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Fixing and flipping houses is all fun and games until you need to find out which loan is the best for flipping houses. The various options can make deciphering which one is best to get your business up and running difficult. Stick around until the end of this article to find out which loan is your best option.
Hard Money Loans
Hard money loans are straightforward to qualify for, and the approval turnaround time is speedy. There are many benefits to hard money lenders, but the best is not having to jump through many hoops to achieve the loan. These lenders mostly look at your debt-to-income ratio, but the fees and interest rates might be higher because of the quick turnaround.
Traditional Mortgage Loans
A traditional mortgage has three types of loans: construction, renovation, and cash-out refinance. You’re most likely to need a renovation loan, which features built-in costs based on the after-repair value of the house you’re flipping.
Home Equity Loans
If you already have significant equity within your business, using a home equity loan may interest you. This loan is like a second mortgage, except with separate monthly payments. The interest rate of this type of loan tends to be higher than that of a primary mortgage, closer to that of credit cards.
If you don’t have an existing relationship with a bank, private loans won’t work for you. However, if you do have this relationship, banks will consider you less of a risk. Private loans don’t require the same amount of time and paperwork as a traditional bank loan would. Private lenders also have the option of placing a lien on your property so that they can take possession of it and sell it if you don’t repay the loan on time.
Depending on your business and how you handle your finances, each loan could mean something different. So which loan is the best for flipping houses? Hard money loans offer you quick turnaround times to allow you to start your project right away, with minimal exclusions and obstacles to go through. However, if a different loan appeals to you and seems like the better option, do what you think is best for you and your business.