Fix and Flip Loans: The 6 Best Fix and Flip Financing Options

Fix and flip loans help short term real estate investors finance the purchase and renovation of a property before flipping it for a profit. There are typically 6 types of fix and flip loans that can finance properties in distressed conditions. They include hard money loans, cash out refinances, lines of credit, and more.

LendingHome offers fix and flip loans to investors with rates starting at 7% for prime borrowers. They fund up to 90% LTC and there’s no prepayment penalty for early repayment. You can get prequalified online in minutes, see your exact rates, and receive funding in as little as 15 days.

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Types of Fix and Flip Loans

To get some additional insight into fix and flip loans, we spoke at length with Than Merrill, star of the A&E show “Flip This House” and author of The Real Estate Wholesaling Bible. He’s also CEO of FortuneBuilders and CT Homes, a multi-million dollar real estate businesses. A coach and mentor, he has helped many people who want to fix and flip properties professionally.

The 6 types of fix and flip loans are:

1. Fix and Flip Hard Money Loan

A hard money loan is a short-term loan secured by real estate and used by fix and flippers to purchase and renovate a property. Investors typically use hard money loans to purchase, renovate, and sell a property within 1 year. These loans are ideal for fix and flippers since they finance properties in poor condition.

Hard money loans, also referred to as rehab loans, have lower qualifications for approval, helping fix and flip investors receive approval and funding in as little as 15 days. This is why hard money loans are ideal for both novice and experienced home flippers, says Than Merrill, because hard money lenders care more about the property and its potential value than about the borrower’s background.

LendingHome is a national hard money lender that helps experienced and inexperienced fix and flippers finance investment projects. Rates start as low as 7% for prime borrowers and prequalification takes minutes. You can fill out their brief online application in 10 minutes or less.

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Fix and Flip Hard Money Loan at a Glance

Fix and Flip Hard Money Loan Rates & Terms

Hard money loans have high rates but they offer short terms and can even finance renovations. Lender fees are taken directly out of the loan and closing costs are either paid out of pocket or taken directly out of the loan. When you consider the cost and fees along with the rates, it’s obvious that hard money loans don’t come cheap.

Hard money loans rates and terms are:

• Term: 1 – 3 years
• Time to funding: 15 days
• Interest rates: 7% – 12%
• Lender fees: 1.5% – 10%
• Closing costs 2% – 5%

However, hard money loans typically don’t have a prepayment penalty and you can reduce the overall financing costs by paying the loan back early. Monthly, interest-only payments are made during the loan and the principal repayment is at the end of the loan term. Hard money loans generally finance 90% of a property’s loan-to-value (LTV) and 80% of a property’s after-repair-value (ARV).

Than Merrill, star of the A&E show “Flip This House” points out that flippers can and should factor the increased cost of financing into the specifics of the project — perhaps bid less for the home or increase the listing price when you sell the home to make up for the high cost of financing.

Also, keep in mind that you’re not paying the interest for very long since you can usually flip a home in less than 1 year. To help speed up the process, hard money lenders such as LendingHome offer prequalification in as little as 3 minutes and funding within 15 days.

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Fix and Flip Hard Money Loan Qualifications

Hard money loans offer comparatively easier qualifications when compared to the other options on our list. For example, hard money lenders will typically require the following:

• Credit score: 550+ (check your credit score for free here)
• Debt to income ratio: 35% – 45%
• Experience: 2 – 3 past rehab projects for DIY projects or licensed contractor help for inexperienced fix and flippers

However, a credit score of 640 or above is preferred. Borrowers with better credit scores and a longer history of successful fix and flip projects will be seen as safer and likely qualify for lower rates and fees as well as higher borrowing limits.

Who Fix and Flip Hard Money Loans are Right for

Hard money loans are fix and flip loans that can finance the purchase and renovations of a property. These loans let experienced fix and flippers conduct their own renovations while allowing novice flippers to use a licensed contractor. Regardless of expertise, the funding of a hard money loan can happen in as little as 15 days. This helps fix and flip investors compete with all-cash buyers (like at real estate auctions).

Hard money rehab loans are right for the following investors:

• Experienced flippers with 2 – 3 past rehab projects
• First-time investors who will have a licensed contractor help
• Fix and flippers who need to compete with all-cash buyers

Where to Find a Fix and Flip Hard Money Loan

Hard money loans are issued by hard money lenders. These lenders can either be found online or in-person. Traditional hard money lenders are typically found offline through industry relationships such as referrals from realtors, contractors, or mortgage brokers.

