A hard money loan is interest-only with a balloon, with no amortization schedule
This is the basic structural mistake on this topic, and a surprising number of calculators on the first page of results make it. A hard money loan is a bridge. You borrow for six to eighteen months, you pay interest and only interest each month, and on the last day the whole principal comes due in one lump. Nothing amortizes. The balance on the last day is the balance on the first.
Run a $224,000 loan at 11.5% through a mortgage amortization formula over a six-month term
and you get a payment near $38,600 a month. The real number is
224000 × 0.115 ÷ 12, which is $2,146.67. Being off by a factor of eighteen is
bad enough. The amortization table also quietly deletes the balloon. It shows the loan
reaching zero by itself, which is exactly what doesn't happen. The balloon gets repaid out
of the sale. If the house hasn't sold, you're negotiating an extension, refinancing into a
rental loan, or handing back the keys.
So there's no amortization table anywhere in this tool. You get a month-by-month carry schedule instead, which is what you actually have to fund out of pocket while the work is going on.
Hard money points cost more than the rate suggests
Every hard money ad leads with the note rate, and on a short term the note rate is close to a decoy. The origination points are charged once, at closing, on the whole loan commitment. Divide a one-time cost by a fraction of a year and it turns into a rate.
You can do this in your head. Three points held for six months is 0.03 ÷ 0.5,
which is six percent a year. So a loan quoted at 11% with three points has an effective
annual cost around 17%. The same three points held for twelve months costs only three
percent a year, because the fixed charge has twice as long to spread. That leads somewhere
most people find backward: paying off a hard money loan early doesn't make it cheaper. It
makes it more expensive per year, because the same closing cost is squeezed into less time.
Selling quickly saves you money by cutting the interest and the carry. Prepaying does
nothing to the points.
Add the underwriting, appraisal, document preparation and inspection fees to the points before you annualize. Then check the term sheet for a minimum interest guarantee, a clause promising the lender three or six months of interest no matter when you repay. If it's there, a fast flip pays for months it didn't use, and the effective cost goes up again.
The 70% rule, and the question it's really answering
Maximum offer = 70% of ARV − rehab budget. With a $320,000 after-repair value and $45,000 of work, that's $224,000 − $45,000 = $179,000. Pay more and, by the rule, the deal no longer works.
Don't count the 30% held back as profit. It's the shock absorber for everything the purchase price leaves out: the points, the interest, the property tax and insurance while you hold it, the agent commission on the way out, and, most reliably, the part of the scope nobody found until the walls came off. Investors who treat that 30% as margin they get to keep are the ones who find out at closing that nothing is left.
Be clear about what the rule is. It's a discipline experienced buyers use to filter deals fast. It tightens to 65% in a soft market and loosens toward 75% for cheap cosmetic work in a market where homes sell quickly. It isn't your lender's underwriting limit. The lender applies its own cap on ARV, usually 65% to 75%, and that cap sets how much money you get. The two constraints kick in at different points, so the calculator shows both and tells you which one is doing the limiting. When the ARV cap is the one binding, a better loan-to-cost buys you nothing.
Hard money draws: the rehab budget isn't borrowed on day one
Rehab money is almost never wired at closing. The lender holds it and reimburses completed, inspected work in tranches, typically three to five on a cosmetic project and more on a gut. That lowers the cost directly. A draw starts accruing interest only after it funds, so a $50,000 budget released across three draws over six months carries noticeably less interest than $50,000 borrowed on day one. Treating the whole budget as outstanding from the first month overstates the loan cost, sometimes by a thousand dollars or more on a small project.
It also hits your cash flow in a way that catches first-time flippers. You pay the contractor, request the draw, wait for an inspector, then wait for funding. That cycle takes one to two weeks, and the whole time it's your money out, not the lender's. Draws lower your interest and raise the working capital you need, both at once.
Then there's the clause that cancels all of it: Dutch interest, where the lender charges interest on the entire commitment from day one whether or not the funds have been released. It's legal, it's disclosed, and it's easy to miss in a term sheet. The calculator has a switch for it. Turn it on and the savings from draws disappear. The difference is exactly what that clause is worth to the lender.
Carry is what a delayed flip actually costs
Interest is only part of what goes out every month. Property tax keeps accruing. The insurance is a vacant-dwelling or builder's risk policy that costs several times a normal homeowner's policy. The utilities have to stay on for the trades, and any association dues keep coming. Add the interest and you have the monthly carry, the number that turns a schedule overrun into a loss you can measure.
