You found the deal. You sent it to a lender. Now there's a document in your inbox full of percentages, fees, and terms, and you have a day or two to decide.

A hard money term sheet tells you exactly what your loan will cost and how it will work. Read it well and you'll know your true cost of capital before you commit. Skim it and you might find out at the closing table.

Here's a line-by-line guide, using a real loan example from REIA Hard Money.

First, What's a Term Sheet?

A term sheet is a lender's written summary of the loan they're offering: amount, rate, points, fees, term, and conditions. Some lenders call it a letter of intent or a loan commitment. At REIA Hard Money, you'll receive a loan commitment: a preliminary version after we review your deal, then a final version once the third-party valuation is back. Our loan process →

The Example We'll Use

This example uses Standard Borrower terms for a first-time borrower. Rates and points improve as you build a track record.

1. Loan Amount

This is the total the lender will fund, often including both purchase and renovation money. Look for how it was calculated. Most hard money lenders cap the loan at a percentage of ARV, loan-to-value (LTV), or of total project cost, loan-to-cost (LTC).

At REIA Hard Money, every loan is capped at 70% of ARV, rehab budget included. In our example, 70% of $300,000 is $210,000. The project costs $235,000, so the borrower brings the $25,000 difference.

What to check: Does the loan amount include rehab funds, or only the purchase? If rehab is included, how is it paid out?

2. After Repair Value (ARV)

ARV is the estimated value of the property once renovations are done. It drives your loan amount, so it's one of the most important numbers on the page.

Expect the lender's ARV to differ from yours. REIA Hard Money uses independent, third-party valuations so the number protects you, the lender, and our investors. Being conservative in your own estimate makes your deal stronger, not weaker. Overestimating ARV →

What to check: Who determined the ARV, and can the terms change if the valuation comes in lower?

3. Interest Rate

Hard money rates are higher than bank rates because the loans are short-term, fast, and secured by properties that often need work. Most are interest-only, which keeps monthly payments lower during the project.

In our example, $210,000 at 15% works out to $2,625 per month in interest. RHM rates range from 15% for new borrowers down to 12% for Pro borrowers and Pro V borrowers.

What to check: Is interest charged on the full loan from day one, or only on funds disbursed? When is the first payment due? Is there a minimum interest period if you pay off early?

4. Points (Origination Fee)

One point equals 1% of the loan amount. Four points on a $210,000 loan is $8,400.

Pay attention to when points are paid. Standard borrowers pay points at closing. For RHM Pro and Pro V borrowers, points and fees are wrapped into the loan, so there's no out-of-pocket cost for them at closing.

What to check: Are points calculated on the full loan amount, including rehab funds? Are they paid at closing or added to the loan?

5. Lender Fees

This is where term sheets vary the most. Here's what RHM's fees look like, all listed up front:

What to check: Watch for vague line items like "processing," "admin," or "misc." fees. Every fee should have a name, a number, and a reason. Ask for anything unclear in writing.

6. Term and Extensions

The term is how long you have to repay, usually through a sale or refinance. Many fix-and-flip loans run 6 to 12 months. RHM loans run 6 months, with up to three one-month extensions at 1 point per month extended.

What to check: How many extensions are allowed, what each costs, and when the extension fee is due. Build your renovation timeline with breathing room so you're not paying for time you didn't plan for.

7. Down Payment and Cash to Close

This is the number that tells you how much cash you actually need. It typically combines your down payment, points (if paid at closing), and lender fees, plus title and closing costs from the title company.

In our example, the borrower's total from RHM's side is $35,200: $25,000 toward the project, $8,400 in points, and $1,800 in fees. Estimate your cash to close →

First-time borrowers typically bring a 10–15% down payment. Experienced Pro and Pro V borrowers can qualify for 0% down, and investors with equity in other properties may be able to use cross-collateralization in place of cash.

8. Repair Escrow and Draws

If your loan includes renovation funds, they're usually held in escrow and released in "draws" as work is completed. Your term sheet or loan documents should explain how draws work.

At RHM, draws reimburse completed work and require receipts or invoices for expenses over $2,500, lien waivers for contractor and labor costs, and photos or video of the finished work. Pro V borrowers may receive up to 20% of the repair escrow at closing. How our draw process works →

What to check: How often are draws processed? What documentation is required? Are inspections in person or by photo and video? What does each draw cost?

9. Prepayment Terms

Can you pay the loan off early without a penalty? Some lenders require a minimum amount of interest regardless of when you pay off. Know this before you list the property, especially if you expect a quick sale.

5 Red Flags on a Hard Money Term Sheet

1. Fees with no explanation. If a lender can't tell you what a fee is for, ask again.
2. Terms that can change after the valuation, with no explanation of how.
3. Hidden prepayment penalties or minimum interest buried in the fine print.
4. No clear draw process for your renovation funds.
5. Pressure to sign immediately. A good lender gives you time to read and ask questions.

What to look for in a hard money lender →

Questions to Ask Any Lender Before You Sign

• What's my total cost of capital if I pay off in month 4? In month 7?
• Are points and fees paid at closing or added to the loan?
• How is the ARV determined, and by whom?
• How long do draws take, and what do you need from me?
• Who do I call when something goes sideways mid-project?

That last question matters more than most people expect. At REIA Hard Money, lending decisions are made in-house by our Brookfield team, and the person who underwrites your loan is the person who answers the phone.

Frequently Asked Questions

What are typical hard money loan terms in Wisconsin?

Terms vary by lender. At REIA Hard Money, rates run 12–15%, points run 3–4, and terms are 6 months with extension options, with loans capped at 70% of ARV.

What does 4 points mean on a hard money loan?

It means an origination fee equal to 4% of the loan amount. On a $200,000 loan, that's $8,000.

Is a term sheet the same as a loan approval?

Not always. A term sheet or preliminary commitment outlines proposed terms. Final terms depend on the valuation and other conditions.

Can I negotiate hard money loan terms?

Track record matters. RHM's pricing improves as you complete deals with us, and experienced investors can verify their history to start at Pro or Pro V terms.