Peter closes on a $300,000 renovation project in Greenwood, MS, using a hard money loan from North End Lending. The terms of the loan include a 65% loan-to-value (LTV), so he must bring 35% of the price as cash at closing, which makes the principle loan amount $195,000. The note is interest only, with monthly payments, and is for 18 months at 8% interest with 1 points paid when the deal closes.
Peter will need to bring $105,000 at closing (35% on the 65% loan-to-value), plus he will have to pay the $1,950 origination fee. he must then pay $1,300 monthly to North End Lending. If Peter sells the project for $405,000 after 18 months, he would earn a total profit of $79,650 after deducting the principle amount of $195,000, the money contributed at the close of $105,000, the origination fee of $1,950, and the aggregate interest payments of $23,400. This amount does not account for building costs.