What Is a Lender Point in Hard Money Lending?
When exploring hard money financing, one term you’re almost guaranteed to encounter is a “lender point”—also commonly referred to as an origination point or simply a point. But what exactly is it, and how does it affect the overall cost of your loan?
In this post, we’ll break down:
- What a lender point is
- How it impacts your total loan cost
- What you should look for when choosing a lender
What Is a Lender Point?
A lender point is a fee charged by the lender, expressed as a percentage of the total loan amount. In most cases, 1 point equals 1% of the loan.
For example:
If you borrow $500,000 and the lender charges 2 points, that equals $10,000 (2% of $500,000).
This fee is typically paid at closing and is separate from your interest rate and other closing costs.
How Lender Points Impact the Total Loan Cost
While interest payments cover the cost of borrowing over time, points are an upfront cost that can affect your loan’s total expense—especially with short-term loans, which are common in hard money.
Let’s look at a quick comparison:
| Loan Amount | Points Charged | Cost in Dollars |
| $300,000 | 1 point | $3,000 |
| $300,000 | 3 points | $9,000 |
These fees are paid regardless of how long you keep the loan. So, if your loan is only 6 months long, high points can substantially increase the effective cost of capital.
Being mindful of this dynamic is important when structuring terms to ensure both parties achieve a fair and financially sound outcome. Since these points reflect the speed, flexibility, and accessibility that hard money lending provides—particularly in situations where traditional financing isn’t a viable option – it is not uncommon to see higher points as part of the trade-off for fast execution and minimal underwriting hurdles.
What to Look for When Choosing a Hard Money Lender
When comparing lenders, it’s important to look beyond just the interest rate. Lender points, and how they’re structured, can vary widely.
Here’s what to consider:
- Point Structure
Some lenders charge 1–2 points, while others may go as high as 4 or more. Make sure you’re clear on:
- How many points will you be charged
- When they’re due (most are collected at closing)
- Transparency
A reputable lender will clearly disclose all fees, including points, up front. If the terms feel unclear or buried in paperwork, that’s a red flag.
- Total Cost of the Loan
Consider both the points and the interest rate when evaluating cost. A lender with a slightly higher rate but fewer points might actually be cheaper overall—especially for short-term financing.
- Flexibility and Speed
Lender points are just one part of the picture. A lender who can close quickly, communicate clearly, and structure a deal that fits your timeline can be worth every penny.
Final Thoughts
Lender points are a standard part of hard money lending, but understanding how they work—and how they impact your total loan cost—can help you make a more informed, financially sound decision.
At Wilshire Quinn Capital, we believe in clear, transparent pricing with no surprises. Whether you’re a seasoned investor or new to private financing, we’re here to make the process simple, fast, and reliable.
