points vs. interest

[John Curseaden]

Have seen or heard from a few lenders on RE websites who claim they don't charge any points on their loans, just interest. One in particular irked me. Here are the terms: 18% on the amount borrowed -- but it's calculated off the total loan amount, not the duration of the borrowing period. That's 18 points not interest -- as interest is usually calculated on an annual basis. The real interest rate on this deal could go as high as 216% if you use the money for only one month. I know usury laws normally don't apply to real estate transactions, but I wonder about this situation. That the lender also wanted 50% of the profit only made the deal that more ridiculous. Don't charge outrageous points to cover your "risk" and also try to benefit from the labor the rehabber puts in.