Fix-and-flip loans are used by short-term real estate investors to purchase and renovate a property before flipping it for a profit. This type of funding for flipping houses offers investors fast closings for properties in any condition. The most popular type of fix-and-flip loans are hard money loans.
Types of Fix & Flip Loans
Fix-and-Flip Loan | Best For |
Hard Money Loan | Experienced investors with 2 to 3 flips or new investors working with a contractor |
Cash-out Refinance Loan | Investment properties with 30% to 40% equity |
Home Equity Line of Credit | Primary residences with a min. of 30% equity |
Investment Property Line of Credit | Investment properties with 30% to 40% equity |
Bridge Loan | Transitioning a short-term loan to permanent financing |
The five types of fix-and-flip loans are:
1. Fix & Flip Hard Money Loan
A hard money loan is a short-term loan secured by real estate and used by fix-and-flip investors to purchase and renovate a property. Investors will use hard money loans to purchase, renovate, and sell a property within one year. These loans are ideal for funding a fix-and-flip project since they finance properties in poor condition.
Hard Money Loans at a Glance
Available Financing | Up to 90% of loan-to-cost (LTC); 75% after repair value (ARV) |
Loan Term | 12 months, 18 months, 24 months |
Time to Approval/Funding | 3 minutes to pre-approval; as few as 5 days for funding |
Interest Rates | 6.5% - 12% |
Fees | 0% - 2.5% of loan amount |
Qualifications | 660 minimum credit score All levels of experience encouraged to apply |
Where to Get | Visit EJN Financial |
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. Hard money lenders are more focused on the property and its potential value than the borrower’s background.
2. Fix & Flip Cash-out Refinance
A fix-and-flip cash-out refinance is when investors refinance an existing property, pay off the existing loan, and use the cash proceeds to finance a new property. A cash-out refinance helps fix-and-flip investors use equity from an existing property by issuing a new loan, paying off the existing mortgage, and freeing up equity for other use.
Cash-out Refinance at a Glance
Available Financing | 75% loan-to-value (LTV) |
Loan Term | 15 - 30 years |
Time to Approval/Funding | 30 - 45 days |
Interest Rates | 5.45% - 5.75% |
Fees | 0% - 3% of loan amount |
Qualifications | FICO 660 45% maximum debt-to-income ratio (DTI) 0 - 6 months cash reserves 30% to 40% equity |
Where to Get | Visit EJN Financial |
The money borrowed from a cash-out refinance must pay off any existing liens before borrowers can use the remaining balance of the loan proceeds. There are no restrictions on how borrowers spend cash-out refinance money. Fix-and-flip investors can use a cash-out refinance on an owner-occupied home or a non-owner-occupied investment property (up to four units).
3. Fix & Flip Home Equity Line of Credit
A home equity line of credit (HELOC) works like a credit card. Lenders issue fix-and-flip investors a line of credit based on both the value of their existing home and available equity (must be at least 30% to 40%), and can draw from the credit line over the HELOC term. Just like a credit card, you’ll only pay interest on the amount borrowed until it is repaid.
Home Equity Line of Credit at a Glance
Available Financing | Up to 85% combined loan-to-value |
Loan Term | 25 - 30 years |
Time to Approval/Funding | 30 - 45 days |
Interest Rates | 3.5% - 6.5% variable APR |
Fees | 0% - 2% of loan amount |
Qualifications | 640 minimum FICO 45% maximum debt-to-income ratio 0 - 6 months cash reserves Existing property with at least 30% to 40% equity |
Where to Get | Visit EJN Financial |
Unlike a cash-out refinance, a home equity line of credit (HELOC) doesn’t refinance the entire loan, but is a second lien in addition to an existing mortgage. A HELOC can only be issued on an owner-occupied primary residence. There are no restrictions on what a fix-and-flip investor does with the money.
4. Fix & Flip Investment Property Line of Credit
An investment property line of credit (LOC) is similar to a home equity line of credit (HELOC), but is borrowed against an investment property, not a primary residence, and works like a HELOC by only paying interest on the money borrowed. This LOC is for short-term cash needs and can be used for both purchases and renovations of fix and flips.
Investment Property Line of Credit at a Glance
Available Financing | Up to 75% loan-to-value (LTV) |
Loan Term | 18 to 24 months |
Time to Approval/Funding | Up to 30 days |
Interest Rates | 6.99% and up |
Fees | 0% - 2% of loan amount |
Qualifications | $75 annual service fee 1% - 5% closing costs |
Where to Get | Visit EJN Financial |
An investment property LOC can only be drawn from 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 will need to outline how you will use the LOC in the application, you can usually use it for whatever you want once it’s funded.
5. Fix & Flip Bridge Loans
A fix-and-flip bridge loan is a temporary loan used to cover the time between two real estate transactions. It’s often used to purchase a new property before selling another property. It allows borrowers to purchase their next fix-and-flip property without having a contingency to sell the other property first or can pay off a hard money loan while a borrower finds permanent financing.
Bridge Loans at a Glance
Available Financing | $50,000 to $2.5M; 85% loan-to-value (LTV), 70% LTV refinance, 65% LTV cash-out |
Loan Term | 12 to 18 months |
Time to Approval/Funding | As few as 15 days |
Interest Rates | Starting at 7.99% |
Fees | $500 appraisal fee 1% - 2% lender fees |
Qualifications | 20% equity A clear exit strategy (sale or refinance) |
Where to Get | Visit EJN Financial |
Fix & Flip Loans Frequently Asked Questions (FAQs)
In this article, we have done our best to detail your options for finding the best fix-and-flip financing for your project. However, as with any type of financing, some questions are asked more frequently than others, and we have tried to address those here.
How much cash do you need to flip a house?
How much cash is required to flip a house depends on the type of financing, your credit score, personal financial statement, the price of the property and its after repair value (ARV), your fix-and-flip experience, and how much cash you have available. You will need money for the down payment, closing costs, and fees.
What is the 70 Rule in house flipping?
The 70 Rule, also known as the 70% Rule, is a term used by fix-and-flip investors to determine what to pay for an investment property for it to be profitable. The 70 Rule states that an investor should pay no more than 70% of the property’s after repair value (ARV) minus the repairs.
Do I need good credit to flip a house?
The credit score needed to flip a house depends on how you intend to fund your fix-and-flip project. If you’re paying all cash, your credit score will likely be irrelevant. If you need to finance buying and rehabbing the property, depending on the type of financing, credit scores can range from 500 to 600 and higher.
Bottom Line
Investors know that in order to make money flipping houses, they need access to the best fix-and-flip funding. Here we’ve reviewed five types of funding for rehabilitating and flipping houses. The best option is generally a hard money loan because it can close fast, offers lenient qualifications, and funds the acquisition and rehab of the fix-and-flip project.
For fix and flippers, we recommend checking out EJN Financial. It’s a hard money lender that issues rehab loans up to 75% of a property’s after repair value (ARV). Rates are competitive for prime borrowers and monthly payments are interest-only. Prequalification takes a few minutes and funding can happen in as quickly as 15 days.