Online hard money lenders, on the other hand, conduct their business completely over the Internet. With these lenders, prequalification takes less than a day and funding can be received in as little as 15 days. For more information on the best national hard money lenders as well as lenders in your area, check out our state-by-state hard money lender directory.

LendingHome is an online hard money lender that offers rates starting at 7% for prime borrowers, monthly payments that are interest-only, and no prepayment penalties. They can fund loans in as little as 15 days and prequalification can take minutes.

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2. Fix and Flip Cash Out Refinance

A fix and flip cash out refinance is a strategy where a fix and flip investor refinances an existing property to finance the purchase of a new investment property. A cash out refinance helps fix and flippers extract equity from an existing property by issuing a new loan and paying off the existing mortgage.

The new loan issued on a cash out refinance is considered a “first lien.” This means that any existing liens (such as the original mortgage) must be paid first before you’re able to extract any equity. The difference between the amount of the new loan and the amount of the old mortgage amount is the cash a fix and flip investor can use to finance other investments.

There are no restrictions on how a fix and flip investor spends the cash received from a cash out refinance. Fix and flip investors can use a cash out refinance, also known as a “cash out refi,” on an owner-occupied home as well as a non-owner-occupied investment property up to 4 units.

Visio Lending offers real estate investors a way to refinance an existing property or portfolio of properties. Their cash out refi offers range from 24-month bridge loans to 30-year rental loans with rates starting at 6.7% for prime borrowers. You can prequalify in just a few minutes.

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Fix and Flip Cash Out Refinance at a Glance

Fix and Flip Cash Out Refinance Rates & Terms

The interest rates on a cash out refi are typically lower than with a traditional mortgage. This is because the borrower already has a track record of good payments. However, since a cash out refinance is more complicated than a regular bank loan, lenders typically charge higher fees.

The rates and terms on a cash out refinance are as follows:

• Term: 15 – 30 years
• Time to approval: 30 – 45 days
• Interest rates: 2.99% – 5%
• Loan origination fees: 3%
• Closing costs: 2% – 5%

Lenders typically offer cash out refinances equal to 75% LTV on a 1 unit property and 70% LTV on a 2-4 unit property. This means you’ll need to have somewhere between 30-40% of equity in an existing property for this loan to make sense. You might, therefore, have to use a cash out refinance as a down payment and then use a hard money loan, because even if you have 40% equity that’s really only 15% you can pull out, which probably doesn’t cover the purchase of a house.

Since a cash out refinance is a first lien, borrowers are required to cover closing costs between 2% – 5% of the existing property’s fair-market-value (FMV). Closing costs are either taken directly out of the loan or paid out of pocket. Once the loan is issued, the lump sum amount is wired directly to a borrower’s bank account. It’s up to the borrower to pay off the existing mortgage.

Fix and Flip Cash Out Refinance Qualifications

The qualifications on a cash out refinance are typically more stringent than with other fix and flip loans. This is because a cash out refinance is usually issued by a traditional bank or mortgage lender rather than an online or hard money lender.

Specifically, a fix and flipper should expect to provide the following when applying:

• Minimum credit score: 640+ (check your credit score for free here)
• Debt-to-income ratio: 45% or less
• Cash reserves: 0 – 6 months
• Debt service coverage ratio (DSCR): 1.25 (if refinancing an existing rental property)
• 2 years personal tax returns (if refinancing an existing rental property)

Finally, all fix and flip investors, whether they’re refinancing an investment property or their primary home, should have at least 30% – 40% equity in the existing property.

Who a Cash Out Refinance is Right for

Cash out refinances are only used by real estate investors who already have an existing property. They’re investors who want to get money to flip a house and compete with all cash buyers without turning to hard money. A cash out refi can only finance up to 75% of the existing property’s loan-to-value (LTV) ratio.

Cash out refinances are best for the following types of investors:

• Fix and flippers with an existing owner-occupied primary residence
• Fix and flippers with an existing non-owner-occupied investment property
• Fix and flippers with at least 30% – 40% of equity in an existing property

A cash out refi is also perfect for portfolio investors. This is because portfolio investors typically own an existing property with enough equity to execute a cash out refinance. These portfolio investors typically use a cash out refi as a downpayment on a blanket mortgage or a portfolio loan. These blanket mortgages can finance 4 or more properties under a single loan and are perfect for investors with multiple houses.

Where to Find a Cash Out Refinance

You can find a cash out refinance at any Fannie Mae-approved mortgage lender. They can also be issued by lenders specifically catering to real estate investors. Lenders that focus on investors tend to have more flexibility and their familiarity with the investing world allows them to get their clients funded more quickly than traditional mortgage companies.

