Is paying 3–4 points on hard money too much or just the cost of speed?

Question

I see a lot of mixed opinions about paying 3–4 points on hard money loans. Some investors say it’s never worth it and that you should avoid it at all costs. Others say it’s just part of the game when speed matters.

For those who’ve actually used hard money on flips, how do you look at it?

Do you see the points as a bad deal no matter what, or just the cost of closing fast and locking up a good opportunity? At what point do the numbers stop making sense for you?

Curious to hear different perspectives and real experiences.

Sasha Mohammed · Answer

i don't think the conversation ends with "speed". consider what else you are gaining by closing with hard money.

for example, if literally NO ONE ELSE can do that deal, is 3-4 points worth it to get it done?

how about your own time shopping the deal? is 3-4 points worth avoiding a few hours of calling around and running through the whole scenario, and potentially a few days providing docs to a handful of other options?

Broker here, but sometimes the convo turns from simply "cost" to "opportunity cost".

Jay Hurst · Answer

I mean you can get speed, closing a handful of days, with out paying 3-4 points. To close in a week or so you will likely pay 2 but every little bit helps. and pay attention to the other fees to. I ahve had borrowers tell me well you are charging two points and this other offer is just charging 1.5 but they have not noticed the 7 other 500 lender fees which adds up to another 1.5% of the loan amount.  A cost is a cost, and who cares what they are called.

Tron Pham · Answer

I'm assuming a person paying 3-4 pts have no other other options? If the deal is good, numbers work and it's your only option. Yes. I'd do the deal. Otherwise, shop around before settling.

Ebonie Beaco · Answer

Great question, and it really comes down to knowing your options, not just accepting the cost as “part of the game.”

I’ve gotten these same deals done many times, both as an investor and as a mortgage broker, without paying 3–4 points, because there are lenders on the Non-QM and DSCR side that can move quickly and still make the numbers work without hard money pricing. Speed matters, but it doesn’t always mean you have to overpay for it. When you know which programs are readily available and which lenders can execute, you can often secure capital fast while preserving more of your profit.

Where investors get burned is assuming hard money is the only path. It makes sense in certain scenarios, but it shouldn’t be the default. The key is understanding the full menu of financing options upfront so you can choose the right tool for the deal instead of paying unnecessary points simply because you didn’t know another option existed.

Erik Estrada · Answer

It just depends on the loan type and scenario.

If you are an A-Paper Client, Scenario is very straightforward, and you close 5+ flips in a given year. Yea I can definitely see sub 9% and 1-1.5 pts with no broker involved.

True Hard Money is not for that kind of client.. Most hard money lenders are last resort. Sub 700 FICO score, Very Hairy Deal, and low/no reserves is the ideal client. Yes you will pay the price to obtain financing if  you fall into this category.

Most people fall in between. This is where a broker comes in handy as you won't get baited and switched if you work with a direct lender, you've never worked with before. It is very common in purchase transactions if you are unfamiliar with business purpose lending.

Matthew Bernal · Answer

Way too much.

Here’s why: points directly eat into your profit and ROI. Plain and simple. The lender is already making money on interest, not to mention document fees, appraisal fees, underwriting fees, and draw fees during the construction period. And let’s not forget the reality that, in a default scenario, some lenders are effectively protected by a 30–40% equity cushion.

In most cases, you shouldn’t be paying more than 1–1.5 points. Maybe 2 points if a broker is involved and materially simplifying the process.

For context, I recently closed with a lender out of Houston called Capital Connect. They charged 1.5 points at 8.99%, had straightforward draws, and closed in 3 days.

If I can do it, so can you!

Andy Gonzales · Answer

this is something a lot of active flippers wrestle with. In many cases, 3–4 points isn’t “good” or “bad” on its own, it just comes down to whether the deal still works after you plug that cost into your numbers.

For some investors, it’s simply the price of speed and certainty when a strong opportunity requires a quick close, while for others it’s a hard no unless the spread is very strong and the exit is clear. Looking forward to hearing how others underwrite that tradeoff in today’s market.

Peter Li · Answer

Points are expected and part of the cost (although it's typically 2 points, 3-4 does seem higher than I've ever paid) you can use a calculator like this Flip Calculator with Hard Money Loan Cost Analysis

Chris Seveney · Answer

depends on deal size as well, for a 150k loan its fine, for a 750k loan its very steep. it also depends on the borrowers experience, credit and current financial situation. There is a lot to unplug here on whether it is good or not a good deal. Too many variables as for some its great for others its awful

Is paying 3–4 points on hard money too much or just the cost of speed?

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