Fix & Flip Cost of Capital Calculator
Compare up to three hard money quotes on what they actually cost — including the Dutch-interest gap that makes two identical-looking rates thousands of dollars apart.
The deal
The quote
Quote 1
Assumptions
Results
| Line item | Quote 1 |
|---|---|
| Loan amount | $400,000 |
| LTC % / ARV-LTV % | 88.89% / 64.00% |
| Rate | 11.50% · interest type not selected |
| Origination points | 2.00% |
| Other fees | $2,5001 item
|
| Rehab holdback | $100,000 |
| Term | 12 months |
| Prepayment penalty | None stated |
| Estimated total cost | —Select an interest type |
| Effective annualized cost | — |
| Cash required to close | —Select an interest type |
Estimates only, based on the assumptions shown above. Actual costs depend on draw timing, exact closing date, extension or prepayment charges, and final lender terms. Not a loan commitment or an offer of credit.
Why two quotes at the same rate are not the same price
Most fix-and-flip borrowers compare term sheets on three numbers: rate, points, and term. Those are the numbers lenders lead with, and they are the numbers that fit in a spreadsheet column. They are also not enough to tell you which loan is cheaper.
The variable that moves the most money is how interest accrues on the rehab holdback. On a non-Dutch loan, you pay interest only on what is outstanding — the initial advance from day one, and each rehab draw from the day it funds. On a Dutch loan, interest accrues on the full committed amount from closing, whether or not you have touched the holdback. Same rate on the term sheet, materially different cost.
Take a real shape of deal: a $350,000 purchase with $100,000 of rehab, financed at $400,000 with $100,000 held back, 11.5% and 2 points, sold in nine months. Non-Dutch, the average outstanding balance across the hold is about $372,000 and the total cost of capital is roughly $42,600. Dutch, the balance is the full $400,000 the entire time and the same terms cost about $45,000. That $2,400 is invisible on the term sheet and it is entirely a function of one word in the loan documents.
The more common error is worse than that. The standard back-of-envelope shortcut — assume you are carrying about half the loan for the hold period — returns roughly $27,750 on this deal and reports both interest types identically. That is understating true cost by something like $15,000 on a $400,000 loan, on a deal where the whole projected profit might be $60,000. Cost of capital is not a rounding error in a flip model; it is frequently the difference between a deal and a lesson.
The second number worth watching is cash required to close. Total cost tells you what the money costs. Cash to close tells you whether you can do the deal at all, and it is the constraint that actually kills transactions. A quote with a slightly higher total cost but $15,000 less cash at the table may be the only quote you can execute. Both numbers are in the results above; neither one is sufficient alone.
Finally, be honest with the hold period. The sliders above exist because the hold assumption is the single input borrowers get most wrong, always in the optimistic direction. Drag the hold out three months past your plan and watch what happens to total cost. If the deal only works at your best-case timeline, the financing is not the problem — the deal is.
Methodology
Let L be the loan amount, H the rehab holdback, A = L − H the initial advance, r the annual rate, R the rehab months and Hm the hold months.
- Non-Dutch average balance:
A + H × (Hm − R/2) / Hm. The holdback is treated as drawn linearly across the rehab period and fully outstanding after it. - Dutch average balance:
L. The full commitment accrues from day one regardless of draws. - Interest:
average balance × r × (Hm / 12). - Total cost: interest + origination points + other fees.
- Effective annualized cost:
total cost / average balance / (Hm / 12) × 100. Use it to compare quotes at different loan sizes or hold periods, not as a headline number. - Cash required to close:
(purchase price − A) + points + fees, with the first term floored at zero when the lender advances more than the purchase price.
What is deliberately excluded: extension fees, prepayment penalties, default interest, draw-request fees, and third-party costs such as inspection, title, and insurance. Prepayment terms in particular are free text on every term sheet and cannot be priced generically, so the tool flags exposure instead of inventing a number. Rehab draws are modeled as a linear curve, which is the standard simplification and is close enough for comparison; your actual draw schedule will differ.
Interest-type selection is required and has no default. Assuming non-Dutch would bias every result toward the cheaper case.
Frequently asked questions
- What is Dutch interest on a fix and flip loan?
- Dutch interest accrues on the entire loan amount from the day you close, including rehab funds still sitting in holdback that you have not drawn. Non-Dutch interest accrues only on the balance actually outstanding, so the rehab holdback costs you nothing until it is drawn. Two quotes at the same rate can differ by thousands of dollars for this reason alone.
- Why does the calculator refuse to compute until I pick an interest type?
- Because there is no safe default. Assuming non-Dutch would show you the cheaper of the two possibilities and quietly understate your cost, which is the exact mistake this tool exists to catch. If your term sheet does not say, ask the lender before you compare.
- Why is the Dutch quote sometimes shown with a lower effective annual rate?
- Effective annualized cost is total cost divided by the average outstanding balance. Dutch interest raises both the cost and the average balance, so the ratio can come out lower even though you pay more dollars. Lead with total cost. Effective annual is the right comparator only when you are weighing quotes at different loan sizes or hold periods.
- Does this include extension fees or prepayment penalties?
- No. Prepayment penalties are free text on every term sheet and cannot be priced generically, so the calculator flags your exposure rather than guessing at it. If your hold period runs past the loan term, costs are capped at the term and the extension fee is excluded — the tool warns you when that happens.
- Do I have to give you an email address?
- No. The calculator is free and ungated. Your numbers stay in your browser — the shareable link encodes them into the URL rather than sending them to a server.
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