What Is a Fix and Flip Loan? How Fix and Flip Financing Works

Who uses a fix and flip loan?

Investors who buy a property below its finished value, improve it, and resell it. The borrower is typically an LLC or other entity, and the property is non-owner-occupied. This is investor lending only: the loan is underwritten for a business purpose, not for someone buying a home to live in.

Most flip loans are a form of hard money: asset-based lending where the property and the exit plan carry the decision more than personal income documents. Axelrad's hard money page puts it simply: the asset leads, the loan is short by design, and the exit is part of the underwriting.

What does a fix and flip loan actually pay for?

Two buckets, usually in one loan:

1. Acquisition. A share of the purchase price, funded at closing.
2. Renovation. Some or all of the rehab budget, held back and released in draws as work is completed and inspected.

Your cash covers what the loan does not: the remaining share of the purchase, closing costs, lender charges, and the carrying costs while you work. The live Axelrad guide on cash to close and rehab draws breaks those cash needs into closing, construction, hold, and exit.

How do lenders size a flip loan? LTC and ARV explained

Two ratios do most of the work.

• LTC (loan-to-cost) compares the loan to the project cost, usually purchase price plus rehab budget.
• ARV (after-repair value) is the estimated market value of the property once the planned work is done. Lenders cap the total loan at a percentage of ARV so there is room between the debt and the likely sale price.

A lender usually applies both and lends the lower result. Leverage limits often depend on the borrower's experience, so two investors can get different loan sizes on the same property. Axelrad's fix-and-flip page has the current program criteria; confirm the figures that apply to your file.

How a flip loan moves from contract to payoff

Use this table as a map. The timing column is general; your loan documents control the details.

Axelrad's fix-and-flip page says borrowers pay interest only on funds drawn, not the total loan amount.

How is a fix and flip loan different from a bank mortgage?

A conventional mortgage is long-term debt, qualified mostly on personal income and credit. It is built for a finished, livable property. A flip loan is built for a property that is not finished yet, for a hold measured in months, and for a repayment that comes from a sale or a refinance. The trade-off is that short-term private money usually costs more than long-term bank debt, which is why the hold period matters so much.

How fast can a fix and flip loan close?

It depends on the file. Timing turns on title, insurance, valuation, and how complete your documents are. Check the fix-and-flip page for current timing, and treat any figure as a best case.

Fill-in template: one-page flip loan summary

Fill this in and copy it into your deal folder before you request terms. Every field should have a number and a source.

Key takeaways

• A fix and flip loan funds the purchase and the rehab of an investment property, with rehab money paid out in draws.
• Lenders size the loan on cost (LTC) and on finished value (ARV) and usually lend the lower amount.
• Your cash still covers the down payment, closing costs, carrying costs, and any gap before a draw arrives.
• The exit (sale or refinance) is part of underwriting from day one.

Ready to run your numbers?

If you have a property under contract or in view, the fix-and-flip loan page has a calculator and the current program criteria. When the summary above is filled in, submit your deal and the team will review it.