Hard money rates & points, explained.

The first question most investors ask is "what's the rate?" It's the right question — but it's only half of what a hard money loan costs, and the rate alone can be misleading. Here's how pricing actually works, in plain terms.

The two parts: rate and points

• Interest rate — the annual cost of borrowing, charged on the money you've drawn. Hard money loans are usually interest-only, so your monthly payment is just the interest, not principal.
• Points — an upfront fee, where one point equals 1% of the loan amount. Two points on a $200,000 loan is $4,000, typically paid at closing.

Together, the rate and points are the real price of the money. A loan with a lower rate but more points can cost more than one with a slightly higher rate and fewer points — especially on a short project.

What it costs in Maryland

Maryland hard money pricing generally runs in the low-to-mid teens on the rate, plus a couple of points. At MD Private Lender, terms are typically 12% and 2 points on a 12-month interest-only loan for qualified borrowers, quoted per deal based on the property, the leverage, and your experience. Because it's interest-only and there's no prepayment penalty, you only pay for the months you actually use.

Why hard money costs more than a bank

Hard money is priced higher than a conventional loan for real reasons — and those reasons are exactly why investors use it:

• Speed. It closes in days, not 30–45 days. That speed wins deals.
• It funds rehab. Banks won't finance a gut renovation; hard money does, with draws.
• It's based on the deal. Approval hinges on the property and your plan, not just your W-2 and credit.
• More risk, shorter term. The lender takes on more risk over a short window, and prices for it.

See the full comparison in hard money vs. conventional loans.

The right way to think about cost

Don't measure hard money against a 30-year mortgage rate — measure it against the deal. On a fix & flip, the loan lives for a few months, so the real cost is a few months of interest plus points, not a full year. Compare that to the profit the deal makes possible. A loan that costs $12,000 but lets you close on a flip that nets $50,000 isn't expensive — it's the reason the deal happened. The most expensive money in real estate is the money you couldn't get in time.

How to lower your effective cost

• Move fast. Interest is charged over time — a 4-month project costs far less than an 8-month one. Line up your contractor and title early.
• Draw as you go. You pay interest on drawn funds, so a well-managed draw schedule keeps costs down.
• Bring a clean, complete deal. Accurate ARV, a real budget, and a clear exit get you the best terms.