Financing a new home purchase is a common subject among potential homebuyers and lenders. However, if you want to flip a home by enhancing an existing property and selling it for a profit, you may also require funding. Luckily, there are financing options for flipping homes if you know where to look. Here are some basic tips for funding a flip:
A hard money loan is a common financing option for house flippers. These loans involve less underwriting and easier qualifications. Hard money loans can have much higher interest rates and startup fees than traditional mortgages.
Private loans are a good option for house flipping. However, they usually require you to have a preexisting business relationship with a bank to get one. If you’ve been with the same bank your whole life, they might be a good place to start since they’ll consider you a lower risk.
Personal loans can be quick and painless, with no collateral involved. It’s easy to qualify for this type of loan and you can get your money faster than other loan options. However, these tend to have incredibly high interest rates compared to mortgages.
A home equity loan is basically another mortgage with a separate monthly payment. This allows you to augment your current borrowing without changing the terms of your existing mortgage. A home equity loan uses the equity you’ve built in the home to invest in the flipping process.
A home equity line of credit works similarly to a credit card. This type of funding uses your house as collateral and gives you a credit line. These come with their own terms and special conditions but can be an excellent source of funding for flips that you expect to take many years at a time, as you’re often able to defer payments for an introductory period.
These are just some of the most common types of loans used to fund a flip. If you’re considering flipping a property, these financing options are a good place to begin.
Stephanie Englund Siegel is a successful Realtor with Compass. She was born and raised in the Northwest suburbs of Chicago. Living in the city for over almost 20 years has given Stephanie the in depth knowledge of many neighborhoods. Stephanie feels that Chicago's culturally diverse residents are what contribute to the richness and quality of life in its neighborhoods. Before joining the Compass Family, she worked as a paralegal for a real estate attorney which gave her the knowledge about every step in a transaction. From the very beginning of the process all the way to the end, Stephanie is dedicated to her clients and the success of the transaction so both parties get a win-win. Stephanie serves real estate needs in the following neighborhoods: Lincoln Park, Gold Coast, Streeterville, Loop, West Loop, South Loop, Lakeview, River north, Lincoln Square, Wrigleyville, Ravenswood, Greater Chicago area and surrounding suburbs.
