How Fix-and-Flip Loans Work

Fix-and-flip loans are usually preferred by short-term real estate investors when buying and restoring a property before selling (or flipping) it for profit.

This form of real estate funding provides investors faster closings for properties in various state and conditions. The most common type of fix-and-flip loans are portfolio loans and hard money loans.

Fix-and-Flip Loans fall under Hard Money Loans which usually have flexible terms and less stringent guidelines

Features and Benefits of Fix-and-Flip Loans

A lot of lending companies offer fix-and flip loans and other financing solutions with highly competitive rates to property investors particularly those who are considered as prime borrowers.

The process involves pre-qualification which is typically done online. The result can be determined within just a few minutes including the exact rates that apply.

There are quite a number of companies that offer fix-and-flip loans. Each one tends to guarantee fast funding to attract more investors and to gain competitive edge against the rest.

This is also one of the reasons why realtors who fix-and-flip properties prefer this form of financing solution. The funding can be received within just 15 days for those who had been qualified for the loan.

In addition to that, this type of loan does not implement a prepayment penalty for those who choose to have an early repayment of the loan.

Investors who are flipping houses for profit prefer short-term loans due to anticipated faster turnaround time

Fix-and-Flip Loan Rates and Terms

In general, Fix-and-Flip loans have flexible terms and lower approval qualifications compared to bank and conforming loans. This makes it possible for fix-and-flip investors to receive loan approval and funding solution in as fast as 15 days.

However, the rates are usually higher when compared to conforming loan rates and starts at 7.5%. Moreover, fix-and-flip loans like hard money loans have significantly shorter duration which is only one to three years.

Overall financing costs can be reduced by simply paying the loan back early or within a shorter time frame since there is no prepayment penalty.

Monthly interest-only payments are settled within the duration of the loan period and the principal amount is usually repaid towards the end of the contract or loan term.