For more information on cash out refinances, check out our guide on cash out refinances for real estate investors.

Visio Lending offers real estate investors cash out refinance options that range from 24-month bridge loans to portfolio loans to 30-year rental loans. Rates start at 6.7% for prime borrowers, but your exact rates will vary based on your borrower qualifications and the refinance option you choose. You can prequalify online in just a few minutes.

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3. Fix and Flip Home Equity Line of Credit

A home equity line of credit (HELOC) is a home equity loan that works more like a credit card than a conventional loan. Fix and flip investors are issued a line of credit based on the value of their existing home and can use that credit over the HELOC’s term. Just like a credit card, interest rates are charged on the amount borrowed until the amount is repaid.

Unlike a cash out refinance, a home equity line of credit (HELOC) can be both a first or second lien, meaning that it can be taken out in addition to your existing mortgage. A HELOC can only be issued on an owner-occupied primary residence. However, there are no restrictions on what a fix and flip investor does with the capital but the HELOC typically needs to be taken out on a primary residence and not an investment property.

Fix and Flip Home Equity Line of Credit at a Glance

Fix and Flip Home Equity Line of Credit Rates & Terms

The overall term of a HELOC is broken down into two phases. The first 5 – 10 years is known as the draw period while the following 20 years is known as the repayment period. During the draw period, borrowers are free to borrow up to their maximum line of credit and pay interest only monthly payments. During the repayment period, fix and flip investors stop borrowing and start repaying the principal.

A home equity line of credit (HELOC) has rates and terms of:

• Term: 25 – 30 years
• Time to approval: 30 – 45 days
• Interest rates: 4% – 5%
• Loan origination fees: 2%
• Repayment: Monthly, interest-only for first 5 – 10 years, interest and principle for remaining 15 – 20 years

The maximum loan amount is equal to 85% of a property’s combined LTV, which means the first mortgage and second HELOC combined cannot exceed 85% of a property’s current fair market value. Since a HELOC is considered a second mortgage, borrowers aren’t required to pay closing costs.

Fix and Flip Home Equity Line of Credit Qualifications

Since a home equity line of credit (HELOC) is a home equity loan, the qualifications for approval are fairly standard. A borrower needs to meet the minimum FICO score requirement and debt to income ratio. The borrower will also need to show equity in their existing property.

Borrowers should expect to have the following prior to applying:

• Credit score: 640+ (you can check your credit score for free here)
• Debt-to-income ratio: 45% or less
• Existing home with at least 30% equity

Further, HELOCs are only allowed on an owner-occupied primary residence. However, lenders aren’t concerned with what an investor does with the money after it’s been issued. If you’re instead looking for a line of credit on your investment property, you can read our investment property line of credit section below.

Who Home Equity Lines of Credit are Right For

Home equity lines of credit (HELOCs) are only issued on an owner-occupied primary residence. HELOCs typically can’t be taken out on an investment property. Further, the combined loan-to-value ratio (CLTV) cannot exceed 85% of the home.

Once a home equity line of credit (HELOC) is issued, a fix and flipper can use it to finance any investment purchase. Fix and flippers will typically use the cash from a HELOC to purchase and renovate an investment all cash or use as a downpayment on a hard money loan.

The real value in a HELOC, however, is in its credit structure. Since it’s not a loan, interesting fix and flippers can get approved for a home equity line of credit (HELOC) and take their time looking for an opportunity. Interest doesn’t start accruing until an actual draw is made.

Therefore, HELOCs are best for the following investors:

• Fix and flip investors with an owner-occupied primary residence
• Fix and flip investors with more than 15% home equity
• Fix and flippers without a specific project in mind

HELOCs allow fix and flip investors to set a maximum budget and wait for the right opportunity, such as with a foreclosure or non-distressed REO.

Where to Find a Fix and Flip Home Equity Line of Credit

Investing in real estate requires having access to the right capital, and for those with equity in existing primary residence, a HELOC can be a great choice. Home equity lines of credit (HELOC) are available at most national banks and mortgage lenders.

To read more about home equity loans, check out our guide on home equity lines of credit. For those considering tapping into their property’s equity, take a look at LendingTree. Their online marketplace has a large number of lenders allowing you to compare rates, offers, and find a good fit. Seeing your options takes just a few minutes.

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4. Fix and Flip Investment Property Line of Credit

An investment property line of credit (LOC) is a line of credit similar to a Home Equity Line of Credit (HELOC) except its specifically used on investment properties. It works like a credit card where you only pay interest on the money that you actually use. This LOC is for short term cash needs and can be used for both purchases and renovations of fix and flips.

