Plan the financing before the renovation
How to Get a Loan to Flip a Home
Thinking about flipping a house? Make sure you read this guide first!
The before-and-after photos get the attention. The numbers decide whether the flip was worth it.
Buying a fixer-upper, improving it, and selling it can be rewarding, but the purchase price is only the beginning. Repairs, financing, holding costs, and selling expenses all want a piece of the proceeds.
Before you pick out countertops, figure out how you’ll fund the project.
Getting a loan
Finance the Property You’re Actually Buying.
A house bought to renovate and resell isn’t the same as a vacation home. Tell lenders how you intend to use it. Compare financing that fits the property’s condition, renovation budget, and expected sale timeline.
Expect questions about your credit, cash reserves, experience, and plan for repaying the loan. A first-time flipper may face different requirements than an investor with completed projects behind them.
Even if you’ve got renovation experience, a fixer-upper can throw you for a loop. Build the financing plan around the work the property needs, not just the price that caught your eye.
For a different kind of purchase, read our guide to buying a second home.
Compare four financing routes
Choose the Loan That Fits the Project.
Look at the total cost over your expected ownership period, the cash you’ll need upfront, and what happens if the sale takes longer than planned.
01 / Traditional mortgage
A Long Loan Term Doesn’t Mean You’ll Keep It That Long.
Selling and paying off a mortgage early generally means you don’t pay all the interest originally scheduled over its full term.
Compare the costs you’ll actually incur: interest during ownership, closing costs, points, and any early-payoff charges. The property must also meet the lender’s condition and eligibility requirements.
The cheapest-looking monthly payment may not be the cheapest way to fund a six-month project.
02 / Hard money and fix-and-flip loans
Speed Has a Price.
Hard-money and other fix-and-flip lenders may offer faster decisions and financing suited to renovation projects. That doesn’t mean automatic approval. These loans are commonly secured by the project property.
Compare rates, points, loan length, renovation draw requirements, and extension fees. Know how much cash you must supply before funds are released.
A fast closing loses its charm if the loan comes due before the house sells.
03 / Home equity line of credit
Your Home Equity Can Fund the Flip. Your Home Also Backs the Debt.
A HELOC lets you draw against an approved credit line secured by your home. The limit depends on the lender’s rules, your home’s value, existing mortgage debt, and your qualifications.
Rates are usually variable, and payments can change. Review the draw period, repayment terms, and whether the lender permits your intended use of the funds.
Don’t let a project across town put the roof over your own head on the line without a repayment plan.
04 / Cash-out refinancing
Don’t Reset Your Whole Mortgage Without Doing the Math.
A cash-out refinance replaces your existing mortgage with a larger one, with cash available after the old loan and closing costs are paid.
Compare the new rate and term on the entire mortgage, not just the cash you receive. If you already have a low rate, accessing project money this way could make the rest of your borrowing more expensive.
Your home secures the new loan. The flip’s timeline doesn’t change that obligation.
Take a closer look at HELOCs versus cash-out refinancing.
Budget for Taxes Before You Spend the Profit.
A flip’s tax treatment depends on the facts, including whether the property is held for investment or for sale as part of a business. Some project costs reduce taxable profit through the property’s basis rather than an immediate deduction.
Keep records from day one and have a tax professional review the plan before you count your take-home profit. Don’t assume that choosing a HELOC or cash-out refinance automatically makes the interest deductible.
The IRS explains the distinction between investment property and property held for sale in a business in Publication 544.
Before you borrow
Make the Numbers Survive a Bad Month.
A short-term project needs a short-term repayment plan. Work through these questions before you commit.
- Price the whole project.Include the purchase, repairs, permits, financing, insurance, taxes, utilities, and selling costs.
- Keep a cash reserve.Allow for surprise repairs and the gap between paying contractors and receiving loan draws.
- Know the loan deadlines.Check maturity dates, draw conditions, extension fees, and early-payoff terms.
- Test a delayed sale.Could you cover two extra months of payments and holding costs? What if the sale price is lower?
A projected profit is only useful if you can fund the path to the sale.
Put cash-flow forecasting to work
The Renovation Has a Budget.
Your Cash Flow Needs a Plan.
Contractors don’t wait for your closing date to get paid. Neither do the mortgage, insurance, utilities, or the bills at home.
Money Max™ Account helps you bring those commitments into one financial picture. Enter the project’s planned expenses alongside your household income, budget, and account balances, then forecast how the timing could affect your available cash.
What if the renovation takes two extra months? What if a repair costs more than expected? Update the amounts and timing in your plan to see how those changes could affect your cash flow before you commit more money.
As available cash changes, your Action Plan recommends payment amounts and timing based on your financial picture. Your Dashboard and Milestones help you keep your broader goals in view while the project moves forward.
A Great-Looking Kitchen Won’t Fix a Cash-Flow Shortfall. Plan for Both.
Explore how Money Max can help you see what’s coming.
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