The Real Cost of Private Lending: Interest Rates, Points, and Fees Explained

Jay Sookhakitch
Jun 28
3 min read

Two people working at a wooden desk with laptops, reviewing documents with charts and notes. Pens are scattered, creating a focused workspace. — Collaborative problem-solving: Two individuals engage in detailed math calculations using laptops and handwritten notes.

If you're new to real estate investing, private lending might seem like a fast track to funding. And it can be. But before you sign on the dotted line, it's crucial to understand what you’re actually paying for. Let's break down the key components: interest rates, points, and fees — and how they play out across different types of loans from Alvear Lending.

Interest Rates: The Ongoing Cost

Think of the interest rate as your "rental fee" for using someone else's money. With private lending, you're usually looking at higher rates than a traditional mortgage — but you're also getting speed, flexibility, and fewer hoops to jump through.

Fix & Flip Loans: Rates typically range from 9.5% to 12.5%
Ground-Up Construction Loans: Expect 10.5% to 13.5%
Bridge Loans: Usually 10.5% to 12%
DSCR Loans (for rentals): Lower than the others, around 7.25% to 9%

The rate depends on your experience, credit score, and deal specifics. Better terms usually come with stronger borrowers and lower-risk projects.

Points: The Upfront Cost

"Points" are basically prepaid interest. One point equals 1% of the loan amount. Lenders charge points upfront to make the deal worth their while, especially for short-term loans.

Fix & Flip: 1.5 to 2.5 points
Construction: 2.0 to 3.5 points
Bridge: 1.5 to 2.5 points
DSCR: 1.25 to 2.5 points

So, if you borrow $300,000 on a fix & flip and pay 2 points, that’s $6,000 due at closing. Some lenders allow you to roll this into the loan, but it depends.

Other Fees: The Extras That Add Up

Fees vary by lender, but here are some common ones to budget for:

Underwriting or Processing Fee: $1,295 to $1,995
Appraisal Fee: Usually $500-$750
Draw or Inspection Fees (for rehab or construction): $125 to $200 per draw
Legal/Doc Fees: Often rolled into closing costs

Each loan product has its quirks. For example, ground-up construction loans might require more frequent inspections and larger reserves. DSCR loans may require rent coverage ratios instead of income verification.

💡 Alvear Lending Advantage: No Junk Fees

At Alvear Lending, we don’t believe in nickel-and-diming our borrowers. That means no surprise junk fees tacked on at closing. Underwriting and processing costs? Already included in your origination points. What you see is what you pay. This transparency helps you budget better and move faster.

Example: What It Really Costs

Let’s say you’re taking a $250,000 fix & flip loan:

Rate: 10.5% interest-only for 12 months = ~$2,187/month
Points: 2 points = $5,000
Fees: Underwriting ($1,495) + Appraisal ($600)

Total upfront cost: ~$7,095 Monthly payment: $2,187 (not including taxes, insurance, or utilities) Total over 6 months: ~$13,122 interest + $7,095 fees = $20,217

So, Is Private Lending Worth It?

Logo of Alvear Lending

It can be — if you understand the full picture. Private loans aren’t cheap, but they’re fast, flexible, and often the only way to move quickly on a deal. The key is making sure your project’s profit margin comfortably covers the cost of capital.

At Alvear Lending, we help you make sense of these numbers upfront. No surprises. Just clear terms so you can focus on flipping, building, or holding profitable properties.