Points (Loan Origination)

Definition

Points are an upfront fee charged by a lender to originate a loan. One point = 1% of the loan amount, paid at close. Hard money lenders typically charge 1–3 points; DSCR lenders 0–2 points; conventional 0–1 points (or none, in exchange for a higher rate). Points are a significant component of true cost of capital on short-term loans — a 2-point fee on a 6-month loan is annualized as roughly 4% additional cost. The shorter the hold, the more points hurt.

Worked example

A $400,000 hard money loan with 2 points = $8,000 paid at close. On a 6-month hold, that $8,000 is effectively 4% of the loan amount per year (annualized) on top of the stated 10.5% interest rate — true cost of capital is closer to 14.5%, not 10.5%.

How DealIntel uses it

DealIntel's financing comparison engine computes true cost of capital across all four loan products, including points, interest, prepayment penalties, and per-diem charges. The headline number on every financing scenario is annualized total cost — not the lender's marketed rate.

Related terms

• Hard Money LoanShort-term, asset-collateralized real estate financing from a private lender — fast to close, higher-cost.
• Debt-Service Coverage Ratio Loan · DSCRAn investment property loan qualified on the property's rental income rather than the borrower's W-2 income.
• Loan-to-Value · LTVThe ratio of a loan amount to the appraised value of the underlying property.

Matt Abadi is the founder of DealIntel. He leads the development of the platform's six-strategy underwriting engine, 25-point Kill List, and Monte-Carlo financial model — the institutional analysis stack DealIntel applies to every fix and flip deal. DealIntel was founded in 2025 with the central thesis that knowing when not to invest is the most valuable number on the page.