4 Benefits of Choosing Fix and Flip Loans vs. Bank Loans for House Renovations!

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Fix and flip loan is a short-term loan that investors can use to buy property, repair, or renovate an existing property. It is characterized by higher interest rates. Lenders consider the real value of the property as collateral. This allows the lenders to overlook the creditworthiness of borrowers. This loan is specially designed for real estate investors seeking to buy or fix property for selling at a profit. Normally, one can still consider traditional bank loans for house renovations. 

However, learn more how fix and flip loans have their advantages over the latter. Check these out. 

Fast Loan Approval

Fix and flip loans take a relatively shorter time to be approved as compared to regular bank loans. It is offered by private investors rather than banks or other credit facilities. The lender mainly focuses on the property in question more than the borrower. All they need is for the borrower to present a plan on how to pay the loan once the house has been renovated. The house serves as the loan collateral. The loan can be approved within a few days. Also, the closing period is short, normally five to ten days. This makes a fix-and-flip loan a better option for house renovation than bank loans. 

No Payment Penalties

If a bank loan is paid before the maturation date, one is charged a penalty for the prepayment. This is called loan prepayment penalties. It is not the case with fix and flip loans. For investors who are afraid that these penalties may decrease profits, consider fix and flip. 

Variety of Properties

Fix and flip loans do not discriminate which kinds of properties to cover or fund. The condition of the house to renovate does not determine whether or not one can get the loan. On the contrary, bank loans are very strict on the kinds of house renovations to fund. If you have a house that is near collapse but has the potential of being restored, do not worry. Fix and flip has the solution. 

Specifically for Flipping Projects

When applying for a loan, it is advisable to go for the one that is specially tailored for the purpose intended. Fix and flip loans are specially designed for flipping houses. That means, one takes the loan and renovates the house to sell it at a profit. Most of such projects are completed within one year. This is impossible with bank loans as not many banks will agree with that time frame. Applying for a specifically designed loan raises the chances of success. It also helps one to remain focused and organized within that period in terms of budget and financing. 

Knowing the benefits of fix-and-flip loans over bank loans is the beginning of success in real estate investment. Unlike bank loans, this is a faster and more convenient way of financing house renovation for profitable selling. In addition to what you already know, this loan has more flexible terms. However, before settling for fix and flip, consider different lenders. Do the research and be sure to work with a respectable lender. Involve all the necessary paperwork to reach an acceptable agreement.

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