Expect a moderate percentage of your loan amount in hard money closing costs, driven primarily by origination points, prepaid interest, and title and escrow charges. That range climbs on construction and rehab deals with draw schedules or higher-risk borrower profiles. Before you sign anything, request an itemized fee worksheet and confirm whether points come off the top of your proceeds or get paid separately at the table.
- Borrowers should verify whether points are deducted from proceeds or paid separately at closing, as this affects available cash on day one.
- Expect closing costs to range from 3.5% to 5% of the loan amount, with higher costs on construction or riskier deals due to additional fees.
- Always request an itemized fee worksheet before signing, and confirm the recipient and purpose of each charge to avoid inflated invoices.
- Draw-based construction loans include recurring inspection fees, reinspection charges, and retainage that can extend loan terms and increase prepaid interest.
- Comparing total costs including points, interest, and fees over your expected hold period is more accurate than relying solely on the headline rate.
Every hard money loan carries a cluster of charges that fall into three buckets: lender fees, third-party costs, and prepaids. Knowing what belongs in each bucket is how you catch a padded invoice before it costs you thousands.
Origination points sit at the top of the list. Most private lenders charge 1.5 to 3 points, with each point equal to 1% of the loan amount. A lender offering a lower rate will frequently charge more points, and vice versa. That tradeoff matters more on short holds than long ones, since points are a fixed cost paid once while rate savings only compound over time you actually hold the loan.
Underwriting, processing, and document fees typically run $500 to $1,500 combined, though some lenders split this into two or three separate line items to make each one look smaller. Ask whether “processing” and “underwriting” describe the same work twice.
Third-party costs include:
Prepaids raise your cash-to-close even though they aren’t technically “fees.” You’ll prepay interest from your closing date through the end of that month, fund the first year of hazard insurance upfront, and often seed a tax escrow account. On a rehab or construction loan, add per-draw inspection fees ($150 to $300 each), plus wire, notary, and courier charges that can repeat every time money moves.
A moderate percentage range generally applies for straightforward fix-and-flip and bridge loans. It can be higher on ground-up construction projects, deals with weaker borrower credit or experience, or when additional fees are charged by brokers.
Here’s how that plays out at two loan sizes, using typical ranges from industry cost breakdowns:
A loan closing at a typical percentage leaves you with less in net proceeds once points are deducted than the gross loan amount. That distinction trips up first-time hard money borrowers constantly.
If your rehab budget or purchase price was calculated against the gross loan amount, you’ll come up short at the first draw. Always run your numbers off net proceeds, not the headline loan figure, and check whether the lender deducts points from proceeds or bills them separately at closing, since industry-standard hard money calculators show that the deduction method changes how much cash you actually have on day one.
Federal disclosure rules give you a standardized way to check every fee against what you were promised. The CFPB’s TILA-RESPA integrated disclosure guidance requires lenders to separate charges into “Loan Costs” and “Other Costs,” then roll both into a “Calculation of Cash to Close” table on the Closing Disclosure. This is the same document CFPB’s example Closing Disclosure prototype uses to group origination charges, third-party services, and prepaids into lettered sections, A through J, so you can trace each dollar to its purpose.
You have a right to receive the Closing Disclosure at least three business days before closing on most consumer mortgage transactions. That window exists specifically so you can compare the final numbers against your original Loan Estimate before you’re sitting at the table with a pen in hand.
Many hard money loans made purely for business or investment purposes fall outside strict TILA-RESPA timing requirements, but reputable lenders still provide a comparable itemized estimate as standard practice. When you review it, check for:
Draw-based loans carry recurring costs that a simple bridge loan doesn’t. Each time you request a construction draw, expect a per-draw inspection fee, and if the inspector has to return because work wasn’t complete, a reinspection charge stacks on top of that.
Retainage, typically 10% held back until project completion, affects your cash flow even though it’s not a fee. Lenders will also require builder’s risk insurance and, on larger projects, documentation from your general contractor before releasing funds.
Pro Tip: Draw turnaround time affects your carrying cost more than a quarter-point difference in rate ever will. A slow inspector who takes five extra days per draw across six draws can cost you more in extended interest than the entire difference between two competing rate quotes.
Before you commit to any hard money quote, run through this checklist:
A lender unwilling to itemize fees on request is telling you something about how they operate.
The biggest mistake we see borrowers make isn’t picking the wrong lender. It’s comparing headline rates without pulling apart what those rates cost in points, prepaids, and third-party charges over the actual life of the loan.
A direct private lender with a large volume of closed loans and a strong BBB rating emphasizes presenting fees clearly before a borrower commits. A trustworthy lender gives you an itemized estimate upfront and will walk you through whether points are deducted from proceeds or billed separately, because that distinction changes your available cash on day one.
Evaluate total cost of capital, meaning points plus interest across your expected hold period, rather than rate alone. A loan with a lower headline rate and heavier points can cost more than a higher-rate loan with fewer points on a six-month flip, and the math behind that tradeoff is worth running before you compare offers side by side.
— Daly Kay DiNatale
A direct private lender, not a broker shopping your deal to a network, so the fee worksheet you get reflects actual charges without additional broker markups. Our Hard Money Loan Program closes in days rather than weeks, and that speed doesn’t come with hidden line items tacked on at the last minute.
Whether you’re financing a fix and flip, a ground-up construction project, a rental property under a DSCR loan, or a commercial bridge deal, we structure fees around your project rather than forcing your deal into a one-size template. Request an itemized fee worksheet and a closing timeline through our loan application, and you’ll know your exact net proceeds before you sign anything.
For official disclosure requirements, consult the CFPB’s Loan Estimate and Closing Disclosure guidance. For tax treatment of points, see IRS Topic No. 504. For practical fee ranges, HardMoneyHome’s cost breakdown remains a solid industry reference.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
It’s an underwriting guideline for fix-and-flip deals, not a closing cost figure, though it directly affects how much of your rehab budget the loan actually covers.
Based on typical fee ranges, closing costs on a $400,000 hard money loan usually total around $14,000 to $20,000, or roughly 3.5% to 5%. The exact figure depends on points charged, whether you need a full appraisal versus a BPO, and title and escrow costs in your state.
If a quote lands anywhere near 10%, request a full itemized worksheet and check for duplicate underwriting or processing charges, broker markups, or unusually high points stacked on top of a high rate.
The main downsides are higher rates and points compared to conventional financing, short repayment terms that create refinance or exit pressure, and closing costs that can eat into project cash if not calculated against net proceeds. Draw-based construction and rehab loans add recurring inspection and reinspection fees that conventional loans don’t carry.
Points on a hard money loan may be deductible as home mortgage interest in certain owner-occupied scenarios, but rules differ for investment and business-purpose loans. IRS Topic No. 504 also notes that appraisal fees, notary fees, and document preparation charges are generally not deductible, so consult a tax professional about your specific deal.
