Short Term Loans for Flipping Houses

You can use a bridging loan to flip a house: it funds the purchase, sometimes the works, and is repaid when the property sells. It suits flips because it completes quickly and lends on properties mortgage lenders may decline.

Bridging completes faster, lends on unmortgageable properties, can fund works, and may allow early repayment, subject to minimum interest periods or exit fees, whereas mortgages are designed for long-term ownership and may penalise a quick sale.

Some bridging lenders fund refurbishment in stages, released after a monitoring surveyor confirms work is done, with the total capped by a percentage of the value after works. Others fund only the purchase.

A light refurbishment bridge funds cosmetic and non-structural work — kitchens, bathrooms, decoration, flooring — usually without planning or building regulations approval, alongside the purchase. Terms are usually simpler than for heavier works.

A heavy refurbishment bridge funds structural works such as extensions, layout changes or conversions that need planning or building regulations approval. Larger schemes may suit development finance. Lenders look closely at contractors, costs and the programme.

Some lenders lend to first-time flippers, usually at lower loan-to-values or with more scrutiny of the works plan and contractors. Experience improves terms and lender choice. A detailed schedule of works and costings strengthens the case.

You need the difference between the bridge's net advance and the purchase price, plus Stamp Duty, fees and any works not funded by the lender. Lower loan-to-values for first-time flippers increase the cash needed.

Auction purchases can suit a flip where the price, condition and costs leave a margin. A bridge may meet the completion deadline, often 28 days, but the auction contract determines the actual deadline. The legal pack and the property's condition are reviewed before bidding.

Profit is the sale price less the purchase price, Stamp Duty, works, bridging interest and fees, legal and valuation costs, and selling costs, before tax. Including a contingency for overruns and delays gives a realistic figure.

Flippers look for a margin that survives a works overrun, a slower sale and a lower sale price. A flip whose profit disappears with a modest delay or overrun carries too much risk.

Each extra month adds bridging interest and holding costs such as council tax, insurance and utilities, and may push the sale into a weaker market, reducing profit. Setting the term to include a realistic sale period limits this risk.

Commonly forgotten costs include the Stamp Duty surcharge, bridging fees and exit fees, holding costs, building control and certificates, contingency for unexpected repairs, and estate agent and legal fees on the sale.

If you already own a home, or buy through a company, the 5% Stamp Duty Land Tax (SDLT) surcharge applies to a flip purchase in England. A £200,000 purchase then costs £11,500 in SDLT.

Buying property to resell at a profit is usually treated as trading, so profits are taxed as income for individuals or corporation tax for companies, rather than as capital gains. An accountant confirms the position.

A limited company pays corporation tax on flipping profits rather than income tax, which can suit higher earners, but residential company purchases generally attract higher SDLT rates in England and Northern Ireland and extracting profits has its own tax. Advice should decide.

Buyers' conveyancers report where a seller has owned a property for under six months, and some buyers' mortgage lenders restrict lending in those cases, so a very quick resale can narrow your pool of buyers.

You can repay a bridging loan early by selling before the term ends. Depending on the lender, unused retained interest may be refunded and minimum interest periods may apply, which the agreement sets out.

If the flip does not sell, options include reducing the price, extending the bridge, or refinancing onto a buy to let mortgage and letting the property, provided the rent passes the lender's stress test.

Refinancing to buy to let is a common fallback if a flip does not sell. The buy to let lender values the improved property and tests the rent, and its ownership rules may affect the timing.

Flip finance is usually unregulated commercial lending, because the borrower does not live in the property. Occupation or intended occupation by the borrower or a related person can change that assessment; the lender must check the full regulatory position.