What Is a Fix and Flip Loan?

How the purchase + rehab structure works

Unlike a conventional mortgage, which only finances the purchase price, a fix and flip loan is built in two pieces: a purchase advance and a rehab holdback. The purchase advance funds at closing, typically up to 90% of the purchase price. The rehab budget is not handed over up front — it sits in a holdback and is released to the borrower in draws as work is completed and verified.

The total loan amount (purchase advance plus rehab holdback) is capped by the after-repair value (ARV), not just the purchase price. This is the key difference from a standard loan: the lender is underwriting what the property will be worth once renovated, and sizing the loan so the total stays within 75% of ARV for 5+ deals completed in the last 24 months; 70% otherwise.

Why fix and flip loans are interest-only

Fix and flip loans are structured as interest-only for the entire term, meaning the monthly payment covers only interest on the funds drawn, with no principal amortization. This keeps monthly holding costs low during the renovation and marketing period, since the borrower's plan is to sell (or refinance) the property and pay off the loan in full, rather than pay it down over 15–30 years like a rental property mortgage.

Because interest often accrues only on funds actually disbursed (not the full approved amount), a borrower who draws rehab dollars in stages generally pays less total interest than if the entire rehab budget were advanced at closing.

Understanding ARV and LTARV

ARV, or after-repair value, is the underwriter's estimate at Curlee Capital of what the property will sell for once the planned renovation is complete, based on comparable sales of already-renovated properties nearby. LTARV (loan-to-ARV) is the loan amount expressed as a percentage of that value — this is the ratio that ultimately caps how much can be borrowed, even if 90% of purchase plus 100% of rehab would otherwise be available.

For example, if a property's ARV is confirmed at $300,000 and the borrower has 5+ deals completed in the last 24 months, allowing 75% LTARV, the maximum total loan (purchase + rehab combined) is $225,000, regardless of how the purchase and rehab pieces split out individually.

The draw process, step by step

Draws are how the rehab holdback gets released to the borrower as work progresses, rather than all at once.

• •Borrower completes a phase of the renovation scope (e.g., framing, electrical, kitchen)
• •Borrower requests a draw and, if required, submits photos or invoices
• •Lender or a third-party inspector verifies the completed work matches the request
• •Funds are released to the borrower, typically within 24–48 hours at Curlee Capital
• •Process repeats until the full rehab budget has been drawn and the project is complete

Typical timeline: acquisition to sale

Most fix and flip loans run 1 to 24 months, with the actual project timeline depending on the scope of work. A cosmetic flip (paint, flooring, fixtures) might close, renovate, and list within 60–90 days. A heavier renovation involving structural, electrical, or full kitchen/bath gut work can take 4–8 months from closing to listing, plus additional time to close a buyer's sale. Curlee Capital structures loan terms with enough runway to cover the renovation plus a reasonable marketing and closing period, and charges no prepayment penalty if the property sells or refinances early.

Cost comparison: fix and flip loan vs. conventional loan

A conventional mortgage is not designed for this use case at all — most conventional lenders will not finance a property that needs significant rehab, won't fund a rehab budget separately from the purchase, and typically take 30-45 days to close, which can cost an investor a competitive off-market deal. Fix and flip loans trade a higher interest rate (7.5%–10.95% versus a conventional rate) for speed, flexibility on property condition, and a financed rehab budget — costs that are usually justified by the ability to close quickly, control the project timeline, and access properties conventional financing simply cannot touch.

Worked example deal

Purchase price: $180,000. Rehab budget: $50,000. ARV after renovation: $300,000. At 90% of purchase, the purchase advance is $162,000. Adding 100% of the $50,000 rehab budget brings the total loan to $212,000. Checking against a 75% LTARV cap: 75% of $300,000 is $225,000, so the $212,000 total loan fits comfortably within that ceiling and the deal fits the experienced tier as structured. In the standard 70% tier, the cap is $210,000, so the borrower needs $2,000 more cash or a revised structure.

The borrower brings the remaining $18,000 of the purchase price plus a 3% origination fee ($6,360 on the $212,000 loan) and other closing costs to the table. During the project, interest accrues only on funds drawn — the $162,000 purchase advance from day one, plus each rehab draw as it's released. Once the renovation is complete and the property sells at or near the $300,000 ARV, the loan is paid off in full from sale proceeds with no prepayment penalty.