Yes, hard money costs more than a bank loan. Points, fees, and double-digit rates are real — and top investors pay them without flinching. Why? Because the alternative is watching the deal vanish while a conventional lender finishes a 45-day underwrite. The fees on a hard money loan are not a tax on the borrower; they are the price of speed, flexibility, and asset-based underwriting — the three things that actually win deals in this market. Experienced operators don't compare rates lender-to-lender. They run the all-in math against the profit the deal generates, and the answer is almost always the same: pay the fee, take the deal, make the money.
This guide walks through every cost in a hard money deal — not to scare anyone off, but so you can run the all-in math the way serious investors do.
Origination and Points
Points are the largest fee most borrowers will pay outside of interest. One "point" equals 1% of the loan amount, paid up front at closing. Hard money lenders typically charge between 1 and 3 points depending on the deal, the borrower's experience, and the loan size.
On a $400,000 loan, that math is straightforward but sobering:
- 1 point: $4,000
- 2 points: $8,000
- 3 points: $12,000
Points are real cash leaving your pocket at closing, and they're rarely negotiable down to zero. Build them into your acquisition budget from day one, not as an afterthought.
Doc, Processing, and Underwriting Fees
Beyond points, expect a stack of smaller line items that can quietly add up to thousands of dollars. These vary by lender, but commonly include:
- Underwriting fee — typically $500 to $1,500
- Document preparation fee — $300 to $900
- Processing fee — $300 to $750
- Appraisal or valuation — $400 to $900 for residential, more for commercial
- Title insurance, escrow, and recording — usually 0.5% to 1% of the loan amount
- Legal review — $500 to $2,000 depending on the structure
Individually these look minor. Stacked together on a $400K loan, they can easily clear $5,000 to $8,000 before you've touched the property. Ask any prospective lender for an itemized fee sheet before you sign — surprises here are a red flag.
Holding Costs During the Project
Holding costs are the silent killer of flip and rehab budgets. The loan doesn't pause while you're permitting, demoing, or waiting on a contractor. Every month the project runs, you pay:
- Interest carry — on a $400,000 loan at 11%, that's roughly $3,667 per month, every month, until you pay it off.
- Property taxes — prorated and ongoing, often a few hundred to over a thousand per month depending on the market.
- Insurance — builder's risk or vacant property policies typically run $100 to $300 per month.
- Utilities — water, electric, and gas during the rehab. Budget $150 to $400 per month.
- HOA, security, lawn care, snow removal — whatever the property demands while it's empty.
Most borrowers budget for a 6-month project and finish in 9 or 10. Three extra months of holding costs on the example above can mean an additional $13,000 to $15,000 — money that comes straight out of your projected profit.
Exit Costs — Refinance Fees or Sale Closing
The loan ends one of two ways: you refinance into long-term financing, or you sell. Either path has its own cost stack.
If you refinance: expect new origination points (typically 0.5 to 1.5 on a DSCR or conventional loan), appraisal, title, lender fees, and possibly a prepayment penalty on the hard money loan itself if you exit too early. Plan for 2% to 4% of the new loan amount in total refinance costs.
If you sell: the bigger hit is the realtor commission (5–6% in most markets), plus transfer taxes, seller-side closing costs, and any concessions to the buyer. On a $600,000 sale, that's $36,000 to $45,000 — easily the single largest expense in the entire deal.
The True All-In Cost — A Worked Example
Let's put real numbers on it. Suppose you borrow $400,000 at 11% for a 9-month flip, with 2 points, planning to sell the finished property for $600,000.
- Points (2%): $8,000
- Doc, underwriting, title, appraisal, legal: $6,500
- Interest carry (9 months at $3,667): $33,000
- Holding costs — taxes, insurance, utilities (9 months): $7,200
- Sale closing — commission and seller costs (~7%): $42,000
Total loan-related and exit costs: roughly $96,700 — on top of your rehab budget and the original purchase price. The headline 11% rate is a real number, but it represents only about a third of the total cost of using the loan.
Conclusion
The interest rate is only half the picture. What matters when you sit down at closing — and when you walk away from a finished deal — is the total cost-to-complete: every fee, every month of carry, every dollar that leaves your account between funding and payoff. Run those numbers before you commit, not after.
At Noble Tree Capital, every fee is disclosed in writing before a borrower signs. No surprise add-ons at closing, no buried line items in the loan docs. That transparency is what lets serious investors model a deal accurately and know exactly what they're walking into — which is the only honest way to lend.