There are two types of fix and flip loans you should know about. The hard money loan and the bridge loan. Both have their benefits and drawbacks. Hence, it’s important to understand them before deciding which one is right for you.
Hard Money Loan
Hard money loans are short-term financing solutions that offer a quick way of accessing capital to fund fix and flip projects. The funds can be obtained in as little as two weeks, making it the fastest loan you can get for real estate investing purposes. Hard money lenders typically base their lending decisions on your project’s property’s after-repair value (ARV) instead of focusing on credit scores or income history.
That is why they provide an excellent funding solution when flipping properties with bad credit scores or low-income levels. They also lend up to 65% – 75% LTV and allow borrowers to use the loan proceeds for various types of repairs such as roof replacement, HVAC system installation, electrical work, among other renovations.
The interest rates on hard money loans are also relatively low, making it an affordable option for many fix and flip investors. Borrowers can expect to pay an annual percentage rate (APR) of between 12% and 18%.
However, keep in mind that the terms of these fix and flip financing loans tend to be shorter – usually six to twelve months. This means you will need to have a solid plan to repay the loan quickly to avoid incurring additional costs.
If you are looking for quick fix and flip loans for your next fix and flip project, then a hard money loan may be the ideal solution for you. These loans offer competitive interest rates, fast funding times, and relaxed credit requirements, making them perfect for investors with bad credit or limited funds.
A bridge loan is a short-term loan used to finance the purchase of a property that you will sell shortly after. These types of fix and flip loans are quite unique. The lender advances money to the borrower, who then uses it to buy the property. The proceeds from the property sale are then used to pay off the bridge loan.
Bridge loans typically have very high-interest rates and are used only as a last resort. They are popular with investors because they can provide quick access to capital without going through the lengthy process of getting a traditional mortgage.
Flip loans lenders will typically give you a flip loan if the property is bought and sold within six months.
Which Is the Best Option?
The best types of fix and flip loans will depend on your needs. As a rule of thumb, you should go for a loan that is easy to get while it meets your fix and flip project requirements. Are you in need of fix and flip loans for your property? i FUND CITIES offers a wide range of real estate funding options. You can always reach out and inquire about some of the loan options we offer.