Cut to the chase
A 100% LTC fix and flip loan can cover the full purchase price and the full rehab budget, but you still need cash. You pay closing costs, any points, monthly interest, insurance and reserves yourself, plus any amount above the lender's after-repair value (ARV) cap. On many deals that adds up to five figures.
At a glance
- HWC lends up to 100% of the purchase price and 100% of the rehab budget, subject to an ARV cap.
- HWC caps the loan at 70% of the after-repair value.
- Closing costs, reserves and interest are paid by the borrower, not the loan.
- HWC recommends at least $30,000 in available reserves to qualify for its Investor Line of Credit.
- Payments are interest-only for 6 to 12 months, with a $0 prepayment penalty.
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What a 100% LTC fix and flip loan covers
LTC means loan-to-cost. It compares the loan to the total project cost, which is the purchase price plus the rehab budget. A 100% LTC fix and flip loan funds both in full.
At HWC, the lender funds the purchase at closing and holds the rehab budget for draws, which are released as work is completed. Payments are interest-only for a 6 to 12 month term, and the balance is due when you sell or refinance. There is no prepayment penalty. These terms come from HWC's hard money loans page.
What 100% LTC does not cover is everything outside the purchase and the approved rehab budget. HWC's own FAQ says the borrower covers closing costs and any expenses outside the approved budget.
The ARV cap behind the 100%
Every 100% LTC loan has a second limit: the after-repair value cap. ARV is what the property should be worth once the work is done. The lender takes a percentage of that value, and the loan can't go above it.
So the loan is the lower of two numbers:
Loan = the lower of (purchase + rehab) or (ARV × cap %)
HWC's ARV cap is 70%, the same figure its calculator on the hard money page uses. When the project cost is below the cap, the loan covers 100%. When it is above, you pay the difference in cash. Our ARV loans page explains how after-repair value drives the loan size.
Two worked examples
Both examples use a 70% ARV cap. They are illustrative, not quotes.
| Line | Deal A: cap doesn't bind | Deal B: cap binds |
|---|---|---|
| Purchase price | $220,000 | $250,000 |
| Rehab budget | $60,000 | $80,000 |
| Project cost | $280,000 | $330,000 |
| ARV | $420,000 | $400,000 |
| ARV cap (70%) | $294,000 | $280,000 |
| Loan (lower of the two) | $280,000 | $280,000 |
| Gap you pay in cash | $0 | $50,000 |
Deal A matches the default inputs on HWC's calculator. The loan covers the whole project, so your cash goes only to costs outside the loan. Deal B has a thinner margin between cost and value. The cap holds the loan at $280,000, and you bring the other $50,000 on top of closing costs.
Want your own number?
Send HWC the purchase price, rehab budget and expected ARV. A loan officer can tell you whether the cap binds and what you need at closing.
Find out if you prequalify · or call 1-800-674-3804
The cash you still bring to a 100% LTC loan
| Cost | When you pay it | How to size it |
|---|---|---|
| Gap above the ARV cap | At closing | Project cost minus (ARV × cap) |
| Origination points | At closing, unless you choose a no-points structure | Each point is a fee equal to 1% of the loan |
| Closing costs | At closing | Title, closing attorney, recording and appraisal fees |
| Monthly interest | Monthly during the 6 to 12 month term | Loan balance × annual rate ÷ 12 |
| Insurance, taxes, utilities | During the project | Quotes from your insurer and the town's tax bill |
| Overruns | As they happen | Anything above the approved rehab budget |
| Reserves | Shown before closing | HWC recommends at least $30,000 for its Investor Line of Credit |
The CFPB describes points as a fee set as a percentage of the loan amount, paid when the loan is made. On a $280,000 loan, one point is $2,800.
Interest is the cost investors most often underestimate. At an assumed 11% rate, which is for illustration only and is not an HWC rate, a $280,000 balance costs about $2,567 a month, or about $15,400 over six months.
In Massachusetts, closings run through attorneys, who also handle title and municipal lien certificates. HWC's Worcester County page covers what that means for local deals, and our Massachusetts lending page covers the rest of the state.
How to estimate your cash to close
- Add the purchase price and rehab budget. This is your project cost.
- Multiply the ARV by the cap. At HWC, that is 70%.
- Take the lower number as your loan. If the project cost is higher, the difference is cash you bring.
- Add points and closing costs. Ask for a written fee sheet.
- Add interest for the full term. Plan for 12 months, even if you expect to sell in six.
- Add carrying costs and a contingency. Insurance, taxes, utilities and a cushion for overruns.
- Check your reserves. Money left in the bank after closing is what keeps a delayed project alive.
HWC's hard money loans page has a calculator that runs steps 1 to 3 for you.
Ways to lower the cash you need
- Ask for a no-upfront-points structure. HWC offers one, which removes points from the closing bill.
- Buy with more room under the ARV. A lower purchase price relative to value keeps the cap from binding.
- Get pre-approved first. HWC's Investor Line of Credit lets you become an approved borrower before you find a deal. Pre-approved borrowers can skip the third-party appraisal, according to the hard money page.
- Price the full rehab scope up front. A line-item scope of work reduces overruns that the loan will not fund.
- Plan the exit. If you keep the house as a rental, refinancing into a DSCR loan pays off the short-term loan. Our guide, What Is a DSCR Loan?, shows how that loan qualifies on rent. To see which short-term loan fits your project, compare our loan programs.
Get a real cash-to-close number
HWC funds fix and flip loans in all 50 states and D.C. Share your deal and we'll show you what the loan covers and what you bring.
Related loan programs
Hard Money Loans
Up to 100% of purchase and rehab, 6 to 12 month interest-only terms.
ARV Loans
Renovation loans sized on after-repair value.
DSCR Loans
Refinance a finished flip into a 30-year or 15-year rental loan.
Sources
- Hedge Wealth Capital, Hard Money Loans program page and calculator
- Hedge Wealth Capital, Worcester County lending page
- Consumer Financial Protection Bureau, points and fees (May 9, 2012)
This article is general information, not a commitment to lend. Financing is subject to underwriting, property eligibility, program availability and final loan terms. Examples and calculations are illustrative, and the 11% rate is an assumption, not an HWC rate. Rates, fees, leverage and terms vary by transaction.
