Hard Money Basics
What Are Points on a Hard Money Loan?
No jargon and no sales pitch. This is how we explain it at the Averlend desk, with the math that matters.
Hard Money Basics
The short version, then the substance.
Key Takeaways
- The definition
- How to think about them
- Points vs rate trade-offs
The definition. A point is 1% of the loan amount, paid as a fee at closing. Two points on a $200,000 loan is $4,000. Points compensate the lender for originating, underwriting, and deploying capital fast.
How to think about them. Points are a cost of the deal, not a moral judgment. Put them in the spreadsheet next to holding costs and commissions. If the deal cannot absorb a few points, the deal was too thin to begin with.
Points vs rate trade-offs. Some lenders quote low rates and stack points, others the reverse. Compare total cost over your actual hold period. On a six-month flip, points weigh more than rate. On a 12 month hold, rate catches up.
The South Texas angle. Averlend underwrites this every week in Corpus Christi and across Nueces County. If you are working a deal in downtown or anywhere else in the metro, the theory above comes with a local desk attached: see our Corpus Christi lending page or send the deal directly.
Questions
Quick answers from the Averlend desk.
The Averlend Promise
Reading is free. So is a deal analysis.
Send the collateral, the numbers, and the exit. An Averlend rep will reach out ASAP, same business day.