Term Sheet Math: Why Your Spreadsheet Doesn't Match Your Lender

Let me paint a picture you might recognize.

You run a deal through your spreadsheet. Purchase price: $200K. Rehab: $50K. Lender offers 90% LTC. Simple math says you need about $25K to close.

Then the term sheet shows up. Cash-to-close? $38,000. Wait — where did that extra $13K come from?

The Full Cost Stack (That Nobody Talks About)

Here’s the thing: loan-to-cost ratios are just the starting point. The real story is buried in the fee structure.

Points and Origination Fees. Most hard money lenders charge 2–3 points upfront. On a $225K loan, that’s $4,500 to $6,750 — right off the top. And here’s a nuance that trips people up: some lenders calculate points on the total loan amount (including rehab holdback), while others only calculate on the initial advance. That half-point difference? It’s thousands of dollars.

Interest Reserves. Many lenders require you to prepay several months of interest at closing. If you’re at 12% on $225K, that’s $2,250/month. A 6-month reserve means $13,500 held from your proceeds. And whether that comes from the loan or as additional cash you bring varies by lender. Big difference.

All the Other Fees. Then there’s the stuff that feels small but adds up: processing fees ($500–1,500), underwriting ($500–1,000), doc prep ($250–500), and wire fees ($25–50). You’re looking at $1,500–3,000 in “miscellaneous” before you’ve done anything.

Rehab Holdback Timing. Even if your lender funds 100% of rehab, that money sits in escrow. You might need to front $10–15K of work before your first draw gets released. That’s working capital you need to plan for.

Let’s Do the Real Math

Here’s a quick example to show how this plays out. The Deal: Purchase at $200,000, rehab of $50,000, total project cost of $250,000.

Loan Terms: 90% LTC gives you a $225,000 loan. Add 2.5 points ($5,625), a 12% rate with 6-month interest reserve ($13,500), and processing fees ($1,200).

Actual Cash Needed: Your down payment is $25,000 (10% of $250K). Points deducted at close add $5,625. Interest reserve is $13,500. Processing runs $1,200. And you’ll need about $8,000 in working capital for your first draw. Total: $54,325.

That’s more than double the “simple math” version. And this is a pretty standard structure.

How to Actually Compare Term Sheets

Don’t just look at the interest rate. Here’s what matters:

Calculate the True Cost of Capital. Annualize all fees based on your expected hold time. A 10% rate with 3 points on a 6-month hold can cost you more than 12% with 1 point.

Ask What’s Funded vs. Out-of-Pocket. For every fee, clarify: “Is this deducted from loan proceeds, or do I bring it to closing?” It makes a huge difference in how much liquidity you need.

Model Multiple Scenarios. Run your numbers at 6, 9, and 12 months. The “best” loan often changes depending on how long you expect to hold.

Stop Getting Surprised at Closing

This is exactly why we built the LendlyX Deal Analyzer. Plug in the term sheet details and see your real cash-to-close — not the napkin math version.

Because there’s nothing worse than scrambling for funds the week before you’re supposed to close.

Try it out — it might save your next deal.