Fix and flip loan is a kind of loan which is mostly used by the real estate investors. They use this loan amount to purchase as well as renovating a property and later, they can flip this property in order to gain some profit. Although the concept looks very interesting, it might be complicated for you if you don’t know how this type of deal properly. However, if you are into real estate business and looking for a fix and flip loans for gaining some profit, you are at the right place. In this article, we are going to tell you everything regarding fix and flip loans.
Classification of Fix and Flip Loan
There are a total of six types of fix and flip loans available and the different loan comes with different competitive rates. We have elaborated on each of these in this article. So, have a look at the following points:
- Hard Money Loan: Hard money loan is one of the most popular fix and flip loans given to fix and flip investors. The real estate investor has to purchase as well as renovate the property and after that, he has to sell it within one year. Hard money loan is also known as rehab loans as it does not require much qualification for getting approved and the loan amount is given within 15 days. In this type of loan, the lenders focus on the property’s potential instead of the background of the borrower. The interest rate in such loans varies from 7.5% to 12% and your credit score must be 620 in order to get qualified for this loan.
- Cash-Out Refinance For Fix And Flip Investments: Cash-out refinance is perfect for those real estate investors who have already owned property with more than 30% of equity. In such loans, fix and flip investors generally refinance the existing property in order to finance the purchase of the new property. The loan that is newly issued is called ‘first-lien’ and on the other side, the fix and flip investors can use the received money through cash-out refinance in whatever way they want.
- Fix and Flip Home Equity Line Of Credit: In short, this loan is called HELOC and it works like a credit card. The investors are issued a certain amount of money based on their existing property such as house and many more. The interest rate that varies from 3.5% to 6.5% is only charged if any amount is used from the credit amount.
- Fix And Flip Investment Property Line OF Credit: This loan is almost similar to the previous one but, here, credit is issued based on the investment properties. Unlike the previous one, it is a kind of short term loan where the interest rate starts from 6.99%.
- Fix and Flip Bridge Loans: It is a kind of temporary loan which is used for covering the time period between two different real-estate transactions.
- Permanent Bank Loan and Online Mortgage for Fix and Flip Funding: It is a kind of long term loan and the investor is issued a certain amount of credit after checking the condition of investment properties. If the property is in poor condition, such a loan will not be issued.