What Is a Fix-and-Flip Loan?

A fix-and-flip loan is short-term financing created for investment projects where the borrower purchases a property, completes renovations, and sells it for a profit. These loans typically fund both the purchase price and renovation costs in a single package and are structured to get capital into the project quickly. Repayment is usually required within a short window (commonly 6 to 18 months).

Common characteristics of fix-and-flip loans:

• Short terms (usually 6–18 months).
• Funding for purchase and renovations in one loan.
• Interest-only payments or deferred interest options during renovation.
• Disbursements (draws) tied to renovation milestones and inspections.
• Faster approval compared with conventional mortgages.

What Is a Second Home Mortgage?

A second home mortgage is for residential properties you intend to use in addition to your primary residence — for vacations, occasional stays, or seasonal use. Lenders typically require documentation showing the property will be owner-occupied for at least part of the year and expect lower risk than an investment property loan but higher risk than a primary residence loan.

Key differences from fix-and-flip loans:

• Designed for occupancy (even if seasonal), not for rapid resale.
• Longer loan terms (15–30 years common) and amortizing payments.
• Different underwriting criteria and occupancy verification.

Can a Fix-and-Flip Loan Be Used for a Second Home?

The short answer: generally no, not if your intention is to occupy the property as a second home. Fix-and-flip loans are intended for investment properties that will be renovated and sold, and most lenders explicitly require the property to be non-owner-occupied. If you plan to use the property as a personal second home (living in it part time or full time after renovations), that typically violates the occupancy rules for a fix-and-flip loan.

However, there are two scenarios to consider:

1. If you plan to flip the property: If your plan is to renovate and then sell the property quickly, a fix-and-flip loan is a good fit — even if you initially considered using it as a second home, as long as your intent is investment and the property will be non-owner-occupied.
2. If you plan to occupy after renovations: If you intend to make the property a second home and live there (even part-time) after renovations, you should use a mortgage product intended for second homes or a renovation mortgage that allows owner-occupancy. Attempting to occupy a property financed by a fix-and-flip loan can breach the loan terms and create legal and financial risk.

Typical Eligibility Requirements for Fix-and-Flip Loans

While specific requirements vary by lender, many fix-and-flip programs share common eligibility guidelines:

• Minimum credit score often around 620.
• Property must be non-owner-occupied (investment property).
• A clear renovation plan and detailed budget or scope of work.
• Real estate experience is preferred but not always required.
• Minimum loan amounts may apply (for some programs this can be $100,000 or higher).
• Proof of financial stability and ability to repay the loan.
• No recent bankruptcy filings (some programs require no bankruptcy within the last two years).

Approval timelines are typically faster than conventional loans — many investors see approvals within 7–10 business days once the application and documents are in order. Exact timelines depend on the lender, property condition, and turnaround on appraisals and contractor bids.

How Fix-and-Flip Loans Are Structured

Understanding loan structure helps you see why these loans are not appropriate for owner-occupied second homes:

• Loan-to-Cost (LTC) or Loan-to-Value (LTV): Lenders will base the loan amount on purchase price, renovation budget, or after-repair value (ARV). Typical maximums depend on lender policy and your profile.
• Draw Schedule: Renovation funds are usually released in stages (draws) after completed work is inspected.
• Interest and Fees: Short-term loans often carry higher interest and origination fees compared to long-term mortgages. Points and fees are charged upfront or added to the loan.
• Exit Strategy: Lenders expect a planned exit — usually a resale, refinance to a permanent loan, or sale to repay the loan at term end.

Why Lenders Require Non-Owner-Occupancy

Fix-and-flip loans are tailored for a specific risk profile: quick renovation and resale. Owner occupancy changes the risk dynamics in several ways:

• Occupancy alters the property’s use and resale timing — a homeowner may delay selling or change renovation plans.
• Insurance and legal requirements differ between investment properties and owner-occupied homes.
• Underwriting fraud and misrepresentation risks increase if occupancy intent is misreported.

Because of these reasons, lenders typically require the property to be non-owner-occupied and may verify intent through documentation and follow-up checks.

Alternatives if You Want to Renovate a Second Home

If your goal is to make a second home livable and you plan to occupy it, consider these alternatives instead of a fix-and-flip loan:

• Second-Home Mortgage with a Renovation Rider: Some mortgage products allow owner-occupant renovations and roll renovation costs into a longer-term mortgage.
• Home Equity or HELOC: If you have equity in another property, these options can fund renovations for a second home you intend to occupy.
• Renovation Loans for Primary/Second Homes: There are renovation mortgage programs designed specifically for owner-occupants.
• Bridge Loans or Purchase-Plus-Renovation Mortgages: Shorter-term bridge solutions that anticipate conversion to a long-term mortgage may be available.

Choose a product that matches your intent: investment vs. occupancy. Using the wrong loan type can create compliance problems and extra costs.

