Comparing hard money lenders by interest rate alone is one of the most common — and costly — mistakes new investors make. Rate is only half the pricing picture. Points are the other half, and they can move your total cost more than the rate difference between two lenders ever will.
A "point" is 1% of your total loan amount, charged upfront (or rolled into the loan) as a fee to originate the loan. If you're borrowing $200,000 and the lender charges 2 points, that's $4,000 — separate from, and in addition to, your interest rate.
Points exist because short-term lending doesn't generate much revenue from interest alone — a loan held for 6-8 months doesn't accrue much interest compared to a 30-year mortgage. Points let a lender price the loan appropriately for a short holding period without needing an extremely high interest rate to compensate.
Say you're comparing two loans:
Lender B looks cheaper on rate. But on a $200,000 loan held for 8 months, the extra 2 points alone cost $4,000 upfront — likely more than the 1% rate difference saves you in interest over 8 months. The lower-rate loan isn't automatically the cheaper loan.
The only way to compare accurately: calculate total cost over your actual expected holding period — points paid upfront, plus interest accrued over the months you'll actually hold the loan — not rate or points in isolation.
For each loan offer:
This is a few minutes of math that can meaningfully change which loan is actually the better deal, especially when comparing offers with different rate/point combinations.
Points are a fixed, one-time cost. Interest accrues over time. That means the shorter your holding period, the more points matter relative to rate — and the longer you hold the loan, the more rate matters relative to points.
If you're planning a fast flip (a few months), a lower-point loan is often cheaper even at a slightly higher rate. If you expect to hold longer than planned — renovation delays happen — a lower rate can end up mattering more than you initially expected. This is part of why realistic timeline planning (see our BRRRR vs. flip breakdown) connects directly back to financing cost, not just strategy.
Points and rate are the two biggest levers, but not the only ones. Also ask about:
[PLACEHOLDER: confirm Swell's current rate ranges, points, and fee structure with underwriting before publishing — this post intentionally avoids stating specific numbers since they change and need sign-off.]
Rate is the number lenders lead with, but it's rarely the number that determines your actual cost on a short-term loan. Points, fees, and — most importantly — your real expected holding period all factor in. Do the total-cost math before you compare lenders on rate alone.