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.

DealIntel's underwriting team builds and maintains the platform's six-strategy engine, 25-point kill list, and Monte-Carlo financial model. Every piece of long-form content on dealintel.io is reviewed by an underwriter with direct experience scoring residential investment deals.