Comparing fix and flip financing requires more than placing two interest rates side by side. Different lenders may structure their offers using different combinations of rates, points, fees, leverage, terms, and draw arrangements. Investors can get a clearer picture by reviewing each component of the financing rather than focusing on one headline number.
The interest rate is an important starting point because it represents the cost of borrowing during the loan term. However, points are another cost to consider. A point equals 1% of the loan amount and is generally charged upfront at closing. Lender fees may also apply for services such as underwriting, processing, or draw administration. These costs can affect the total amount paid for financing.
Leverage is another comparison point. Investors can review the proposed loan amount against the total project cost to determine the loan-to-cost ratio. The property’s projected ARV should also be considered because lenders may use it alongside LTC when evaluating borrowing capacity. Comparing the loan term and interest structure is equally important, particularly when interest is charged on the amount actually drawn.
Borrower requirements should not be overlooked. Different lenders may establish their own standards for credit, construction experience, property type, and other qualification factors. InstaLend’s published program, for example, requires a minimum FICO score of 660 and either a licensed general contractor or prior construction experience. Its program covers 1–4 unit single-family residential properties and offers up to 95% of total project cost, with a maximum 90% loan-to-cost ratio.
The best way to compare offers is to place the major terms next to one another: interest rate, points, lender fees, loan amount, LTC, loan term, draw structure, borrower requirements, and expected total financing cost. This gives investors a more complete basis for evaluating fix and flip loans and understanding how each offer fits the specific numbers of the project.
