What is a fix and flip loan?

A fix and flip loan (also called rehab financing) is a short-term loan used by real estate investors to purchase a property and fund renovations. These loans are designed to move quickly so you can buy the deal, rehab the home, and sell it for a profit. Typical features include fast approval, loan structures covering both purchase and renovation, and short terms that reflect the project’s timeline.

Why would you want to refinance a fix and flip loan?

Refinancing is changing the loan that currently finances the property. For someone using a fix and flip loan, common reasons to refinance include:

• Locking in a lower interest rate or better payment structure after renovations are complete.
• Converting the short-term rehab loan into a longer-term rental or permanent loan if you decide to keep the property.
• Withdrawing equity (cash-out refinance) to fund another project or pay off higher-cost debt.
• Extending the repayment timeline if the original loan is coming due and the property hasn’t sold.

Common refinance outcomes for fix and flip borrowers

Refinancing a fix and flip loan usually results in one of these outcomes:

• Refinance into a short-term bridge loan or another rehab loan with a different rate or timeline.
• Refinance into a conventional or portfolio mortgage for rental properties if you convert the property to a buy-and-hold investment.
• Cash-out refinance to pull out equity once the home’s value rises after renovation.
• Loan extension with the original lender or a new lender to avoid default if sale is delayed.

Eligibility and typical requirements

Requirements vary by lender, but typical criteria for refinancing a fix and flip loan include:

• Completed renovations or clear evidence of substantial progress.
• An appraisal or updated market analysis that supports the after-repair value (ARV).
• Minimum credit score thresholds (many programs require around a 620 score or higher for certain refinance products).
• Proof of financial stability and an ability to cover payments on the new loan.
• No recent bankruptcy filings in some programs (requirements vary by lender).
• For conversion to a rental mortgage: documentation of intent to rent and possible additional underwriting focused on rental income and property management plans.

Minimum loan amounts and specific underwriting standards differ by lender and program. Always confirm exact requirements with a prospective lender.

Types of refinance options for fix and flip loans

Here are the most common refinance paths investors use after completing a fix and flip:

1. Rate-and-term refinance

This replaces the existing loan with a new loan that has a different interest rate or term. The goal is usually to lower monthly payments or move to a longer, more affordable term.

2. Cash-out refinance

Cash-out refinancing lets you replace the current loan with a larger loan and take the difference in cash. This can be useful if the property’s value increased after renovation and you want capital for the next project.

3. Refinance into a rental/permanent loan

If you decide to keep the property as a rental, you can refinance into a mortgage designed for investment properties. These loans typically have longer terms and amortization schedules suited to landlords.

4. Construction-to-permanent conversion

Some lenders offer a single-close loan that converts from the construction/rehab phase into a permanent loan. If you used a short-term loan initially, a lender offering conversion can simplify the transition.

5. Bridge or extension loans

If the marketplace is slow and you need more time, some lenders will offer short-term extension or bridge financing to avoid a foreclosure or sale at an unfavorable price.

Pros of refinancing a fix and flip loan

Refinancing can offer several advantages when handled correctly:

• Lower monthly payments: Moving to a longer-term mortgage reduces cash flow pressure and can stabilize your finances.
• Lower interest cost: If market rates drop or you qualify for a better rate, you may reduce interest expense over the loan life.
• Access to equity: A cash-out refinance unlocks capital to start another project or cover unexpected costs.
• Avoid forced sale: An extension or refinancing option gives you time to sell at a better price.
• Simplified financing: Converting to a single permanent loan avoids juggling short-term debt and repeated closings.

Cons of refinancing a fix and flip loan

Refinancing has downsides and costs you should weigh carefully:

• Upfront costs: New closing costs, origination fees, appraisal fees, title work, and prepayment penalties on the original loan can add up and erode profit margin.
• Qualification hurdles: Some refinance products are stricter than rehab loans. If the work is incomplete or the valuation is lower than expected, the refinance may be denied.
• Longer commitment: Converting to a long-term loan ties up the property and may reduce flexibility to sell quickly if conditions change.
• Higher rate for investment lending: Long-term investor mortgages often carry higher rates than owner-occupied loans, reducing interest savings versus expectations.
• Tax and capital gains considerations: Holding a property longer can have tax implications. Consult a tax professional for your situation.

Cost factors and how to calculate whether refinancing makes sense

When deciding to refinance, compare the total cost of refinancing to the benefit. Important factors include:

• New interest rate vs. old rate
• Loan fees, closing costs, and points
• Any prepayment penalties on the original loan
• How many months you plan to hold the new loan
• Net proceeds if doing a cash-out refinance

Simple break-even approach:

1. Add all upfront costs for the refinance (closing costs, appraisal, points, prepayment penalties).
2. Calculate monthly savings from the lower rate or longer term.
3. Divide total upfront costs by monthly savings to get the months to break even. If you plan to keep the property beyond that point, refinancing can make sense.

Example (illustrative only): If upfront costs are $8,000 and monthly savings are $400, break-even is 20 months. If you expect to hold the property more than 20 months, the refinance could be beneficial.

Practical timeline and steps to refinance

Typical timeline and steps to refinance a fix and flip property:

1. Decide goal: lower payment, cash-out, or convert to rental.
2. Collect documents: proof of completed renovations, contractor invoices, updated budget, rental plan (if keeping), proof of reserves.
3. Obtain an appraisal or market value assessment. Lenders typically require an appraisal to support ARV.
4. Compare refinance programs and get prequalified to understand likely terms.
5. Submit a formal application to the chosen lender and lock a rate if available.
6. Underwriting, title work, and closing. Expect several weeks depending on lender capacity and documentation completeness.

