What Are Fix & Flip Loans

And Fix & Hold Loans?

Real estate investors utilize financing differently depending on whether they plan to quickly renovate and resell a property or keep it as a long-term rental. Fix & Flip and Fix & Hold loans each support these strategies, but in distinct ways.

Understanding these differences is crucial for selecting the right financial tool and maximizing your investment’s potential.

What is a Fix & Flip loan and how does it work?

A Fix & Flip loan is short-term financing used to buy, renovate, and resell a property for profit. These loans emphasize speed and flexibility. Terms typically range from six to twenty-four months – long enough for most projects to move from purchase through renovation and resale.

Fix & Flip loans usually cover both the purchase price and renovation costs. Loan approval focuses heavily on the project itself rather than traditional income documentation. Mortgage professionals often rely on two key metrics:

Why is your LTV ratio important?

Mortgage professionals use your LTV to assess financial risk. A lower LTV signifies a larger ownership stake in the property, which positions you as a less risky borrower.

They also use LTV to tailor your loan terms, including rate, loan type, and insurance requirements. A lower LTV often leads to more favorable terms, potentially including a lower interest rate or even eliminating the need for mortgage insurance. Ultimately, a strong LTV is a key factor in reducing the overall cost of your mortgage.

  • After-Repair Value (ARV): The projected market value after improvements.
  • Loan-to-Cost (LTC): The loan amount compared to the total project cost (purchase price plus rehab budget).

Because these loans are secured by the property, investors can qualify quickly and move fast in competitive markets. The loan is typically paid off once the finished property is sold.

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What is a Fix & Hold loan and how does it work?

Fix & Hold loans support investors who plan to renovate a property and keep it as a long-term rental. Rather than a quick flip, these loans emphasize rental income, stability, and long-term appreciation. Terms generally range from 15 to 30 years, mirroring traditional mortgages.

Most Fix & Hold strategies use a two-phase structure:

  • Renovation Phase: A short-term loan covers purchase and rehab costs, with construction funds released in stages. To keep initial costs low, borrowers often make interest-only payments during this period.
  • Permanent Financing Phase: Once renovations are complete and the property is rent-ready, investors typically refinance into long-term financing such as a conventional mortgage, DSCR loan, or FHA-backed loan.

During approval, mortgage professionals consider projected cash flow, borrower reserves, property condition, and long-term viability.

Non-Dutch Interest Explained

Traditional Dutch-style construction or rehab loans charge interest on the full approved loan amount starting on day one – even if a portion of the funds (such as the rehab budget) is not drawn for months. Investors pay interest on money they have not used.

Equinox Home Financing offers Non-Dutch interest structures, where interest is charged only on the funds actually drawn. For projects with rehab costs spread over several months, this can reduce costs substantially and improve overall cash flow. Investors pay interest on the purchase funds immediately, but not on unused renovation funds until they are drawn.

Pros and Cons: Loans for Fix & Flip or Fix & Hold

These loan types can support both short-term and long-term strategies.

Conventional Loan

  • Pros: Lower long-term rates; predictable monthly payments.
  • Cons: Slower approval; strict income and credit requirements.

Home Equity Line of Credit (HELOC)

  • Pros: Draw funds as needed; competitive rates.
  • Cons: Variable rates can rise; it uses your home as collateral.

Home Equity Loan

  • Pros: Fixed rate; predictable repayment schedule.
  • Cons: You pay interest on the full amount immediately.

Bridge Loan

  • Pros: Fast funding; interest-only options; ideal for transitional purchases.
  • Cons: Higher rates and fees than long-term mortgages.

Jumbo Loan

  • Pros: Supports high-value properties; flexible terms.
  • Cons: Requires strong credit and substantial assets.

CPA Profit & Loss Loan

  • Pros: Ideal for self-employed borrowers; qualification uses a CPA-prepared profit and loss statement.
  • Cons: Rates may be higher than conventional programs.

1099-Only Loan

  • Pros: Designed for commission and contract-based earners.
  • Cons: Higher interest rates.

No-Income Loan

  • Pros: Qualifies based on assets or property strength.
  • Cons: Requires higher down payments and significant liquidity.

Pros and Cons: Loans for Fix & Hold Only

FHA Loan (1 – 4 Units)

  • Pros: Low down payments; easier credit requirements.
  • Cons: Mortgage insurance and property condition restrictions.

FHA 203(k) Home Improvement Loan

  • Pros: One loan for purchase and renovation; low down payment.
  • Cons: Requires licensed contractors; increased documentation.

DSCR Loan (Debt Service Coverage Ratio)

  • Pros: Approval is based on rental income instead of personal income.
  • Cons: Strong cash flow is required; higher interest rates apply.

Blanket Loan

  • Pros: Finance multiple properties with one mortgage.
  • Cons: All properties are at risk if one defaults.

Foreign National Loan

  • Pros: Enables non-U.S. citizens to invest without a U.S. credit history.
  • Cons: Higher down payments and interest rates.

How Investors Can Leverage Each Loan Type

Smart investors match the loan to the project timeline, property condition, and long-term strategy.

Fix & Flip and Fix & Hold Loans

  • Conventional Loan: Often used as a permanent loan after a flip-to-rent transition, providing long-term stability and low rates.
  • HELOC: A flexible revolving tool for repeated or smaller renovations, emergency repairs, or improvements across multiple properties.
  • Home Equity Loan: Useful for major renovations requiring a lump sum with predictable fixed payments.
  • Bridge Loan: Ideal for acquiring properties quickly with a non-contingent offer or funding the purchase and rehab of a rental before refinancing.
  • Jumbo Loan: Supports high-value flips or luxury long-term rentals exceeding conforming loan limits.
  • CPA Profit & Loss Loan: A strong option for self-employed investors who need qualification based on CPA-verified financials rather than tax returns.
  • 1099-Only or No-Income Loans: Allow investors without traditional W-2 income to secure financing based on assets, income streams, or property strength.

Fix & Hold–Only Loans

  • FHA Loan: Excellent for purchasing 1 to 4 unit properties with low down payments.
  • FHA 203(k): Allows investors to transform distressed homes into rentals using one loan for purchase and renovations.
  • DSCR Loan: A cornerstone of portfolio growth, enabling investors to qualify based on projected or actual rental income.
  • Blanket Loan: Useful when managing or expanding multiple rentals under a single loan structure.
  • Foreign National Loan: Allows international investors to build U.S. rental portfolios without traditional domestic income requirements.

Both Fix & Flip and Fix & Hold loans provide specialized financing for real estate investors. Whether you want to generate profit through a quick flip or build long-term wealth through rental income and appreciation, choosing the right loan is essential.
To talk about which loan option is best for you, call us at 1-888-505-8960 or connect with us online.

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