AX Capital

True Cost Comparison (6-Month Term)
While hard money loans have higher interest rates, their total cost over a short 6-month period is often lower because:
DSCR loans are designed for the long term, making their lower interest rates beneficial over years, not months.
Hard money loans are structured to be paid off quickly, so the high interest (which accrues monthly) doesn’t accumulate as much as it would over a longer term. The primary cost is the high upfront points.
Prepayment penalties are common with DSCR loans (often spanning one to five years), which would be triggered when paying off the loan in just 6 months, adding significant extra cost. Hard money loans do not typically have these penalties.

For a short-term investment horizon of 6 months, the hard money loan saves you money by avoiding the prepayment penalties and longer closing times of a DSCR loan, despite its higher interest rate. Hard money is designed for speed and a quick exit strategy, which aligns perfectly with a 6-month term.