Fix and Flip vs Bridge vs Construction Loans: Which One Fits Your Project?

The short version: three loans, three jobs

Fix and flip loans, bridge loans and ground-up construction loans are all short-term, asset-based loans that private (hard money) lenders make on investment property. They look similar on a term sheet: interest-only payments, a term measured in months, points paid at closing, and a balloon payment at the end. But they are built for different jobs, and picking the wrong one can leave you short on cash halfway through a project.

Here is the one-sentence version of each:

• Fix and flip loan: money to buy a property and fund a renovation budget, usually released in draws as work gets done.
• Bridge loan: money secured by a property that needs little or no construction, used to buy quickly, pull equity out, or carry the property until a sale or long-term refinance.
• Ground-up construction loan: money to build a new structure (or rebuild after a full teardown), sized against the total project cost and the finished value, and funded almost entirely through draws.

The rest of this guide explains how each loan measures leverage, how the money is released, how terms and pricing typically differ, and how to handle the gray areas where a project could fit more than one category.

Fix and flip loans: purchase plus rehab

A fix and flip loan (sometimes called a rehab loan or fix-to-sell loan) finances two things at once: part of the purchase price and some or all of the renovation budget. It is the default choice when you are buying a dated or distressed house, improving it, and either selling it or refinancing into a long-term rental loan.

How the loan is typically sized

Many lenders use three tests and lend the lowest result:

• A percentage of the purchase price, often somewhere around 80% to 90% for experienced borrowers.
• A percentage of the rehab budget, often up to 100%, paid back to you in draws.
• A cap based on the after-repair value (ARV), commonly in the 65% to 75% range.

If those terms are new, our guide to LTC vs LTV vs ARV walks through each ratio, including where the after-repair number comes from.

Typical terms

Terms are commonly 6 to 18 months, sometimes with paid extensions. Payments are usually interest-only. Rates and points vary widely by lender, borrower experience, leverage and market, so treat any single number you hear as one data point, not the market.

Best fit

Cosmetic to heavy renovations of existing 1–4 unit homes: kitchens, baths, roofs, systems, layout changes and modest additions. If you are planning a flip, our fix and flip loans hub covers the product in more depth.

Bridge loans: speed and transition with little or no rehab

A bridge loan “bridges” you from one situation to the next. The property is usually habitable or close to it, and the borrower needs short-term financing because a conventional or long-term loan is too slow, unavailable, or not the right fit yet.

Common bridge loan uses

• Buying a property quickly at auction or from a seller who needs a fast close, then refinancing later.
• Pulling cash out of a property you own free and clear to fund another deal.
• Carrying a property you just finished renovating while it sells or while it seasons for a rental refinance.
• Buying a rental that needs light work (paint, flooring, minor repairs) that you will pay for yourself.

How the loan is typically sized

Because there is no large construction budget, bridge loans are usually sized on loan-to-value (LTV): the loan amount divided by the current “as-is” value, or by the purchase price on an acquisition. Many lenders land somewhere around 65% to 80% LTV, with lower leverage for cash-out than for a purchase. There is usually no rehab holdback, or only a small one.

Typical terms

Terms are often 6 to 24 months. Because the lender is not managing a construction budget, there are usually fewer draw and inspection fees. Pricing can be similar to or slightly better than a fix and flip loan at the same leverage, but it depends on the lender and deal. See the bridge loans hub for more.

Ground-up construction loans: building from dirt

A ground-up construction loan funds a new structure on land: a spec home, a duplex on an infill lot, or a rebuild after a full teardown. The lender is taking on more risk than with a rehab, because there is nothing to sell on day one except land, and the value only exists once the house is built.

How the loan is typically sized

Construction lenders usually look at loan-to-cost (LTC): the loan divided by the total project cost (land plus hard costs plus, at some lenders, soft costs like permits, plans and engineering). Many lenders lend somewhere around 75% to 90% of cost, with a separate cap on the completed value, commonly around 65% to 75% of the as-completed value. If you already own the land, many lenders will count your land equity toward your contribution.