Practical Examples

Example 1 — Using a Fix-and-Flip Loan (Allowed)

You find an undervalued property, intend to renovate and resell within 12 months. The property will never be occupied by you. A fix-and-flip loan that covers purchase and renovation is an appropriate choice, with a clear exit strategy to sell the home and repay the loan.

Example 2 — Trying to Use a Fix-and-Flip Loan for a Vacation Home (Not Allowed)

You purchase a beach house intending to renovate and use it as a vacation spot for your family. Because you plan to occupy the property, most fix-and-flip lenders will not approve the loan for that use. Instead, look for a second-home mortgage or a renovation loan designed for owner-occupants.

How to Prepare to Apply for a Fix-and-Flip Loan

Preparation improves your chances and speeds up approval. Steps to prepare:

1. Assemble a clear renovation plan and detailed budget, including contractor bids or estimates.
2. Gather financial documents: bank statements, tax returns, proof of assets, and any proof of renovation reserves.
3. Check your credit score and correct any errors; many programs accept scores from around 620 and up.
4. Have a realistic exit strategy: resale timeline, projected ARV, and plans if the property doesn’t sell on schedule.
5. Document relevant experience (project photos, prior flips) if you have it; experience helps but is not always required.
6. Be ready for inspections tied to draw disbursements and plan contractor timing accordingly.

Many investors who are prepared and submit complete packages receive approvals in about 7–10 business days, though times will vary.

Pros and Cons of Using a Fix-and-Flip Loan

Pros

• Fast approval and funding designed for investment timelines.
• Single-loan solution for purchase and renovations streamlines financing.
• Flexible terms geared to short project horizons.

Cons

• Not intended for owner occupancy — can’t be used for a second home you plan to live in.
• Higher costs (interest and fees) compared with long-term mortgages.
• Short repayment windows require a clear exit strategy to avoid penalties or extensions.

Tips to Avoid Problems

• Be honest about your occupancy intent — misrepresenting occupancy is serious and can lead to loan default or legal issues.
• Plan conservative renovation timelines and budgets to avoid cost overruns that can jeopardize resale.
• Confirm draw-inspection requirements and make sure contractors are responsive to inspection schedules.
• Keep contingency reserves for unexpected issues discovered during renovation.
• Consult a tax advisor about how flipping or owning a second home affects your taxes and estimated tax payments.

How to Get Started

If your intent is to flip a property (not occupy it), a fix-and-flip loan can be an efficient financing tool. To explore options and get a personalized quote, reach out to a specialist who handles investment property financing. You can learn more and request a quote here:

Get a personalized fix-and-flip loan quote

Rates are competitive and vary based on your credit score, experience, and project specifics. Reach out for a personalized quote today.

FAQs

Q: Can I use a fix-and-flip loan to buy a second home that I plan to live in part-time?

A: No. Fix-and-flip loans are typically restricted to non-owner-occupied investment properties. If you plan to occupy the property even part-time, use a mortgage product designed for second homes or an owner-occupant renovation loan.

Q: What if I buy the property with a fix-and-flip loan but later decide to keep it as a second home?

A: That is risky and may violate the loan agreement. Occupying an investment-financed property can be considered a breach of terms and could lead to default or lender action. If you think you might keep the property, discuss alternatives with your lender before closing.

Q: How long are typical fix-and-flip loan terms?

A: Typical terms range from 6 to 18 months, giving you time to renovate and sell or refinance. Extension options are often available if you need more time — contact your lender in advance to discuss extensions and avoid penalties.

Q: How fast can I get approved for a fix-and-flip loan?

A: Approval times vary, but many borrowers see approvals within 7–10 business days when documentation is complete. Complex deals or properties in need of major work may take longer.

Q: What are common eligibility requirements?

A: Typical requirements include a minimum credit score (often around 620), non-owner-occupancy, a detailed renovation plan and budget, proof of financial stability, and no recent bankruptcies in certain programs. Minimum loan amounts may apply.

Q: Can a fix-and-flip loan cover both purchase and renovation costs?

A: Yes. These loans are designed to finance both purchase and renovation in a single package, with renovation funds disbursed in draws as work is completed and inspected.

Q: What happens if I don’t sell within the loan term?

A: Many lenders offer extension options if you need more time. Contact your lender in advance to discuss extending the loan term to avoid penalties. Options may include paying fees for an extension or refinancing into another product.

Q: How much should I budget for unexpected renovation costs?

A: Carry a contingency reserve (commonly 10%–20% of the renovation budget) for unforeseen issues such as hidden damage or code-related upgrades. Conservatism with budgets reduces the risk of running out of funds before completion.

Q: Where can I get a quote or more information?

A: To explore fix-and-flip loan options and get a personalized quote, visit this link: Get a personalized fix-and-flip loan quote. Rates are competitive and vary based on your credit score, experience, and project specifics. Reach out for a personalized quote today.