The Benefits Of Short-Term Fix-And-Flip Loans
If you are looking to purchase a dilapidated home, fix it up, and flip it, you may be wondering what financing option is available to you. One of the types of loans that are specifically designed for this type of real estate is a short-term fix-and-flip loan, also referred to as a hard money loan or rehab loan. If you are considering taking on this type of project, you may find yourself wondering what the benefits of a short-term fix-and-flip loan are compared to a traditional mortgage loan. Here are a few of the benefits.
They Finance Quickly
One of the benefits associated with taking out a short-term fix-and-flip loan is that you are able to get financing for these types of loans relatively quickly. In fact, many hard money lenders will approve your paperwork and get you the financing to close in 7 to 15 days. This is important, as you are often up against cash buyers who can close immediately in the flipping world. If you cannot get financing for a month or two, many buyers may not even look at your offer. They want to close on the house quickly and move on, and a short-term fix-and-flip loan allows you to close quickly.
They Look at The Potential Home Value
Another benefit associated with short-term fix-and-flip lenders is that they look at the potential home value, rather than solely looking at the current home value. You want a loan that allows you to buy the property itself and pay for renovations. Unfortunately, if you go with a conventional loan that looks solely at the value of the house, you may not get approved for the amount you need to make the renovations, which can make completing your project impossible if you don't have the cash available.
They Don't Have Pre-Payment Penalties
The final benefit to short term fix and flip loans is that most lenders do not have pre-payment penalties, nor do they charge you interest for the life of the loan if you pay the loan off early. Many conventional mortgage lenders either charge you interest for the life of the loan or charge a pre-payment penalty.
If you are looking to get in the flipping business, a short-term fix-and-flip loan may be perfect for you. It can help you get the financing you need for a home without having to wait a long period of time to close, without looking at the current value of the home and without having to pay a pre-payment penalty for paying the loan off early. Take your time to compare lenders to find the one who offers the best rates on short-term fix-and-flip loans in your area.