Hard money loans are short-term, asset-based loans typically used by real estate investors for "fix-and-flip" projects. Unlike traditional mortgages, hard money lenders look primarily at the collateral (the property) rather than the borrower's credit score.
The 70% Rule: Most professional flippers and hard money lenders follow the "70% Rule." This suggests you should never pay more than 70% of the After Repair Value (ARV) minus the costs of repairs. This calculator helps you determine if your deal fits within those lender constraints.
Key Terms Explained
After Repair Value (ARV): The estimated market value of the property after all renovations are completed.
LTV Limit: The Maximum Loan-to-Value ratio. Lenders often cap their risk at 70% to 75% of the ARV.
Points: Upfront fees paid to the lender at closing. 1 point equals 1% of the loan amount.
Interest-Only: Most hard money loans do not include principal repayment in the monthly bill, only interest.
Real-World Example
Imagine you find a distressed property for $200,000. You estimate it needs $50,000 in repairs. Once fixed, it will be worth $350,000 (the ARV). If a lender offers a 70% ARV loan at 10% interest with 2 points:
Max Loan: $350,000 x 70% = $245,000.
Upfront Points: $245,000 x 2% = $4,900.
Monthly Interest: ($245,000 x 0.10) / 12 = $2,041.67.
In this scenario, the loan covers the purchase and most repairs, but you must still account for closing costs and the monthly carrying costs during the renovation period.
function calculateHardMoney() {
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0;
var repairBudget = parseFloat(document.getElementById('repairBudget').value) || 0;
var arv = parseFloat(document.getElementById('arv').value) || 0;
var ltvLimit = parseFloat(document.getElementById('ltvLimit').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var points = parseFloat(document.getElementById('points').value) || 0;
var loanTerm = parseFloat(document.getElementById('loanTerm').value) || 0;
if (arv <= 0 || ltvLimit <= 0) {
alert("Please enter valid ARV and LTV values.");
return;
}
// Calculation Logic
// 1. Max Loan Amount based on ARV percentage
var maxLoan = arv * (ltvLimit / 100);
// Most lenders cap the loan at the total cost (Purchase + Repair)
// but for this calculator we focus on the ARV threshold.
// 2. Monthly interest payment (Interest only)
var annualInterest = maxLoan * (interestRate / 100);
var monthlyInterest = annualInterest / 12;
// 3. Points cost
var totalPoints = maxLoan * (points / 100);
// 4. Total Cash Required (Gap between Total Cost and Loan + Points)
var totalProjectCost = purchasePrice + repairBudget;
var cashGap = totalProjectCost – maxLoan;
var cashRequired = cashGap + totalPoints;
if (cashRequired < 0) cashRequired = 0; // If loan covers everything
// 5. Total cost of the loan over the term
var totalInterestTerm = monthlyInterest * loanTerm;
var totalLoanExpense = totalInterestTerm + totalPoints;
// Display Results
document.getElementById('resMaxLoan').innerText = '$' + maxLoan.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resMonthly').innerText = '$' + monthlyInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resPoints').innerText = '$' + totalPoints.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCashRequired').innerText = '$' + cashRequired.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTotalCost').innerText = '$' + totalLoanExpense.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('hmResults').style.display = 'block';
}