f you’re exploring private money lending terms, you’re likely ready to dive into the fast-moving world of real estate investing. But before you close your next deal, let’s talk about something that doesn’t always get the spotlight—how much borrowing really costs.
Whether you’re partnering with private lenders for real estate or working with hard money lenders, understanding points, interest, and loan terms can make or break your bottom line. Let’s break it down in real terms so you can borrow smart and scale wisely.
What Are Points in Private Money Lending?
Think of Points as Upfront Borrowing Fees
In private money lending, “points” refer to fees paid upfront to the lender, calculated as a percentage of the total loan amount. One point equals 1% of the loan.
For example, if you’re borrowing $200,000 and the lender charges 2 points, that’s $4,000 due at closing. Points are essentially the lender’s way of making money upfront on the deal.
Why Do Lenders Charge Points?
Points help lenders reduce risk and get compensated early. The higher the risk of the loan—or the shorter the term—the more points they may charge. Private hard money lenders who specialize in fix and flip loans often charge more points because of the fast turnover.
Typical Range: 1 to 4 points, depending on property type, borrower experience, and local market risk.
How Interest Rates Work in Private Money Lending
Expect Higher Rates Than Banks
Unlike traditional banks, private lenders for real estate investors are offering short-term, high-speed capital. That speed and flexibility come at a cost—higher interest rates.
Typical private loan interest rates range from 8% to 15%, depending on:
- Deal complexity
- Borrower track record
- Property location
- Exit strategy and loan term
If you’re using fix and flip financing or new construction hard money loans, expect to land on the higher end of that spectrum.
Interest-Only Payments
Many private money lenders for real estate investing offer interest-only loans. This means you only pay the interest monthly, and repay the principal at the end (when you refinance or sell the property).
That keeps cash flow flexible—crucial when you’re mid-rehab on a fix and flip loan in Savannah or waiting for permits on new home construction loans in Cedar Rapids.
Term Structures: Timing Matters More Than You Think
Short-Term by Design
Hard money loans for real estate typically run from 6 to 24 months. These aren’t 30-year fixed mortgages; they’re built for investors who move fast.
If you’re scaling rentals, you’ll likely use a short-term loan to acquire the property and then refinance later with a conventional mortgage—or with long term private money lenders if you’re working with tenants who aren’t yet stabilized.
What About Extensions?
Most private mortgage lenders offer extension options, but they come with added fees and points. Always check if your term includes an extension clause and what it costs.
What Affects Points, Rates, and Terms?
Many variables go into a private money lender’s decision-making. Here’s what can influence your offer:
- Experience level: Hard money lenders for new investorsmay charge more until you build a track record.
- Market demand: High-risk markets like Newark, Huntsville, or Clarksville may come with higher interest or points.
- Loan type: A hard money construction loanusually has different terms than hard money rental loans.
- Exit strategy: If you plan to refinance quickly with hard money refinance, you may negotiate better terms.
Comparing Lender Offers the Smart Way
Before choosing between fix and flip bridge loans or hard money construction loans, compare your options beyond the headline rate. Look at:
- Origination points
- Monthly interest rate
- Loan term and any prepayment penalties
- Extension fees or balloon payment structure
Use tools like a free fix and flip calculator or a real estate flip investing calculator to model different scenarios.
How Loan Structures Can Align With Your Strategy
Understanding how to pair the right loan with your investment goals can make or break a deal. Instead of chasing the lowest rate, match structure to strategy:
Short-Term Flip Strategy
You’re in and out fast—think cosmetic updates, quick permits, and a hot resale market. You want:
- 12-month term
- Interest-only payments
- 2–3 points upfront, depending on experience
Mid-Term New Build or Major Rehab
If you’re building from the ground up or gutting a property, flexibility matters. Look for:
- 15–18-month interest-only terms
- 5–3.5 points
- Exit strategy: refinance or sell at completion
Long-Term Buy and Hold
For investors planning to rent and refinance, the right structure is key:
- 24-month loan term
- 5–2 points
- 8–10% interest, interest-only for the first year
- Refinance into a traditional or long-term private loan
Each structure has a purpose—plan accordingly to stay profitable and agile.
Tips for Managing Costs When Borrowing
- Negotiate points if you have a strong track record.
- Shop local. Local private money lendersmay offer better terms than national lenders.
- Bundle deals. If you plan multiple flips, ask for bulk pricing from your fix and flip lenders.
- Get prequalified with multiple private money lendersbefore locking in one.
- Match loan type to the deal. Use hard money lenders for rental propertiesfor buy-and-hold and fix and flip loans for short-turnaround projects.
The Bottom Line on Private Money Lending Terms
Every percentage point counts when you’re working on narrow margins. By fully understanding private money lending terms, you protect your profit and move faster through every phase of your deal—whether it’s a rehab in Greenville, a duplex in Evansville, or a ground-up build in Spokane.
You don’t need to guess. You just need the right lending partner.
Let’s Talk Numbers That Work for You
At Insula Capital Group, we’re more than just private money lenders. We’re dealmakers who know what it takes to win in today’s market. Whether you need fix and flip loans in Columbia, new construction loans in Wichita, or you’re exploring private lenders for home loans in Rock Springs—we’ve got you.
Let us walk you through private money lending terms, structure the best deal for your goals, and help you scale with speed. From fix and flip loans to commercial and rental property loans, we’ve built a network of lenders you can trust.
Ready to borrow smarter? Let’s talk today.
