Rate is the number borrowers ask about first and the one that explains the least. A hard money loan has three moving parts, and the cheapest rate on your desk can still be the most expensive loan on the table once the other two are counted. Here is how the price of a private loan is actually built, what pushes each part up or down, and where our published numbers start.
The three parts of the price
The rate. The annual interest charged on the outstanding balance. Almost every short-term private loan is interest only, so the payment is the rate applied to the money drawn, not an amortizing payment that chips away at principal. Our bridge program publishes rates from 9.00% to 13.00%, fix and flip from 9.99% to 12.00% and the Non-QM rental loan from 6.50%, and construction is priced per project. Starting means the floor for the strongest version of that deal, not the number every file gets.
The points. A one time origination charge expressed as a percentage of the loan amount, paid at closing. Points compensate the lender for the work of underwriting and funding a loan that may only live for a few months. A point on a twelve month loan spreads very differently from a point on a three month loan, which is why the effective cost of a short project is always higher than the headline rate suggests. See origination fee and points for the mechanics.
The third party costs. Appraisal or valuation, title insurance, escrow, recording, legal document preparation and, on construction files, fund control or inspection fees. None of these are lender profit and all of them are real. They arrive on the settlement statement whether the loan is private or institutional.
Add the three together across the number of months you actually hold the loan and you have the real price. That total is the only number worth comparing between lenders.
What moves the rate
Leverage moves it the most. A loan at the top of the published loan to value band prices differently from the same loan at a conservative level, because the equity underneath the loan is the lender’s protection. Our bridge program publishes LTV up to 75% on residential and 70% on commercial, and the owner occupied bridge publishes up to 70% of the purchase price. Those bands are not arbitrary. They are the price of the cushion.
Property type moves it. A single family home in a liquid neighborhood is easier to value and easier to sell than a special purpose commercial building, and pricing follows that difference. Our bridge program is written for SFR, condo and townhome and two to four unit properties. The commercial bridge products take retail, office, industrial, multifamily, mixed use and land, and they carry their own bands.
The exit moves it. A loan repaid by a sale with strong comparable sales behind it is a different risk from a loan repaid by a refinance that has not been discussed with anyone. Lenders price certainty.
Term moves it. Our bridge terms run one or two years, fix and flip 6 to 18 months and construction 12 to 18 months. Longer money is a longer commitment of capital, and it is priced as one.
Credit moves it, but less than borrowers expect. Our bridge program publishes a 650 minimum credit score, fix and flip a 620 minimum FICO and construction 600. A score sets the band you are priced inside, not whether you get an answer.
What moves the points
Loan size is the first lever. The work of underwriting a small loan and a large one is not proportional to the amount, so smaller loans usually carry more points and larger ones fewer. Our published loan sizes run from $150,000 to $25,000,000 on business purpose bridge, $250,000 to $10,000,000 on fix and flip, and $200,000 to $10,000,000 on Non-QM bank financing.
Complexity is the second. A clean purchase with one borrower, one property and a clear title report is faster to underwrite than a cash-out on an entity-owned property with a tenant in place and a lien to clear. Complexity costs time, and time is priced in points.
Speed is the third. Our standard close runs 5 to 7 days and our low documentation files can close in as quickly as 3 days. Compressing a file into that window means people reorder their week around it.
How to read a term sheet
Read a term sheet in this order and you will not be surprised at closing.
Start with the loan amount and confirm what it is a percentage of. A number quoted against purchase price, against as-is value and against after repair value are three different loans. Our fix and flip program publishes up to 85% of the purchase, 100% of the rehab and 75% of ARV, and the tightest of those tests applies.
Next, find the term and the extension language. Our short term interest only bridge publishes one or two year terms with up to two six-month extensions, and only while the loan is current. A conditional extension is not a right, and the cost of an extension belongs in the conversation before you sign, not in the last month of the term.
Next, find the prepayment terms. Our bridge and fix and flip programs publish no prepayment penalties, which means selling early costs you nothing beyond the interest already accrued. Not every lender writes it that way.
Next, find whether interest is charged on the full loan amount or only on funds drawn. On a rehab or construction file with a holdback, that single line can change the total cost more than a quarter point of rate.
Finally, find the fee schedule and the third party estimates. Ask what is refundable and when. A deposit taken before a file has been reviewed is worth a question.
Why the rate is not the price
Two quotes can carry the same rate and cost very different amounts. One charges interest on the whole facility from day one while the other charges only on funds drawn. One carries a prepayment penalty and the other does not. One requires an appraisal and a second review, the other a single valuation. One closes in a week and the other in five, and the seller has already told you the deal dies at day twenty.
That last one is the cost borrowers forget. The price of a loan includes the price of not getting the property. Investors who have missed a deal waiting for cheap money rarely make that trade twice.
Where to go from here
The pricing guide sets out how the price of a private loan is assembled in more depth, and every published band per program sits on the bridge loan program page and the fix and flip program page. If you want a number for a specific property rather than a range, the fastest route is the borrow page or a call to (619) 617-2797. Bring the address, the purchase price or payoff, the plan and the exit, and you will get a straight answer the same day.
