Did you know that one of the best ways to make money through real estate is by flipping houses? In fact, that is what makes this method so popular among investors. With that said, it can be difficult to start your journey of flipping houses without sufficient funds.
Not to worry, you can always seek your savings, or even better, look at various types of fix and flip loans. Read on to learn about these 6 types of fix and flip loans.
Cash Out Refinance Loan
First, we have the cash out refinance loan. We recommend this to investors who have existing properties with at least 30 to 40% equity. This is because, in order to satisfy the lender’s demand and obtain enough cash out for your project, you must have adequate equity because lenders seldom issue loans up to 100% loan to value (LTV).
Business Credit Cards
Are you a new investor? If you are, business credit cards may be a great type of fix-and-flip loan type for you. The benefit of business credit cards is that many of them do not report to personal credit, so your credit scores won’t be impacted by the sums you hold unless you default. But take note that interest rates can be quite high.
Bridge Loan
Next, we have the bridge loan. We recommend this for investors seeking a rapid closing with the intention of obtaining more funding later. This is because you can use a bridge loan to assist with the down payment on your subsequent flip before concentrating on finding another source of funding, like a conventional mortgage, to cover the remaining balance.
Not to mention, they are frequently simpler for most borrowers to qualify for than conventional loans.
Investment Property Line of Credit
If you wish to use rental property equity to finance other acquisitions, an investment property line of credit is the perfect loan for you. This is because the equity in your real estate investment property can be used as collateral for this particular loan.
With that said, take note that you normally need to have owned the property for at least a year and must have a good credit score as well.
Hard Money Loan
Have you had the experience with two or more flips, or have lower credit scores, are just starting out with a contractor, or perhaps struggling with other financing options? In this case, a hard money loan can be a type of fix and flip loan that can best benefit you.
With a hard money loan, you collaborate with online non-bank lenders or private lenders to obtain the funding you want. If your personal or corporate credit ratings aren’t fantastic, you may still be eligible for funding because hard money lenders often have less stringent qualifying standards. With that said, take note that their interest rates can be rather high.
Permanent Bank Loan or Online Mortgage
Are you an investor who seeks to flip properties for the long term? If so, a permanent bank loan or online mortgage would be a great choice. When compared to alternative financing choices, you’ll be eligible for cheaper interest rates, and the loan’s repayment period can last up to 30 years.
To be eligible for a mortgage, you might need to have a substantial down payment saved up as well as a steady source of income. You will need to pass a very demanding underwriting procedure, which includes a credit check and an appraisal, to be approved by traditional mortgage lenders.
