A short-term business-purpose loan to buy a house, renovate it and sell it, repaid from the sale instead of from monthly income.
A fix-and-flip loan pays for part of the purchase price and usually part of the renovation budget on a house the borrower plans to sell. The term is short, counted in months, payments are commonly interest only, and the renovation money is released in draws as work is finished and inspected. The loan is repaid when the house sells, or is refinanced into a rental loan if the plan changes.
Lenders size it two ways and take the smaller result: a share of total cost, meaning purchase plus renovation, and a share of the after repair value. Each lender sets its own shares. The value side needs care. Federal appraisal standards for banks require an appraisal to analyze and report deductions and discounts for proposed renovation, so a bank works from a supported as-is value and a supported completed value, not from a hoped-for sale price.
This is business credit, so consumer mortgage rules under Regulation Z do not cover it. Most lenders are non-bank or private. Some community banks make these loans to builders and investors they know. Bring a scope of work, a budget with a contingency, and comparable sales for the finished house.
How it shows up in the data here
HMDA does not label flip loans, but it can include them. The rule's commentary says a nine-month loan to buy, renovate and resell a home is not excluded as temporary financing, so a lender that reports under HMDA reports it. Those loans fall in this site's 1-4 unit investor counts. See 1-4 unit investor lenders and comps. Small private lenders below HMDA's reporting thresholds are not here.
Go further
- 1-4 unit investor lenders: Lenders with investor and business-purpose loans on 1-4 unit properties in HMDA.
- LTV and LTC calculator: Loan against value and loan against total cost.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- How to read HMDA data for multifamily and investor loans: HMDA is the one public file that lists individual apartment and rental-house loans by lender, amount, county and year. It covers loans on dwellings only, and not every lender reports.
- What to do after a bank says no to a business loan: One bank's no is one lender's answer, and the reasons are yours to ask for. They usually point to a constraint you can name.
Related terms
- After repair value (ARV): The estimated market value of a property once a planned renovation is finished, used to size fix-and-flip and other renovation loans.
- Hard money loan: A short-term real estate loan from a private or non-bank lender that is decided mainly on the property's value and the exit plan, not on the borrower's income.
- Investor 1-4 unit property: A house, duplex, triplex or fourplex held as a rental or for resale, not lived in by the borrower. It has fewer than five units, so it is not multifamily.
- Bridge loan: A short-term loan that carries a newly built or newly bought commercial property until it is leased and earning enough to be sold or refinanced with a permanent loan.
- Loan-to-cost ratio (LTC): The loan amount divided by the total cost of a project: the property plus all construction costs. It shows how much of the budget the lender funds.
- Construction draw: One advance of construction loan money, released after the lender confirms that the work it pays for is in place.
- DSCR loan: A business-purpose mortgage on a rental home of one to four units that is sized mainly on the property's rent against its payment, not on the borrower's personal income.
- Non-bank lender: A non-bank lender is a company that makes loans but does not take deposits, so it is not a bank, a savings institution or a credit union.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.