What lenders review that a flip lender may not

• Approved plans and permits, or a clear path to them.
• A detailed construction budget and timeline, often from a licensed general contractor.
• Your track record building, not just flipping.
• Site factors: utilities, access, zoning and any required impact or tap fees.

Typical terms

Terms are often 12 to 24 months because building takes longer than renovating. Almost all of the construction money is held back and released in draws. The U.S. Census Bureau publishes new residential construction data, including how long single-family homes take from start to completion, which is a useful reality check when choosing a term length. The ground-up construction loans hub covers this product in detail.

How leverage is measured differently, with a worked example

The biggest practical difference between these loans is how the lender decides the maximum loan amount. Below are three hypothetical deals in the same neighborhood. All numbers are illustrative, not quotes.

Deal 1: Fix and flip

• Purchase price: $220,000
• Rehab budget: $60,000
• ARV: $380,000
• Hypothetical terms: 85% of purchase, 100% of rehab, capped at 70% of ARV

85% of $220,000 is $187,000. Add the full $60,000 rehab and you get $247,000. The ARV cap is 70% of $380,000, or $266,000. The lower number wins, so the maximum loan is $247,000: $187,000 at closing and $60,000 in draws. You bring the other $33,000 of the purchase price plus closing costs.

Deal 2: Bridge

• Purchase price: $300,000 for a house that only needs paint and carpet
• As-is value: $300,000
• Hypothetical terms: 75% LTV

75% of $300,000 is $225,000, all funded at closing. You bring $75,000 plus closing costs and pay for the light cosmetic work yourself.

Deal 3: Ground-up construction

• Lot purchase: $90,000
• Hard costs: $310,000
• Soft costs (plans, permits, fees): $25,000
• Total project cost: $425,000
• As-completed value: $560,000
• Hypothetical terms: 85% LTC, capped at 70% of completed value

85% of $425,000 is $361,250. The value cap is 70% of $560,000, or $392,000. The lower number is $361,250. Your required equity is $63,750, and at many lenders most of it goes in early, toward the land and first stages, before construction draws begin.

You can run your own numbers with the calculators linked at the end of this guide: an ARV-based max loan calculator for flips and an LTC calculator for construction.

How draws work for each loan type

A draw is a reimbursement (or advance) from the lender’s construction holdback after an inspector confirms work is complete. How much of your loan comes through draws changes your cash planning dramatically.

• Fix and flip: the purchase portion funds at closing; the rehab portion is held back. You typically pay for the first phase of work yourself, request a draw, an inspector visits, and the lender reimburses you for completed work. Expect several draws over a typical rehab.
• Bridge: usually no draws. The full loan funds at closing.
• Ground-up construction: most of the loan is drawn. Many lenders tie draws to milestones (foundation, framing, dry-in, mechanicals, drywall, finishes, final) or to a percentage-of-completion inspection. Expect more draws and more inspection fees than on a flip.

Two things catch new investors off guard. First, draws are often paid in arrears, so you need cash or contractor credit to fund each phase before you are reimbursed. Second, draw turnaround time varies by lender, and a slow draw can stall a job. Ask every lender how long draws typically take from request to funding, and what they cost.

Our guide on how construction draws work goes step by step, including how to map your cash needs by construction phase.

Terms, rates, points and interest calculation

All three loans are typically interest-only with a balloon at maturity, but a few structural details differ in ways that affect total cost.

Term length

Bridge and flip loans commonly run 6 to 18 months; construction loans commonly run 12 to 24. Ask what an extension costs before you sign. Extensions are often priced as an additional fee (sometimes a fraction of a point to a full point per extension) and may require the project to be on schedule.

Interest on the full loan vs drawn balance

Some lenders charge interest only on money that has been disbursed. Others charge interest on the full loan amount from day one, including undrawn rehab or construction funds. This second method is often called Dutch interest. It matters most on construction loans, where a large share of the loan sits undrawn for months. Always ask which method a lender uses, because the same rate can produce very different interest costs.

Rates and benchmarks

Hard money rates are set by each lender and are not tied to a single public index, but they tend to move with broader short-term rates over time. The Federal Reserve publishes selected interest rates (H.15), including the bank prime loan rate, if you want context on the overall rate environment.