It gets its own section because nothing on the income side moves when the job runs late. The ARV doesn't go up because your plumber didn't show. Each extra month takes its full carry out of the profit, and the profit is usually a small number sitting on top of very large ones. On a deal carrying $2,150 in interest and $650 in holding costs, three months of delay costs $8,400. On a $20,000 projected profit that's more than a third of the return gone, for a slip most renovations go through. That's why the tool shows profit and ROI at your term and at one, two and three months past it. Price the delay before it happens.
The exit is where flip profit quietly disappears
Selling costs money, and leaving it out is the fastest way to get an ROI that looks great and never shows up. Agent commission, transfer taxes, title and escrow, the owner's policy where local custom puts it on the seller, and the concessions that show up in the last week of negotiation add up to roughly seven to nine percent of the sale price. On a $320,000 sale that's around $25,600, often more than the entire projected profit.
Two more points sit outside this calculator but not outside your bank account. Profit on a
flip is ordinary income, not a long-term capital gain, and if you do this repeatedly the IRS
may treat you as a dealer, which adds self-employment tax on top. And the break-even sale
price isn't just the sum of your costs, because the commission is a percentage of the sale
price itself. With an 8% cost of sale, break-even solves as total costs ÷ 0.92.
The tool computes that and shows how much cushion sits between it and the ARV you typed. If
the cushion is under ten percent, the deal depends on your ARV estimate being right, and ARV
estimates are the least reliable input on the page.
Read the hard money term sheet before you sign it
Hard money is asset-based, so underwriting looks at the property first: the ARV appraisal or broker price opinion, the scope of work, your track record of finished projects, and enough liquidity to cover the down payment plus several months of carry. Credit gets checked but is rarely what decides it. Approval takes days, not weeks, and that speed is what you're paying for. It lets you close on a distressed property against buyers who need forty-five days of financing contingency.
Ask five questions before you sign. Is there a prepayment penalty or a minimum interest guarantee? Is interest charged on drawn funds or on the full commitment? How many draws are included, what does each inspection cost, and how long does funding take? What does an extension cost, and is it automatic or at the lender's discretion? Is the loan recourse? Nearly all are, so the LLC on the deed won't stop a personal guarantee from following you. Put the answers into the fields above and within a few seconds you'll see whether the loan you were offered leaves a profit worth the risk.
Frequently asked questions
How is a hard money loan payment calculated?
Multiply the outstanding balance by the annual rate and divide by twelve. That's all of it, because hard money is interest-only: $224,000 at 11.5% costs $2,146.67 a month, every month, and the principal never moves. On the last day you owe the full $224,000 back. That's the balloon, normally paid from the sale. A calculator that hands you an amortization table for a six-month bridge loan is modeling the wrong product. It will overstate your monthly cash need by roughly ten times and hide the balloon completely.
What is the 70% rule and how do I use it?
Maximum purchase price equals 70% of the after-repair value minus the rehab budget. On a $320,000 ARV with $45,000 of work, that's $224,000 minus $45,000, so $179,000. The 30% the rule holds back isn't profit. It's there to absorb the loan cost, the holding costs, the selling costs and the estimate you got wrong. Use it as a margin habit, not an underwriting rule. Your lender's real limit is its cap on ARV, a separate constraint that kicks in at a different point.
Why is the effective APR so much higher than the quoted rate?
Points are charged once, at closing, on the full loan commitment, and the term is short. A fixed cost spread over half a year annualizes at double its face value: three points over six months is six percent a year on top of the note rate, which turns a quoted 11% into roughly 17%. The same three points over twelve months is only three. That's also why paying off early doesn't make hard money cheaper. It makes it more expensive per year, because the same fixed cost gets squeezed into less time.
Do I pay interest on the rehab money before I draw it?
One clause decides it. Under a normal draw structure the lender reimburses completed, inspected work, so each tranche starts accruing interest only after it funds. A rehab budget released across three draws costs noticeably less interest than the same amount wired at closing. Under a Dutch interest clause you pay on the entire commitment from day one, whether the money is in your account or not, and the saving is gone. Ask which one you're signing. The calculator has a switch so you can price the difference.
How much cash do I need for a hard money fix and flip?
More than the down payment. At 90% of purchase and 100% of rehab you still fund the 10% down, the origination points, the lender fees, the transfer tax and title costs, then the monthly interest and holding costs for the whole hold, and finally the gap between what a draw reimburses and what your contractor wants paid this week. The calculator separates cash at closing from total cash in the deal for that reason. The first tells you whether you can start. The second is what your return is measured against.
Is the ROI on a flip calculated on the purchase price or on my cash?
On your cash. Return on equity divides net profit by what you actually put in (down payment, points, fees, out-of-pocket rehab, interest and carry), not by the value of the house, most of which was the lender's money. Dividing by total project cost is the common mistake, and it gives a number three or four times too low. Annualize it too: 20% earned over six months isn't comparable to 20% earned over a year, and this tool shows both.