When investors think about loan expenses, they often focus on interest rates and points. But in California’s private lending world, closing costs can quietly make or break your project’s ROI if you don’t plan for them.
Unlike conventional loans—where the bank handles most underwriting in a standardized way—hard money lenders tailor loans individually. That flexibility is what makes them fast and effective, but it also means closing fees can vary depending on property type, deal complexity, and funding speed.
If you understand the structure, you can budget accurately and negotiate smarter.
Typical Components of Hard Money Closing Costs
A clear, reputable lender should outline each cost on your term sheet or settlement statement (HUD-1 or Closing Disclosure). Here’s what you’ll typically see in California:
1. Origination Points
The core of every hard money deal.
- Usually 1–3 points (1 point = 1% of loan amount)
- Paid at closing, deducted from proceeds
- Covers lender’s profit, risk, and internal processing
Example:
A $500,000 loan at 2 points = $10,000 in origination fees.
2. Underwriting & Processing Fees
Flat fees that cover documentation, compliance checks, and file setup.
Typical range: $750–$1,500.
Lenders like Lending Bee keep this simple—one transparent processing fee instead of a mix of “administrative” or “review” charges that some brokers pile on.
3. Appraisal or Broker Price Opinion (BPO)
Private lenders rely on fast, accurate valuation.
- Standard appraisal: $500–$900
- Drive-by or BPO: $250–$400
Some direct lenders skip third-party appraisals and instead rely on internal evaluations for speed—reducing time and cost.
4. Escrow, Title, and Recording Fees
Handled through a licensed California escrow company or title agency:
- Escrow fee: $600–$1,200
- Title insurance: $800–$1,500 (based on loan size)
- Recording: $150–$250
- Notary and courier fees: $100–$200
Tip: Even when closing fast, make sure you’re using a reputable escrow that issues title insurance on time—this protects both borrower and lender.
5. Legal or Document Preparation Fees
Used when your loan requires:
- LLC or trust documentation
- Custom guarantees
- Cross-collateralized properties
Cost: $500–$1,000 depending on complexity.
Some lenders include doc prep in origination; others charge separately.
6. Wire Fees or Funding Charges
Outgoing wires typically cost $25–$50 each.
Small, but worth noting if you have multiple draws or concurrent closings.
7. Insurance and Tax Prorations
If you’re funding mid-month or mid-year, escrow prorates property taxes and insurance premiums.
You’ll prepay partial months or set up impound accounts if the lender requires them.
Optional or Situational Fees
| Fee Type | When It Applies | Typical Range |
|---|---|---|
| Extension Fee | Loan term extended beyond original maturity | 0.5–1 point per month |
| Prepayment Minimum | Lender requires minimum interest period | 3–6 months of interest |
| Inspection / Draw Fee | For rehab or construction loans | $100–$300 per draw |
| Loan Servicing Fee | For in-house servicing or statement access | $25–$50 monthly |
| Payoff / Reconveyance Fee | Administrative cost at loan payoff | $200–$400 |
Example from Lending Bee: California Hard Money Loan Cost Breakdown
📍 Scenario: Fix-and-flip in Riverside County
Loan Amount: $400,000
Term: 12 months
Rate: 10% interest-only
Points: 2
| Cost Item | Estimated Cost |
|---|---|
| Origination (2 points) | $8,000 |
| Underwriting / Processing | $1,000 |
| Appraisal | $500 |
| Title / Escrow / Recording | $1,800 |
| Legal Docs | $750 |
| Wire / Courier | $100 |
| Total Estimated Closing Costs | $12,150 (≈3% of loan) |
This investor knew their costs upfront—no hidden backend fees, no surprise “admin” charges—and completed the rehab in 5 months, exiting profitably.
How to Plan for Closing Costs Without Stress
1. Request an Itemized Estimate Early
A serious lender should give you a transparent Good Faith Estimate before ordering appraisal or title work.
Lending Bee provides a detailed cost summary with every term sheet—no hidden conditions, no mystery “broker fees.”
2. Budget 3–5% of Loan Amount
That’s a safe rule of thumb for total closing and transactional costs in California.
Heavier documentation (multi-property, construction, cross-collateral) pushes toward the upper end.
3. Verify What’s Collected at Closing vs. Monthly
Ask your lender which fees are deducted from proceeds and which are billed separately.
- Points, processing, title, escrow → deducted upfront
- Interest → paid monthly or prepaid for shorter terms
4. Compare Transparency, Not Just Price
Two lenders may quote the same rate and points, yet your closing costs differ by thousands.
Always ask for:
- Itemized line items
- Proof of third-party invoices (title, appraisal, escrow)
- Any backend or renewal fees in writing
5. Ask About Refund Policies
If your deal falls through mid-process, ask which fees are refundable.
Reputable lenders return unused third-party costs; brokers often don’t.
Why Transparent Fees Matter
In private lending, surprises at closing can damage both trust and ROI.
Lending Bee’s approach is straightforward:
- One clear processing fee
- No markup on title or appraisal costs
- Fast, predictable closing timeline (often 5–7 days in California)
That level of transparency keeps borrowers focused on what matters—finding, fixing, and flipping profitable deals—not chasing fee explanations.
Investor Tip: Turn Closing Costs Into Strategy
You can often leverage closing costs strategically:
- Roll them into the loan amount to preserve cash on hand.
- Deduct allowable costs as business expenses (consult your CPA).
- Use lender relationships to negotiate reduced repeat-client fees.
Seasoned investors treat closing costs as part of the investment model, not an inconvenience.
Summing up:
Hard money lending gives you the flexibility and speed banks can’t—but clarity around closing costs is what keeps deals predictable.
When you understand where every dollar goes, you can:
- Evaluate offers accurately
- Plan project budgets better
- Avoid unpleasant surprises at funding
And when you work with a transparent lender like Lending Bee, those numbers are clear from day one—so you can focus on returns, not red tape.