First Time Investing in Real Estate? 5 Types of Loans for Flipping Houses
Flipping Houses
Relatively few people get into the house flipping game by buying houses with their own cash. Most flippers take out loans, but taking out the right kind of loan is actually harder than one might think.
As such, it’s a good idea to familiarize yourself with five of the most common types of loans that flippers use.
Hard Money Loan
A private loan from a hard money lender, usually called a hard money loan, is a popular way to finance a house flip.
These loans tend to be relatively short-term and can have higher interest rates, but they’re ultimately easier to get than conventional loans and tend to have fewer strings attached.
Hard money loans are also issued quickly, so they work well for those on a tight schedule.
Home Equity Loan
If you already own a home, a home equity loan might be the best way to leverage your existing equity in order to flip a house.
You’ll be able to borrow money against your current equity and pay it off over the life of your mortgage.
These will usually have interest rates that are lower than what you’d see from other loans.
Cash Out Refinance
This is another one that involves already owning a property. You can cash out your equity by refinancing your loan based on what you currently owe plus the equity that you already have.
This is a good way to get a significant amount of money, but this kind of refinancing can be costly and generally requires a significant amount of equity along with a reasonably high credit score.
Peer-to-Peer Lending
This type of internet lending is fairly new, but it can be a great choice for home flippers.
You can apply for a loan on a peer-to-peer site and get funded by a pool of investors who each contribute a bit.
You’ll pay back the loan with interest, but the actual process of getting approved and getting your money is quicker than virtually any other type of loan.
Acquisition Line of Credit
This is a type of credit line that’s mostly meant for experienced flippers.
Relatively quick to process and with single-digit interest rates, whether or not you can get this kind of line of credit is really dependent on your past history of flipping.
If you’re ready to up your game, though, this might be the kind of funding you need.
Don’t be afraid to investigate multiple funding sources.
Not every loan is right for every borrower, so find what works for you. If you can get the right loan or line of credit, you can work on flipping homes in a way that will make future borrowing much easier.
Category: Housing
