Fix-and-Flip Loan Interest Rates Insights
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July 27, 2023

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What are fix and flip loan rates today?

As of August 2023, the average interest rate for a fix and flip loan is 10.67% which is 3.86% higher than the average conventional, 30-year fixed rate mortgage according to Freddie Mac.

  • Average conventional rate: 6.81%
  • Average fix-and-flip rate: 10.67%

Fix and flip loans finance two costs at the same time:

  1. The cost of buying and owning the property that needs renovations
  2. The cost of doing the renovations

Fix and flip loans provide fast and temporary financing. Completing the renovations and re-selling the home should generate the cash to pay off the loan. It’d be unusual to keep one of these loans for more than two years, and some developers can pay them off within a few months.

So, your fix and flip loan interest rate won’t be part of your life for years, or decades, the way a conventional loan’s rate would.

Still, a lower rate means lower project costs and more profit.

Get a fix and flip loan rate quote here.

How to get lower fix and flip loan interest rates

Current market conditions set the parameters for interest rates in all types of borrowing, including fix and flip loans. Even the most qualified borrowers pay higher rates when market rates are high — compared to the rates they’d pay when market rates are much lower.

But within this context, which is set by the Federal Reserve, a variety of variables affect an individual borrower’s fix and flip interest rates.

Borrowers can get lower rates depending on:

Their experience level as an investor

Borrowers who have successfully flipped houses in the past get lower average interest rates on new fix and flip loans. Borrowers who complete two or three flips a year can get the very best rates.

Why does experience matter? Because flipping a house requires skill and knowledge. Someone with a string of successful flips usually has that skill and knowledge. Lenders know these borrowers are less likely to get overwhelmed by a project, cut their losses, and leave the lender unpaid.

Some fix and flip lenders won’t approve a first-time flipper. If you’re new to this business, find a f&f lender who will.

Down payment size

Putting down more money than the lender requires can lower fix and flip loan interest rates. More money down means the lender risks less on your project.

Exceeding the lender’s minimum down payment won’t be easy, though. Minimum down payments are already steep: Many lenders set a maximum loan of 70-80% of the home’s after-repair value, or ARV. That’s the value of the home when you’ve completed renovations and put it back on the market.

Let’s say you’ve found a home that costs $190,000. The home needs $40,000 in repairs, for a project cost of $230,000 not including finance charges. Once renovated, the home should be valued at $300,000. If the lender’s max loan is 70% ARV, then the loan amount can’t exceed $210,000. You would need $20,000 out of pocket to cover the $230,000 project cost. However, some lenders place another cap on the loan based on project cost, not just ARV.

Related: How Much Money Do You Need To Flip A House? $10k?

The nature of the project

Property types and scopes affect interest rates on fix and flip loans. An investor who’s buying and renovating a single-family residential home can expect to pay lower interest rates — compared to the same investor who wants to renovate a multi-unit housing complex.

Again, it goes back to risk: Single-family dwellings should be simpler to fix and flip than bigger projects. Plus, the market for single-family homes is simpler. For example, to find the after-repair value of your home, the lender can look at sales of similar homes in the same neighborhood. That’s not so easy with large, multi-unit projects.

Also, a fix and flip loan for a simpler rehab project tends to charge less interest. If you’re only performing cosmetic improvements — painting, replacing countertops, and changing out fixtures, for instance — your loan is less risky than a loan for a home that also needs a new plumbing system, a new roof, and new wiring.     

See if you qualify for fix and flip financing.

The borrower’s credit score

For the most part, the investor’s personal finances won’t make or break a fix and flip hard money loan. The lender cares more about the project itself than the investor’s personal income.

That said, lenders do care about the borrower’s personal credit score for fix and flip loans. Credit scores reflect a borrower’s willingness to repay the loan on time.

A higher credit score — a FICO above 720, for example — can help lower fix and flip loan interest rates. Many lenders require FICOs of at least 660, which is higher than the 620 needed for a 30-year fixed conventional loan.

Monthly payments for a fix and flip loan

Interest rates matter so much because they help set monthly payment sizes. Here’s a breakdown of monthly payment costs at different interest rates:

Interest Rate$150,000$250,000$350,000
9%$1,125$1,875$2,625
10%$1,250$2,083$2,917
11%$1,375$2,292$3,208

If you kept a $250,000 loan at 9% for six months, you’d make $11,250 in payments. The same $250,000 loan, at an interest rate of 11%, would require paying $13,752 over six months. That’s an extra $2,500 — enough to make a dent in anyone’s profit margin.

Of course, the longer renovations take, the more a higher interest rate would cost.

Fix and flip loan FAQ

Do banks give fix and flip loans?

Most banks do not offer designated fix and flip loans. Instead, investors work with alternative, non-QM lenders to get financing. However, a bank could help in other ways: By approving a home equity line of credit (HELOC) on your existing home, for example. This type of loan leverages the equity you’ve built in your existing home. You can use the cash any way you want, including to invest in a fix and flip.  

How does a fix and flip loan work?

A fix and flip loan is any type of loan that offers fast, temporary financing. Many experienced investors like hard money loans because they close quickly and have simple terms. But other types of loans could finance a flip, too, including a home equity line of credit or even, in some cases, a large personal loan. Traditional home loans don’t work well for flippers because they can take six weeks, or more, to close.  

What credit score is needed for a fix and flip loan?

Credit score rules vary by lender, but most lenders want to see FICOs of at least 660. Borrowers with higher credit scores can get lower interest rates, saving money on the project.

Get a rate quote

Market rates create the context for fix and flip loan interest rates, but your experience as an investor, your credit score, and the nature of your rehab project will also affect your rate.

The best way to get a sense for your financing costs before you make an offer? Get a rate quote from a fix and flip lender.

Submit your fix and flip loan scenario here.

Methodology

To get a sense for fix and flip interest loan rates this month we looked at interest rates advertised by 5 leading fix and flip lenders in this market. We chose a variety of lenders — some that require fix and flip experience and some that welcome new investors. We averaged their current rates to arrive at a rate estimate that fix and flip investors might see in the marketplace today.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.

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More on Mastering Fix and Flips with REInvestor Guide