Hard Money Closing Costs: Lender Fees vs Third-Party Costs

Hard money closing costs are the lender's fees plus third-party charges, and the lender's share is usually the larger piece. At Ambition Lending, points typically run 2 to 4% of the loan amount; title, escrow, recording, insurance, valuation and any state mortgage taxes are on top of that and are paid to other parties.

Run your numbers: Free hard money loan calculator — Estimate your maximum loan, monthly interest, points and cash to close.

Most surprises come from budgeting for the interest rate and ignoring the rest of the settlement file. This guide separates the two buckets so you can total your cash to close before you commit. For the program basics, see hard money loans, and for the pricing side see hard money rates and points explained.

Key takeaways

• Lender fees: points (typically 2 to 4) plus any other lender charge, which should be disclosed in writing.
• Third-party costs: title and escrow, recording, insurance, valuation, and state or county taxes on the new mortgage where they apply.
• Business-purpose loans generally do not come with the standard consumer Loan Estimate and Closing Disclosure, so you have to ask for the numbers in writing.
• Cash to close is your down payment plus both buckets plus a buffer, not just the equity check.

What are the lender fees on a hard money loan?

Lender fees are mainly points: an origination fee charged as a percentage of the loan and usually collected at closing. Ambition Lending's typical range is 2 to 4 points with interest of 8 to 12%, and the exact figures depend on the deal.

Because points are a percentage, they scale with loan size. A hypothetical example, not a quote: on a $250,000 loan, 3 points is $7,500 and 2 points is $5,000. Any other lender-side charge, such as an underwriting or processing fee, should appear as its own line in dollars. If a term sheet shows only a rate, ask what else is charged. Our guide to reading a hard money term sheet shows where each fee normally appears.

What third-party costs come with a hard money closing?

Third-party costs are paid to vendors and governments rather than the lender, and they are needed to close and protect the lender's lien position. Typical lines are:

• Title and escrow: the title search, title policy and the settlement agent's fee. Late-discovered liens are the most common source of delay and added cost; see how title, liens and payoff sequencing work at closing.
• Recording fees: county charges for recording the deed of trust or mortgage and the deed. Amounts vary by county, so get the figure from your settlement agent.
• Insurance: hazard coverage that matches the property's condition. Vacant and mid-rehab properties often need different policies; see insurance for hard money loans.
• Valuation: an appraisal or a broker price opinion. Cost matters less than timing here; see appraisal vs. BPO.
• State taxes on the mortgage: some states tax the new loan itself, which is covered below.

Do some states charge taxes on the loan itself?

Yes. Florida is the clearest example. According to the Florida Department of Revenue, documentary stamp tax on a mortgage is 35 cents per $100 secured, and Florida's intangible tax statute (s. 199.133) adds a one-time 2 mills on the mortgage amount.

Hypothetical example, not a quote: on a $300,000 Florida mortgage, documentary stamp tax would be $1,050 and the intangible tax $600, or $1,650 before any title or lender charges. Many states charge nothing comparable, so the same loan can have a very different third-party total depending on where the property sits. Our Florida bridge vs. bank loan comparison works through this in more detail.

Why don't hard money loans come with a Closing Disclosure?

Because consumer mortgage disclosure rules generally do not apply to business-purpose loans. Regulation Z excludes credit extended primarily for business, commercial or agricultural purposes (12 CFR 1026.3), and Regulation X, which implements RESPA, carries the same exemption for business-purpose loans (12 CFR 1024.5).

That is why Ambition Lending makes business-purpose loans only, and it is also why you should not wait for a standardized form to reveal your costs. Ask for two documents in writing before you commit: a fee worksheet listing every lender and third-party charge in dollars, and a conditions-to-close list. Your title company's settlement statement then lets you confirm the final numbers line by line.

How do I calculate cash to close on a hard money loan?

Cash to close equals your down payment plus lender fees, third-party costs, valuation, insurance and a buffer for friction such as a small title fix or a slipped date. On a fix and flip, Ambition Lending's program covers up to 90% of the purchase price plus 100% of rehab, capped at 75% of ARV, so your down payment is the remaining share of the purchase price.

This is an illustration with made-up placeholders, not a quote or a promise of terms. Whether points are paid in cash or deducted from proceeds changes how much you bring to the table, so confirm that in the term sheet. For a deeper look, see how much cash to close you need, and model the loan itself with the hard money loan calculator.

What extra costs do rehab and construction loans add?

Rehab loans release money in stages, so expect draw-related steps such as inspections or progress verification, and insurance that reflects active construction. Whether those carry a fee depends on the lender, so ask. Organized scope and budget documents reduce both cost and delay; see how to build a rehab budget lenders approve and how draw schedules work. If a loan carries a prepayment or minimum-interest provision, it also affects your payoff cost; see prepayment penalties on hard money loans.

Can closing costs be financed or deducted?

Financing is sometimes possible, but every dollar financed counts toward leverage limits, and on a flip the 75% of ARV cap still applies. On the tax side, the IRS says in Publication 551 that certain settlement costs, such as recording fees, transfer taxes and legal fees for the title search and deed, are added to the property's basis instead of being deducted right away. Loan interest is treated differently; see whether hard money interest is tax deductible. Confirm your own treatment with a tax professional.

How do I protect closing funds?

Wire instructions are a favorite target for fraud. The CFPB's guidance on mortgage closing scams recommends verifying wiring instructions by phone using a number you already trust. Our own checklist is in protecting funds from wire fraud at closing.

Frequently asked questions

What are hard money closing costs?

They are the lender's fees, which at Ambition Lending typically run 2 to 4 points, plus third-party charges such as title and escrow, recording, insurance, valuation and any state taxes on the new mortgage.

Are points the same as closing costs?

No. Points are the lender's origination fee, a percentage of the loan amount. Closing costs also include third-party charges that the lender does not keep.

Do hard money loans get a Loan Estimate and Closing Disclosure?

Usually not. Loans made primarily for business or investment purposes are exempt from the Regulation Z and RESPA disclosure rules that require those forms, so ask for a written fee worksheet instead.

Can closing costs be financed into a hard money loan?

Sometimes, depending on leverage and deal economics, but on a fix and flip the loan is capped at 75% of after-repair value, so costs financed into the loan use up that room.

Are closing costs tax deductible?

Some are added to the property's basis rather than deducted immediately. The IRS explains which settlement costs are capitalized in Publication 551; confirm treatment with a tax professional.