Guide
Hard money points and interest
Team RE Underwrite Lab
Interest and points are different checks
Hard money is often interest-only and short. The rate decides the monthly interest. Points are a fee charged up front as a percent of the loan. Adding them into one bucket hides which number moves when you negotiate.
The hard-money calculator uses its own sample loan. This guide uses a different loan, a different points percent, and a different term so the two pages are not the same worked example. Neither page is a commitment to lend.
Formula
Monthly interest = loan amount × annual rate ÷ 12. Points cost = loan amount × points percent. Total interest = monthly interest × months.
Principal is not in the monthly interest. Draws, extension fees, and a Dutch interest schedule are not in this formula. A term sheet with those lines will not match the three results.
Example
Illustrative example. A loan of $120,000 at 12% interest costs $1,200 a month, because 120,000 × 0.12 ÷ 12 = 1,200. Three points are $3,600. Over 8 months, interest is $9,600. These figures are made up. They are not a term sheet and not a loan this company borrowed.
The $3,600 of points is cash at the start in this sketch. It is not spread across the eight months. If you add it to the $9,600, the financing cost you have named is $13,200, and the $120,000 is still unpaid.
Common pitfalls
Treating the monthly interest as a principal-and-interest payment understates what you still owe at the exit. The sample payment does not reduce the loan balance.
Quoting the rate and forgetting the points makes the loan look cheaper than the cash you wire on day one. Points are a percent of the whole loan, paid even if you exit early, unless the term sheet says otherwise. This page does not model a refund of points.
Steps
Turn the annual rate into a month
Monthly interest equals the loan amount times the annual rate, divided by 12. The sample is interest only.
Price the points
Points cost equals the loan amount times the points percent. That cost is separate from the monthly interest.
Multiply interest by the months
Total interest equals monthly interest times the term in months. Principal is still owed at the end.
Questions
Why doesn't this match the hard-money calculator's sample?
The calculator's sample is there so its headlines can be checked. This article changes the loan, the points, and the months on purpose.
Are points the same as an origination fee?
People use both names for an up-front percent of the loan. Type the percent you were quoted. The page does not translate a lender's fee schedule.
What if interest is charged on the full amount before I draw it?
That is a different schedule. This formula charges the rate on the loan amount you typed, for every month, as if that amount were outstanding the whole time.
Does an 8-month term include extensions?
No. An extension fee or extra months would be added by you. The $9,600 stops at eight months.
Is 12% a rate the site recommends?
No. It is a sample rate that divides cleanly. Type the rate on the term sheet.
Example only. Not financial, investment, legal, tax, lending, or appraisal advice.
Estimates only. Not financial, legal, tax, or investment advice. RE Underwrite Lab calculators and PDF reports provide educational estimates based on the numbers you enter. Actual purchase costs, rents, expenses, financing terms, taxes, insurance, vacancy, rehab costs, refinance eligibility, and returns vary by property, market, lender, and local law (including short-term rental rules). We do not guarantee any outcome, profit, cash flow, or appraisal. Some content and tools may be generated or assisted by artificial intelligence and can contain errors. Always verify assumptions with licensed professionals and your own due diligence before making decisions.