subtracted out of any excess cash and the borrower will be provided the balance.
It’s also important to note, that even if the lender bases the loan on ARV and the amount is more than what’s needed to purchase the property, the lender may still require you to have a down payment…commonly referred to as having “skin in the game”.
For example, let’s say 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 as your skin in the game.
Up-Front 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.
What You Will Need for a Hard Money Loan Application
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 following:
- Information on the property itself (location, type of building, square footage, condition, etc.)
- Purchase price – a signed contract is best, but if you are in the preliminary stages, you can supply an offer price even if it isn’t formal.
- Project budget – if you are rehabbing the property, a solid project budget is necessary. Most lenders will want contractors’ bids. If you plan on doing the rehab yourself, the lender might ask for information on past projects to demonstrate you know what you are doing.
- Timeline for rehab
- After repaired value (ARV) – it’s best to get a real estate agent’s or appraisers comparative market analysis of the estimated after repaired market value for the property.
The hard money lender will verify all of this information.
Additionally, while the loan is principally based on the property value, be prepared (especially if you are a new customer) to supply basic personal financial information such as:
- Credit score – each lender will expect a minimum credit score. A score of 550+ is the usual threshold. You can check your score for free here
- Income verification – normally this will be verified with W-2’s or tax returns
- Personal financial information – often, bank balances will be requested
- If the property is being bought via an entity like an LLC, be prepared to supply financials and information for the company along with personal finances
Bottom Line
Hard money loans are one of the fastest routes to financing rehabs project or house flips. Hard money’s benefit is that it’s usually approved based on the property’s value over the purchaser’s qualifications.
However, hard money should only be considered short-term financing. It can be expensive, both in terms of upfront points and fees and interest, and the costs should be examined in the light of how much profit the renovation or flip will generate. The hard money loan calculator will help you ballpark those costs so you can factor them into the deal. If you’re interested in more information on hard money loans and want to know where to find them, check out our hard money lender directory.
For more information on our top choice for hard money financing for investors, check out LendingHome. They currently offer 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.
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Allison Bethell
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