Hard Money Loan Costs for a Flip: A Full Breakdown

Hard Money Loan Costs for a Flip: What You'll Actually Pay

Hard money loan costs for a flip typically run 2 to 4 points up front plus roughly 10% to 13% annualized interest, which on a $200,000 loan held for six months works out to about $14,000 to $19,000 in total financing expense. That figure — not the headline rate — is what should flow into your deal analysis, because hard money is priced for speed and risk, not for a low cost of capital.

If you flip houses, hard money is often the fastest path to a closing table. But it is also one of the easiest line items to underestimate, and a flip that pencils at an 8% rate assumption can quietly turn into a break-even deal at the true all-in cost. This breakdown walks through every component, shows the math on a realistic example, and flags the mistakes that erode profit.

The Components of Hard Money Cost

Hard money is not one number. It stacks several charges, and each one hits at a different time.

Origination points

The largest up-front cost. One "point" equals 1% of the loan amount. Most flip lenders charge 2 to 4 points, due at closing. On a $200,000 loan, 3 points is $6,000 — paid before you've swung a hammer.

Interest rate

Annual rates on fix-and-flip hard money generally sit in the 10% to 13% range in a normal market, higher for first-time borrowers or thin deals. Because you only hold the loan a few months, interest is usually quoted annually but accrues monthly.

Interest on the full loan vs. drawn funds

This detail matters enormously. Some lenders charge interest on the entire loan amount from day one, including the rehab portion sitting in escrow. Others charge interest only on funds drawn as you complete work. On a $50,000 rehab budget, that difference can be several thousand dollars over the hold.

Junk fees

Underwriting, processing, document, and draw-inspection fees. Expect $1,000 to $3,000 combined, plus a fee each time you request a construction draw (often $150-$250 per inspection).

Other closing costs

Standard third-party items still apply: title, escrow, appraisal or BPO, recording, and sometimes an appraisal management fee. Budget another 1% to 2% of the purchase price.

A Realistic Six-Month Example

Assume a flip with:

• Purchase price: $200,000
• Rehab budget: $50,000
• Loan: 90% of purchase + 100% of rehab = $230,000
• Terms: 3 points, 11% interest on the full balance, 6-month hold

Here is the financing cost:

• Points: 3% of $230,000 = $6,900
• Interest: $230,000 × 11% × (6/12) = $12,650
• Junk + draw fees: roughly $2,500
• Total hard money cost: about $22,050

Now compare it to a lender who charges interest only on drawn funds. If you draw rehab in thirds over the project, your average outstanding balance is lower — closer to $210,000 — which trims interest to around $11,550. Same house, ~$1,100 saved just from loan structure.

That is why the all-in number belongs in your underwriting from the start, not as an afterthought. When you run the full deal — ARV, rehab, carrying costs, and financing — in a tool that pulls live comps and verified market data like PropertyWiz AI, the true cost of capital stops being a guess and starts being a line you can defend. See how to analyze a fix and flip for the full underwriting framework.

How Hold Time Multiplies Cost

Interest is a per-day expense, so every week over schedule adds up. On the $230,000 loan at 11%, you're burning roughly $2,110 per month in interest alone. A rehab that slips from 4 months to 7 months adds over $6,300 — often enough to wipe out your margin of safety.

Rules of thumb seasoned flippers use:

• Underwrite the hold at least 2 months longer than your contractor's estimate. Permits, inspections, and material delays are the norm, not the exception.
• Watch the prepayment terms. Some lenders require a minimum interest period (e.g., 3 months guaranteed) even if you sell early. Fast flips can trigger this.
• Model the extension fee. Many loans are 6-12 month terms with an extension costing 0.5-1 point. Know that number before you need it.

Best Practices to Control the Cost

• Negotiate points before rate. A borrower with a track record can often get points down to 1.5-2. That up-front dollar savings is immediate and certain.
• Prefer interest-on-drawn-funds lenders for heavier rehabs — the savings scale with your construction budget.
• Keep leverage disciplined. Borrowing 100% of everything feels efficient, but higher loan balances mean higher points and interest. A larger down payment can lower total cost and improve your maximum allowable offer math.
• Line up your exit early. Whether you sell or refinance, knowing your takeout keeps you from paying extension fees on a stalled project.
• Build a buffer into rehab. For a disciplined approach to the rehab side, use a repeatable method like the one in how to estimate rehab costs fast.

The Risks and Pitfalls to Watch

Hard money magnifies both outcomes. The strategy's biggest dangers almost always trace back to cost assumptions:

• Underpricing the loan. Assuming a bank-style rate instead of the true 2-4 points plus double-digit interest is the classic first-timer mistake.
• Ignoring draw mechanics. If you front rehab cash and get reimbursed slowly, you may run short on working capital mid-project.
• Over-optimistic ARV. Your loan is sized against after-repair value. An inflated ARV means an under-funded deal and a thinner cushion against overruns.
• No contingency for a soft sale. If the market cools and days-on-market stretches, every extra month compounds interest while your profit shrinks.

Hard money is a tool, not a crutch. Used on a deal with a real margin — bought right, rehabbed on budget, exited on time — the cost is simply the price of velocity. Used to force a marginal deal to close, it is how flippers go backward.

Bottom Line

Plan on hard money costing roughly 8% to 12% of the loan amount in total for a typical six-month flip once points, interest, and fees are stacked. Model it accurately from day one, negotiate points, favor interest-on-drawn-funds structures, and always pad your hold time. The deals that survive are the ones where the financing cost was priced in before the offer, not discovered after the closing.