Last Updated on June 28, 2021
How to Properly Use a Hard Money Loan Calculator
The Hard Money Loan Calculator is a useful tool to see the return metrics for your next real estate fix-and-flip investment. At Hard Money Lenders, we understand that using our Hard Money Loan Calculator tool can be a daunting task, so we’ve prepared a short guide to help you navigate our calculator during your first use.
When calculating the metrics of your hard money loan using our Hard Money Loan Calculator, there are a few different terms you should know. LTV stands for Loan to Value. This is the amount of money you get from a hard money lender against the value of the property. LTC stands for Loan to Cost, and it’s the loan value in comparison to the total cost of the project. This includes the property price, any additional fees, and all estimated repair costs. ARV stands for After Repair Value. This is the total value of the property once all the renovations have been made. Finally, origination fees are fees charged directly by the hard money lender as a requirement to access a loan. These fees cover the administrative work that goes into preparing a loan. If you come across any other terms you don’t know, a more comprehensive list of real estate terms can be found here.
Navigating the Hard Money Loan Calculator
Find our Hard Money Loan Calculator here.
Amount: This is the total purchase price of the property that you want to invest in.
Down Payment: This is the amount that you will pay out of pocket for your investment. Typically, you can expect a down payment requirement of around 25% for hard money loans.
Interest Rate: This is the amount of interest charged yearly on your loan amount. Typical interest rates for hard money loans are between 9-12%, but can vary greatly depending on each individual investor and investment.
Mortgage Term: This is the duration of the loan. While conventional mortgages have loan periods of 15 or 30 years, hard money loans have much shorter loan terms; typically, hard money loans have terms between 1 and 3 years.
Start Date: This is the date that you plan on receiving the loan and purchasing your investment property.
After you input all these metrics, press calculate to see your amortization schedule! The amortization schedule includes all interest and principal payments that you’ll pay for the life of the loan.
Understanding Your Amortization Schedule
After you click “calculate,” you’ll see a breakdown of your estimated monthly payments for your loan. You’ll see a few terms that may be new to you, so we’ll break each of them down below:
Down Payment: This is the amount you paid out of pocket for your investment, and will be subtracted from the property’s total value before calculating your loan amount.
Extra Payments: This is a plug value that you can insert if you want to include any monthly or yearly allowances for your loan. Some investors put aside a certain amount of money each month or year to handle any unforeseen expenses.
Total Principal Paid: Principal is the initial amount of money that you received a loan for. If you receive a loan for $100,000, the principal on that loan will be $100,000. Any amount paid beyond your monthly interest payments will be applied to paying down your principal. As you pay down your principal, you will also pay less interest on your loan. This is because the remaining principal balance is used to calculate interest.
Total Interest Paid: Interest is the amount paid to cover the interest rate on your loan. Each month, interest payments are calculated by applying an interest rate to the remaining principal balance on your loan.
Tip: Most times, interest and principal payments are set on a fixed schedule approved by your lender. It’s sometimes possible to pay down your principal early, but prepayment penalties may apply. Be sure to check if prepayment penalties apply before paying down your principal prematurely!
Total of All Payments: By adding your down payment, interest payments, and principal payment, you will get your total of all payments. This is the total cost of your investment, less any additional repairs or money that you put into the property.
A detailed breakdown showing how all the moving parts of an amortization schedule work can be found here.
Now, you should have a good understanding on how to make use of our Hard Money Loan Calculator! We hope this guide has been useful to help understand the terms and metrics used for fix-and-flip loans. Now, you can visit our Hard Money Loan Calculator and estimate your loans with confidence!
Jack Roberts has spent the last 5 years in the Private Money Lending world helping real estate investors secure financing for their non-owner occupied real estate investments. When he’s not thinking about real estate, Adam is an avid Jazz music fan and fisherman.