An investment property LOC can only be used on non owner occupied properties. However, it’s possible to get either a single asset investment property LOC or a portfolio investment property line of credit. While you typically need to outline your expected use for the LOC in your application, you can usually use it for whatever you want once it’s funded.

CoreVest offers an investment property line of credit starting at $1MM and going up $25MM for single assets or portfolios. Their lines of credit are up to 80% of a property’s cost with terms between 18 – 24 months. The line of credit offers experienced flippers with significant equity in an existing portfolio a high degree of flexibility and speed.

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Fix and Flip Investment Property Line of Credit at a Glance

Fix and Flip Investment Property Line of Credit Rates & Terms

The rates for an investment property line of credit are based on the borrower’s credit score and credit history but also based on the investment property itself. The terms are set by the bank offering the line of credit. The rates and terms vary from single asset to portfolio LOCs.

The single asset investment property line of credit rates and terms include:

• Term: 18 – 24 months years
• Time to approval: Up to 30 days
• Interest rates: 5.2% – 8%
• Loan origination fees: 1% – 2%
• Closing costs: 1 – 5%

There are also sometimes annual service fees around $75. Minimum lines of credit on single assets are as low as $25,000 while minimum lines of credit on a portfolio of properties is typically around $1 million. Investment property lines of credit are usually capped at 75% LTV or at 80% of the cost.

Fix and Flip Investment Property Line of Credit Qualifications

An investment property line of credit for a single asset has certain qualifications that a borrower and their property must meet in order to get approved. A portfolio LOC has stricter qualifications and looks more at the borrower’s overall financial standing. Generally, all LOCs require a certain amount of equity in the property.

Typical investment property lines of credit qualifications include:

• Credit score: 660+ (Check your score for free here)
• Debt to income ratio: 45% or less
• Existing Equity: 30% – 40%
• A single family home or a property with 1-5+ units

Who Investment Property Lines of Credit are Right for

Investment property lines of credit are right for fix and flip investors who want a short term loan in order to purchase and/or rehab a property and then flip it and pay off the line of credit. Long term investors with substantial equity in their property, a high credit score, but may be short on cash may also benefit from an investment property LOC.

Specifically, an investment property line of credit is right for the following investors:

• Fix and flip investors with at least 30% – 40% equity in an existing non owner occupied property
• Fix and flippers with a portfolio of rental properties who want to purchase and/or renovate a fix and flip
• Fix and flip investors who want access to financing but might not have a current use for it

Where to Find a Fix and Flip Investment Property Line of Credit

Investors can find a fix and flip investment property line of credit at their bank, credit union, or with an online lender. A portfolio LOC is a more specialized product and isn’t usually offered by banks. Instead, only certain financial establishments offer investment property lines of credit for a portfolio.

For more detailed information on an investment property line of credit, check out our investment property line of credit ultimate guide.

CoreVest does offer investment property LOCs for one or multiple assets. Their lines of credit start at $1,000,000 with interest rates starting at 8% for prime borrowers. You can apply online and then will be assigned a personal representative to work with you.

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5. Fix and Flip Bridge Loans

A fix and flip bridge loan is a temporary loan used to cover the time between 2 real estate transactions. It’s typically used to purchase one property before selling another property. It allows you to purchase a fix and flip property without having a contingency to sell your other property first. Unlike a hard money loan, you can’t finance rehabs with fix and flip bridge loans.

If you are looking for a bridge loan, check out LendingOne. They offer 12 month bridge loans up to $4MM with rates starting at 7.49%. You can prequalify online in minutes and get funded in as little as 10 business days.

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Fix and Flip Bridge Loan at a Glance

Fix and Flip Bridge Loan Rates & Terms

Bridge loans are short term temporary loan products that provide interim or quick financing for a certain window of time. They are specialty loan products used to bridge the gap when selling one property and selling another, so their guidelines vary widely. Their rates are generally lower than hard money loans but higher than permanent bank loans.

Fix and flip bridge loans have the following rates and terms:

• Term: 2 weeks – 1 year
• Time to approval: 15+ days
• Interest rates: 6.2% – 9%
• Loan origination fees: 1% – 2%
• Closing costs: 1 – 5%

Fix and Flip Bridge Loan Qualifications

The qualifications for a bridge loan vary since they are such a specialty loan product. However, lenders generally look less at the borrower’s credit and financial history and more at the deal itself.

