The stated interest rate is only one part of a private real estate loan's cost. Ask for a written, itemized quote showing who receives each charge, when it is due, and whether it can change before closing.
Points and origination
A point is one percent of the amount used to calculate it. For example, two points on a $400,000 loan equal $8,000. Confirm whether the lender applies points to the committed amount, initial advance, or another base. Ask whether a separate processing, underwriting, or broker charge is added. A label alone does not tell you which services the fee covers.
Third party and project costs
Valuation, title, legal, recording, and insurance charges may come from outside the lender. For a renovation or construction loan, ask whether each draw requires an inspection and what it costs. Identify any deposit due before approval, whether it is refundable, and who receives it.
Repayment and extension
Read the payoff section as carefully as the origination section. A loan may have minimum interest, a prepayment charge, an extension fee, or a higher default rate. The contract controls. Model costs if the project finishes early, on schedule, and late.
Compare offers using your expected hold
- Use the same loan amount, draw schedule, and planned repayment date for each quote.
- Add lender and broker charges, estimated third party costs, interest, and any likely draw or extension charges.
- Record cash needed before and at closing separately from total lifetime cost.
- Ask the lender to explain any difference between the quote and final documents before signing.
The CFPB comparison guide illustrates why upfront charges and cash to close matter for consumer mortgages. Its standardized Loan Estimate process does not necessarily apply to an investment or business purpose loan, so request a transaction-specific fee schedule.
Our directory can help identify potential lenders. Verify their current fees and terms directly.
FAQs
How much is one point?
One point is one percent of the calculation base. Ask whether the fee uses the full loan commitment, the amount initially advanced, or another figure.
Are origination and broker fees the same?
They can be separate charges paid to different parties. Ask for an itemized quote identifying each recipient and amount.
What is a minimum interest period?
A contract may require a stated amount of interest even if the loan is repaid early. Check the actual payoff provision before signing.
How should I budget for draws?
Ask whether draw inspections or processing carry a fee, who pays it, and when funds will be released.
How do I compare two loan offers?
Use the same loan amount and expected hold period, then compare all upfront charges, interest, third party costs, and likely payoff or extension charges.