Approval windows vary; short-term lenders might approve new loans faster than traditional banks, but underwriting for permanent financing can take longer. Some rehab-to-perm or investor programs can close more quickly than conventional loans but still require a thorough appraisal and title review.

Common pitfalls and how to avoid them

Watch for these mistakes when refinancing a fix and flip loan:

• Not running the numbers: Failing to account for total refinance costs leads to surprises. Do a full cash-flow and break-even analysis.
• Incomplete renovations: Lenders may withhold refinancing if punch-list items remain. Finish major work before applying.
• Ignoring prepayment penalties: Your original loan might include penalties for early payoff. Factor these into costs.
• Underestimating appraisal risk: If the appraised value is lower than expected, you may not qualify for the refinance or cash-out amount.
• Not verifying occupancy rules: Some refinancing programs have strict rules about owner-occupancy vs. investor properties. Choose a product tailored for investors if you plan to rent.

When refinancing is usually the best strategy

Refinancing often makes sense when:

• Renovations are complete and the appraised ARV supports a better loan-to-value (LTV).
• Current market rates are favorable compared to the original loan.
• You want to convert the property to a rental and need a permanent mortgage with monthly amortization.
• You need capital to start a new project and the cash-out option provides a lower net cost than alternative financing.

If you expect to hold and rent the property for several years, converting to a long-term rental mortgage typically yields the most predictable cash flow and easier management of debt service.

When refinancing may not be worth it

Refinancing may be a poor choice when:

• Projected hold time is very short — closing costs may eat any short-term savings.
• The property valuation is uncertain or appraised value is lower than ARV expectations.
• Prepayment penalties or residual fees are large enough to negate any monthly savings.
• Interest rates for investment mortgages are significantly higher than the original rehab loan, eliminating any benefit.

Typical lender timelines and program notes

Different lenders and programs will vary in speed and flexibility. Many private or specialty rehab lenders can approve and fund fix and flip loans quickly; however, converting to a permanent mortgage often takes longer due to underwriting standards and appraisal requirements. If timing is critical, ask potential lenders about expected turn times and any fast-track options.

Approval times for refinance applications vary based on lender capacity and documentation, but getting prequalified and preparing full documentation ahead of time will speed the process.

How to prepare for a refinance application

To improve your chances for a smooth refinance:

• Keep all contractor invoices, change orders, and proof of permits organized.
• Document revenue potential if converting to rental (rent comps, lease terms, management plan).
• Maintain good credit and avoid new large debts during underwriting.
• Have reserve funds documented to satisfy lender liquidity requirements.
• Be ready to explain any project delays or budget overruns with supporting documentation.

Where to learn more and get a personalized quote

If you want to explore refinance options for your specific fix and flip project, it’s best to reach out to an experienced financing source who understands investment property underwriting. They can evaluate your project’s ARV, your credit and experience, and present appropriate refinance pathways.

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

Learn more or request a personalized quote for fix & flip financing: Get a fix & flip loan quote

FAQs

Can you refinance a fix and flip loan?

Yes. You can refinance a fix and flip loan into another short-term loan, a bridge, a cash-out refinance, or a long-term mortgage if you decide to hold the property as a rental. The availability and terms depend on the lender, the completed condition of the property, and the appraised value.

Do renovations need to be complete before refinancing?

Most lenders require the significant portion of renovations to be complete and for the property to reach a stable condition before refinancing. An updated appraisal reflecting the after-repair value (ARV) is usually required.

How long does refinancing take?

Refinancing timelines vary. A streamlined investor refinance can take a few weeks, but standard underwriting for permanent loans may take 30–60 days depending on documentation, appraisal schedules, and title work.

Will refinancing hurt my credit?

Applying for a refinance will typically result in a credit inquiry, and a new loan will appear on your credit report. Responsible handling of the new loan (on-time payments) generally has a neutral to positive effect over time. Ask the lender about their application process and whether they offer prequalification options that do not impact your credit score.

Can I refinance to pull cash out for another project?

Yes, a cash-out refinance is a common way to extract equity after renovation to fund additional deals. Whether you qualify depends on the post-renovation appraisal, LTV limits, and lender policies.

Are there prepayment penalties on fix and flip loans?

Some short-term loans include prepayment penalties or yield maintenance provisions. Before refinancing, review your existing loan documents to identify any penalties that could affect the cost-benefit analysis.

What credit score do lenders typically require to refinance?

Requirements vary. Many investor-focused refinance products require a credit score around 620 or higher, while conventional investment mortgages often require higher scores. Lenders also weigh experience, reserves, and property value.

Can I refinance if I haven’t sold the property?

Yes, refinancing is often used as an alternative to a sale when market conditions are unfavorable. You can refinance to extend the loan term, lower payments, or convert the property to a rental mortgage.

What happens if the appraisal is lower than expected?

If the appraisal comes in lower than the anticipated after-repair value, the refinance may not be approved at the expected terms, or the lender may offer a smaller loan amount. This can limit cash-out options or require additional funds to close the gap.

How much does it cost to refinance a fix and flip loan?

Costs can include origination fees, appraisal fees, title and escrow costs, recording fees, points, and any prepayment penalties on the original loan. Evaluate total costs vs. monthly savings to determine whether refinancing is worthwhile.

Who should I contact to get a quote or start the refinance process?

Contact a lender or broker experienced with investment property refinancing. They will review your project, the completed renovation, your credit, and goals to recommend the best refinance path. To get started or request a personalized quote for fix & flip financing, visit: Fix & Flip Loan Quote