If you’ve ever had two term sheets in your inbox and couldn’t tell which was cheaper, you’re not alone. Hard money pricing isn’t just about the headline rate—it’s about points, minimum interest, draw fees, and timing. This article breaks down how to make an apples-to-apples comparison.
What’s in a Term Sheet?
- Rate (interest-only, usually monthly)
- Origination points
- Minimum interest period (e.g., 3 months no matter what)
- Extension fees (if project runs long)
- Draw/inspection fees
- Third-party fees (appraisal, title, doc prep)
- Holdback structure (drawn funds vs. full accrual)
Example: A vs. B
Loan $320k, 90-day project, avg outstanding $280k.
- Sheet A: 11.75% rate, 2 points, 3-month min interest, draws included.
- Sheet B: 10.99% rate, 3 points, no min interest, $175 per inspection × 4.
Base Case (90 days)
A: $17,240. B: $20,000. Winner: A.
+30 Days (Delay)
A: $22,400. B: $23,400. Winner: A, but gap narrows.
–30 Days (Fast Exit)
A: Still pays 3 months (min). B: Cheaper if you finish early. Winner: B.
Lessons
- Model base + ±30 days. Always.
- Watch holdback mechanics. If you pay interest on undrawn funds, that’s thousands lost.
- Check extension fees in advance; build into pro forma.
Negotiation Tips
- Ask for one free inspection or bundled draws.
- Request interest-on-drawn-funds only.
- Push for lower points if you’re in their “A-box.”
Quick Comparison Checklist
- Points (× loan amount)
- Interest (avg outstanding × months)
- Draw/inspection fees
- Third-party fees
- Extension/minimum interest
Bottom Line
Pick the term sheet that wins not just in your best-case timeline, but across the realistic range of outcomes. Total cost always beats headline rate.
