Glossary Term

Rehab Loan

What is a Rehab Loan?

A rehab loan is a type of financing designed specifically to fund the purchase and renovation of properties. These loans are popular among real estate investors, particularly those focused on fix and flip projects or transforming distressed properties into income-generating assets. Rehab loans provide the capital needed to acquire and improve properties, often with flexible terms to accommodate the unique challenges of renovation projects.

How Rehab Loans Work

Rehab loans combine the purchase price and renovation costs into a single loan, simplifying the financing process. Key features of rehab loans include:

Loan Amount: Based on the property’s after-repair value (ARV) or a combination of the purchase price and estimated renovation costs.

Disbursements: Funds for renovations are typically released in stages (draws) as the work progresses and is verified by inspections.

Short-Term Nature: Most rehab loans have terms of 6 to 24 months, reflecting the expected timeline for purchasing, renovating, and selling or refinancing the property.

Higher Interest Rates: To account for the risk of renovation projects, rehab loans often carry higher interest rates than traditional mortgages.

Types of Rehab Loans

Several types of rehab loans cater to different needs:

Hard Money Rehab Loans: Private loans offering fast funding with flexible qualification criteria, often used by investors seeking quick turnaround projects.

FHA 203(k) Loans: Government-backed loans designed for homeowners or investors purchasing properties requiring substantial repairs.

Conventional Rehab Loans: Offered by traditional lenders, these loans may require higher credit scores and stricter qualifications.

Benefits of Rehab Loans

Rehab loans offer several advantages for borrowers:

Access to capital for both property purchase and renovations in a single loan.

Flexible terms tailored to the needs of renovation projects.

Potential for high returns on investment when the property is sold or refinanced.

Challenges of Rehab Loans

Despite their benefits, rehab loans come with unique challenges:

Higher Costs: Interest rates and fees may be higher than traditional loans due to the added risks of renovation projects.

Strict Oversight: Lenders often require inspections and approval before releasing renovation funds.

Short Timelines: Borrowers must complete renovations and repay the loan quickly to avoid penalties or higher costs.

Rehab Loans with LYNK Capital

At LYNK Capital, we specialize in providing tailored rehab loan solutions for real estate investors. Our competitive terms, quick approvals, and flexible draw schedules empower you to confidently take on renovation projects. Contact us today to learn more about how our rehab loans can help you achieve your investment goals.

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*LYNK Capital Fund, L.P. operates as LYNK Investments, LLC in the state of Texas.

LYNK Capital offers fix & flip loans, new construction loans, bridge loans, and DSCR rental loans to real estate investors.

Disclaimers: LYNK Capital makes loans solely for business purposes (and not for personal or consumer use) and is exempt from licensing in all states in which it operates. LYNK Capital Fund, L.P. does not lend on owner-occupied properties. Listed rates, terms, and conditions are offered only to qualified borrowers, may vary by loan product, deal structure, property state, or other applicable considerations, and are subject to change at any time without notice. No information on this site is intended to, or shall, create a legally binding commitment or obligation on the part of LYNK Capital Fund, L.P. and all terms are expressly subject to LYNK Capital's credit, legal, and investment approval process.

Private Lending Glossary - Rehab Loan