Points, Interest, and Exit Fees: How to Read a Private Lender's Term Sheet Before You Sign

New borrowers shop private lenders on one number: the interest rate. Experienced ones read the whole term sheet, because the headline rate is often the smallest part of what a loan actually costs. Points, fees, and the structure of how money is advanced and repaid can quietly double your cost of capital on a short flip. Knowing how to read each line keeps a good deal from turning into an expensive one.

The Lines That Decide Real Cost

Beyond the interest rate, four terms drive what you actually pay:

• Points (origination fee): charged up front as a percentage of the loan. Two points on $200,000 is $4,000 due at closing, regardless of how fast you repay.
• Exit or back-end fees: a charge due when you pay the loan off — easy to miss because it sits at the end.
• Draw schedule: on rehab loans, the lender releases funds in stages tied to completed work, so you front the cash and wait for reimbursement.
• Prepayment terms: some loans guarantee a minimum number of months of interest even if you repay early.

On a six-month flip, points and exit fees often cost more than the interest itself.

Why Short Hold Times Magnify Fees

Fixed fees hurt more the faster you repay. A flat two points plus a one-point exit on a loan you hold for four months is an enormous effective annual rate, even if the stated interest looks modest. The shorter your project, the more those one-time charges dominate. That is why a slightly higher interest rate with no points can beat a low-rate, high-fee loan on a quick project — you have to run the all-in number, not the sticker rate.

How to Compare Lenders Apples-to-Apples

Add every cost — points, fees, and total interest for your expected hold — and divide by the amount borrowed to get a true cost of capital. Compare that figure across lenders, not the rates. Building a list of private lenders and collecting term sheets from several lets you negotiate from real numbers instead of taking the first offer.

Frequently Asked Questions

What are points on a private loan?

Points are an origination fee charged up front as a percentage of the loan amount; one point equals one percent of the loan.

Why do exit fees matter so much?

Exit fees are due when you repay, so on a short hold they add significantly to your effective cost while being easy to overlook at signing.

Is a lower interest rate always cheaper?

No. A low rate paired with high points and fees can cost more than a higher rate with no fees, especially on short projects. Always compare all-in cost.

What is a draw schedule?

On rehab loans, the lender releases funds in stages as work is completed, meaning you advance the cash and get reimbursed after inspection.

Read Every Line Before You Sign

The cheapest private loan is rarely the one with the lowest rate. Explore private lender and distressed property data at ListCentral.us, or email info@listcentral.us to build a private lender list for your next deal.