Financing a Flip: The Best Funding Options

Financing a new home purchase is a common subject among potential homebuyers and lenders. However, if you want to flip a home by enhancing an existing property and selling it for a profit, you may also require funding. Luckily, there are financing options for flipping homes if you know where to look. Here are some basic tips for funding a flip:

Hard Money Loans

A hard money loan is a common financing option for house flippers. These loans involve less underwriting and easier qualifications. Hard money loans can have much higher interest rates and startup fees than traditional mortgages.

Private Loans

Private loans are a good option for house flipping. However, they usually require you to have a preexisting business relationship with a bank to get one. If you’ve been with the same bank your whole life, they might be a good place to start since they’ll consider you a lower risk.

Personal Loans

Personal loans can be quick and painless, with no collateral involved. It’s easy to qualify for this type of loan and you can get your money faster than other loan options. However, these tend to have incredibly high interest rates compared to mortgages.

Home Equity Loan

A home equity loan is basically another mortgage with a separate monthly payment. This allows you to augment your current borrowing without changing the terms of your existing mortgage. A home equity loan uses the equity you’ve built in the home to invest in the flipping process.

Home Equity Line of Credit

A home equity line of credit works similarly to a credit card. This type of funding uses your house as collateral and gives you a credit line. These come with their own terms and special conditions but can be an excellent source of funding for flips that you expect to take many years at a time, as you’re often able to defer payments for an introductory period.

These are just some of the most common types of loans used to fund a flip. If you’re considering flipping a property, these financing options are a good place to begin.