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## How Much am I Really Paying?

**THE SCENARIO**
Last time, I discussed buying a house with a hard money loan (or 'buying it with hard money'). To summarize, the loan would be for $60,000 and it would last for 8 months, with an interest rate of 11% and 2 points. At the end, I'd pay the principal, interest, and points, in an amount totaling $65,743.78.
**The question:** The note's interest rate is 11%, but the points change my effective borrowing rate. What's my effective annual interest rate on the $60,000 I'm borrowing?

**THE SOLUTION**
This one is pretty straightforward.
First things first, make sure the calculator is using 12 Payments per Year.
N: 8 (I pay back the loan after 8 months)
I/YR: (This is what I'm trying to find)
PV: 60,000 (I borrow $60,000 in the beginning)
PMT: 0 (During the course of the loan, no payments are due)
FV: $65,743.78 (At the end, I repay $65,743.78)

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I'm paying an effective annual rate of **13.79%** due to the combination of interest rate, points, and the short time frame after which I repay the loan.

What do you think? Would you borrow at a nearly 14% effective rate? Why or why not? Let us know in the comments!