The qualifications of a bridge loan typically include:

• The financial ability to pay two mortgages
• At least 20% equity in your current property
• A clear exit strategy (sale or refinance)

Who Fix and Flip Bridge Loans are Right for

A bridge loan can be right for a real estate investor who finds a great deal on a property that won’t be available by the time they have the cash or financing in place to purchase it. Investors typically use a bridge loan to purchase a property before refinancing it or flipping the property to pay off the bridge loan.

Where to Find Fix and Flip Bridge Loans

Bridge loans are a specialty loan product and aren’t as popular as other private loans, so they aren’t offered at all banks or credit unions. Instead, look for private lenders who offer non traditional loan programs. They are sometimes referred to as cross collateralized loans by lenders, so ask your local mortgage lender if they offer bridge loans.

LendingOne is a great option if you are looking for a bridge loan that will fund quicker than a traditional bank. They offer 12 month bridge loans up to $4MM with rates starting at 7.49%. You can prequalify online in minutes and get funded in as little as 10 business days.

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6. Permanent Bank Loan & Online Mortgage

Permanent bank loans and online mortgages are characterized by 15 – 30-year terms and are used to purchase long-term owner-occupied primary residences or non-owner-occupied investment properties in good condition. Therefore, permanent bank loans and online mortgages are not suitable for fix and flip investors since they typically purchase distressed properties.

However, there are a few permanent bank loans and online mortgages that benefit longer-term rehabbers. The FHA 203(k) loan, for example, allows for the owner-occupied purchase and renovations of a primary residence. The Fannie Mae HomeStyle loan, in addition to financing the owner-occupied purchase and renovations of a primary residence, also finances the purchase and renovations of a 1 unit investment property.

Permanent Bank Loan & Online Mortgage at a Glance

Fix and Flip Permanent Bank Loan & Online Mortgage Rates & Terms

A permanent investment property loan and online mortgage typically has a term between 15 – 30 years. The approval time and time to funding is usually around 30 – 45 days and the lender fees and interest rates are lower than some of the other fix and flip loans in this article.

Permanent bank loans and online mortgages typically have the following rates and terms:

• Term: 15 – 30 years
• Time to funding: 30 – 45 days
• Interest rates: 4% – 6%
• Lender fees: 0% – 1%
• Closing costs: 2% – 5%
• Repayment: Monthly amortized payments

You can typically finance between 80% – 96.5% of a property’s purchase price, but the specific amount of financing is dependent on whether a lender is FHA-approved or not. FHA loans often only require 3.5% as a down payment. Fannie Mae loans typically require up to 20% as a down payment. Remember that permanent bank loans and online mortgages can only finance properties in good condition.

Permanent Bank Loan & Online Mortgage Qualifications

The qualifications of a permanent bank loan and online mortgage are very standard. This is because these long-term loan options are typically issued by FHA- or Fannie Mae-approved lenders, but not always. They can also be non conforming portfolio loans.

Specifically, permanent bank loans and online mortgages require the following:

• Credit score: 640+ (check your credit score for free here)
• Debt-to-income ratio: 45% or less

To verify income, lenders typically ask for 2 current pay stubs, a list of debts, as well as 2 – 6 months bank statements. Further, permanent bank loans and online mortgages can only finance a property in good condition, limiting the effectiveness of the fix and flip loan.

Who Permanent Bank Loan & Online Mortgage are Right for

While permanent bank loans and online mortgages are great options for long-term buy-and-hold investors and those purchasing rental properties, the terms are too long for a short-term fix and flip investor.

Further, most of these permanent bank loans and online mortgages can’t finance properties in poor condition, with the exception of Homestyle Renovation Loans and 203k loans. Still, these aren’t right for short term fix and flippers.

Where to Find Permanent Bank Loan & Online Mortgages

There are many great long-term permanent mortgage providers. In fact, the U.S. Department of Housing has a list of both FHA-approved lenders and Fannie Mae-approved lenders. These online mortgage lenders include such companies as Rocket Mortgage.

However, fix and flippers should instead rely on a lender like LendingHome. They’re a national hard money lender that offers short-term rehab loans with interest-only payments. Rates start as low as 7% and prequalification takes as little as 3 minutes.

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Bottom Line

Flippers know that in order to make money flipping houses you have to have the best flip funding for your project. A hard money loan might be the best option for both experienced and inexperienced fix and flippers. For more ideas on how to make your next flip a success, read all of our tips from the pros on how to flip a house.

For fix and flippers, we recommend checking out LendingHome. They’re a hard money lender that issues rehab loans up to 75% of a property’s after-repair-value (ARV). Rates start as low as 7% for prime borrowers and monthly payments are interest-only. Prequalification takes minutes and funding can happen in 15 days.

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