Points and fees

Expect origination points on all three, plus lender fees. Construction and flip loans add draw or inspection fees; construction loans may add plan or budget review fees. Add every one of these into a single total cost before comparing offers.

Gray areas: when a project could fit more than one loan

Real projects do not always sort neatly. Here are common edge cases and how lenders often treat them. Policies vary, so always describe the full scope to the lender up front.

Heavy rehab and additions

A gut renovation that keeps the foundation and most framing is usually a fix and flip loan. But if the rehab budget is very large relative to the purchase price, or the scope adds significant square footage, some lenders will move it into a “heavy rehab” tier with lower leverage or treat it under construction guidelines. Expect more scrutiny of permits and your contractor.

Teardowns

If you buy a house to demolish it and build new, that is usually a ground-up construction loan, even though you bought a house. The lender values the starting point as land.

Light rehab you pay for yourself

If the work is small enough to fund from your own cash, a bridge loan may be simpler: no draws, no inspections, and possibly lower fees. The tradeoff is that you bring more cash to the table because the lender is not funding the repairs.

Bridge after a flip

If a finished flip is not selling and your fix and flip loan is nearing maturity, a bridge loan (or an extension) can buy time. Compare the extension fee on your current loan against the full cost of a new bridge loan, including new points, title and closing costs.

Disclosures and consumer rules

All three are business-purpose loans on investment property. Federal Truth in Lending rules under Regulation Z generally exempt credit extended primarily for business purposes (see the CFPB’s text of Regulation Z § 1026.3), which is one reason you may not receive the standardized consumer Loan Estimate you would get on a home loan. Ask each lender for a written term sheet that lists every cost.

Exit strategy: how each loan usually gets paid off

Every short-term loan needs a clear exit. Lenders will ask about yours, and the right loan type often depends on it.

• Sell: the classic flip exit. Your timeline should include renovation, listing, time on market and closing. Build in a cushion.
• Refinance into a rental loan: many investors refinance a finished flip or new build into a long-term loan, such as a debt service coverage ratio (DSCR) loan, and keep the property. DSCR lenders typically size the loan on the property’s rental income rather than your personal income.
• Refinance into a conventional loan: conventional investment property loans follow agency guidelines such as the Fannie Mae Selling Guide, which has its own rules on ownership history, cash-out and property eligibility. Check those requirements before you rely on this exit.

Match your term to your exit. A 12-month loan on a project with a 9-month build and a 3-month sale has zero margin. Many investors pick a term with several months of buffer, or confirm extension terms in writing before closing.

Renovation rules that can affect your timeline

Whatever loan you choose, permits, inspections and safety rules shape how fast you can finish, and lenders care about that because it determines when they get repaid.

If you are renovating a home built before 1978, the U.S. Environmental Protection Agency’s Renovation, Repair and Painting (RRP) program generally requires renovation firms that disturb painted surfaces to be certified and follow lead-safe work practices. Budget for this when it applies, and ask your contractor about certification before you lock in a timeline.

For ground-up builds, municipal permit and plan review times can add weeks or months before the first shovel. Many construction lenders want permits in hand, or nearly in hand, before closing so that interest is not running while you wait on the city.

How to choose: a quick decision checklist

Answer these questions in order:

1. Are you building a new structure or replacing one entirely? If yes, you need a ground-up construction loan.
2. Do you need the lender to fund a renovation budget? If yes, a fix and flip loan is usually the fit.
3. Is the property usable as-is, or will you fund minor work yourself? If yes, a bridge loan is usually simpler and may cost less in fees.
4. How long will the project realistically take, including the exit? Choose a term that covers it with buffer.
5. How much cash can you bring, and when? Construction loans front-load your equity and pay in arrears; flips need cash for the down payment plus the first phase of work; bridge loans need a larger down payment but no draw float.

Once you know the loan type, compare total cost, not just rate. On Hard Money Lender Match you can enter a fix and flip, bridge or construction deal on the comparison tool and see anonymized lenders side by side with rate, points, lender fees and total cost over your hold period.