Loan Cost
Analysis
Compare short-term investment loans versus traditional mortgages.
Understanding Loan Cost Differences
Investment loans come in many forms, each with different costs, rates, and terms. This calculator helps you compare short-term investment financing like ARV loans against traditional 30-year mortgages to understand true total costs.
Why This Comparison Matters
- ✓Higher short-term rates may be better for flips and ARV deals
- ✓Compare apples-to-apples for truly informed decisions
- ✓Understand holding costs and how timeline affects total cost
- ✓Short-term loans often have lower total interest if exited early
Loan Comparison
ARV/Short-Term Loan
Traditional 30-Year Mortgage
Comparison
ARV Loan Monthly
$22,386
Total: $537,271
Conventional Monthly
$3,160
Total: $1,137,722
Difference
- $600,451
- Principal (loan amount)93%
- Total interest paid7%
When to Use Each Loan Type
- ✓ARV/Short-Term Loans: Best for flips and short holds
- ✓Conventional: Better for long-term rentals (10+ years)
- ✓Speed matters: Short-term loans fund faster
- ✓Exit strategy: Determines which loan works best
Loan Cost Components
- ✓Interest rate - Varies by loan type and term
- ✓Loan term - Shorter = higher monthly, less total interest
- ✓Origination fees - 1-3% of loan amount upfront
- ✓Points - Additional discount fees upfront
💡 Pro Tip
Don't choose a loan based on monthly payment alone. Calculate your actual exit date and compare total costs over that period. A higher-rate short-term loan that you exit in 6 months often costs less than a lower-rate loan you hold for 30 years.
Key Metrics You Should Know
Total Interest Paid
Sum of all interest payments over the loan's life. Short-term loans typically have lower total interest even with higher rates because you're borrowing for less time.
Cost Per Year
Annual cost divided by years held helps compare different loan types on equal footing. A $50k total cost over 6 months is more expensive than $45k over 2 years.
Loan Type Comparison: Real Scenarios
Flip: 6-Month Project
ARV Loan (12%, 6 months):
- Loan: $300,000 | Monthly: $5,291
- Total paid: $331,764
- Interest cost: $31,764
Conventional (6%, 360 months):
- Loan: $300,000 | Monthly: $1,799
- Total paid over 6 mo: $10,794
- Interest cost: $10,794
ARV winner - but you exit in 6 months vs staying 30 years
If project takes 12 months, ARV total: $63,528. Conventional still low but you'd refinance into conventional anyway.
Rental: 10-Year Hold
ARV Loan (12%, 24 months):
- Loan: $300,000 | Monthly: $13,573
- Total paid (24 mo): $325,752
- Refinance to 6% conventional
Conventional (6%, 360 months):
- Loan: $300,000 | Monthly: $1,799
- Total paid (10 years): $215,880
- Interest cost: $215,880
Conventional winner for long-term holds
ARV at 24 months ($325k) + refi conventional. Total over 10 years: ~$395k. Conventional: ~$216k. Clear winner.
Types of Short-Term Investment Loans
ARV (After-Repair Value) Loans
- ✓Best for: Fix-and-flip projects with defined timeline
- ✓Rates: Illustrative only and vary by deal, market, and experience (not a commitment to lend)
- ✓Terms: 6-24 months, project-based
- ✓Funding speed: 5-10 business days
Fix & Flip Loans
- ✓Best for: Purchasing and renovating a property to resell
- ✓Rates: Illustrative only and vary by deal, market, and experience (not a commitment to lend)
- ✓Terms: Short-term and project-based
- ✓Common use: Renovate and resell, or refinance into a DSCR rental loan
Approval Requirements for Short-Term Loans
Documentation Needed
- ✓Purchase agreement: Signed contract and proof of earnest money
- ✓Detailed rehab estimate: Item-by-item breakdown with timeline
- ✓Comparable sales: 3-5 recent similar sales in area
- ✓Borrower info: Credit score, financials, experience
Credit & Financial Evaluation
- →Credit score: 600+ typical, 620+ preferred
- →Cash reserves: 10-20% of project cost for contingencies
- →Down payment: 10-20% of purchase price typical
- →Experience: Previous flips or real estate background valued
Key Takeaways for Smart Borrowing
Match Loan to Exit Strategy
Short-term loans for flips, conventional for rentals
Calculate Total Cost Not Monthly
Factor in your actual holding period
Plan Exit Early
Extensions are expensive—stay on timeline
Don't Just Compare Rates
Include fees, points, and term in analysis
Explore ARV Financing Options
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