"What's the rate?" is usually the first question investors ask a hard money lender, and usually the wrong one to lead with. Rate is one line item in a cost structure with several moving pieces, and the deal that looks cheapest on rate alone isn't always the deal that pencils out best. Here's what actually goes into the cost of a hard money loan in 2026, and how to compare offers properly.
Interest Rate: The Headline Number
Across the current hard money market, rates for residential fix-and-flip and bridge loans commonly run in the 9%-13% range, with experienced borrowers on stronger deals often landing toward the lower end of that band. Rate is driven by your experience, credit, the loan-to-value ratio, and how competitive the specific lender's cost of capital is — it is not a fixed, one-size number across the industry.
Points: The Cost Most Investors Underestimate
Origination points are typically 1.5 to 3 points, paid at closing. One point equals 1% of the loan amount, so on a $400,000 loan, 2 points is $8,000 due at closing — real cash out of your deal before a single renovation dollar gets spent. Points are the piece of the cost structure new investors most often forget to budget for, because they don't show up in a monthly payment estimate the way rate does.
Rate tells you the monthly cost. Points tell you the entry cost.
A loan with a slightly higher rate but lower points can easily beat a lower-rate loan on a short hold period, since points are a fixed cost regardless of how long you keep the loan, while rate cost scales with time.
Leverage: LTC and ARV Caps
Most hard money lenders fund a percentage of total project cost — commonly 70%-90% — capped at a percentage of after-repair value, typically in the 65%-80% ARV range. Both caps apply simultaneously; whichever one is more restrictive on your specific deal is the one that actually sets your loan amount. A deal with a thin renovation budget relative to purchase price can hit the ARV cap before it hits the cost cap, or vice versa.
The Costs That Don't Show Up on the Term Sheet's First Page
- Draw/inspection fees — charged each time you request a construction or rehab disbursement, and they add up over a multi-draw project
- Extension fees — if your project runs past the loan's term, expect a fee to extend rather than an automatic grace period
- Underwriting/processing fees — smaller than points individually, but still real cash due at closing
- Prepayment terms — some loans carry a minimum interest period even if you sell or refinance early; know this before you assume an early exit saves you money
Running the Real Math
Take a $300,000 purchase plus $80,000 rehab, financed with 85% of cost and 2.5 points, at 10.5% for an expected 7-month hold. Points alone are roughly $8,075 upfront. Interest at 10.5% on the funded balance over 7 months (accounting for the fact that rehab draws fund gradually, not all at once) typically runs several thousand less than a naive "full balance x rate x time" estimate — which is exactly why running the actual draw schedule matters more than eyeballing an annual rate.
How to Actually Compare Two Offers
Don't compare rate to rate. Compare total dollars of financing cost — points plus estimated interest over your realistic hold period plus fees — against each offer's total leverage (how much of the deal it actually covers). The lowest-rate offer with the least leverage or the most restrictive ARV cap can cost you more in the deals it forces you to walk away from than it saves you in interest on the ones it funds.