Routing # 256078446
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HELOCs for Home Flippers
What you'll learn: The pros and cons of using a HELOC to fund your house flipping project.
EXPECTED READ TIME: 3 MINUTES
May 24, 2024
A home equity line of credit, or HELOC, is a revolving line of credit that is secured by the value in your home. HELOCs function similarly to a credit card in that you have a credit limit you can tap into whenever you need the money.
If you have built up the equity in your home, you may want to consider tapping into that resource as a means of funding your house flip project. Many people use HELOCs for renovating, upgrades, and more. Read on to discover the pros and cons of using a HELOC for house flipping.
What’s the cost to flip a house?
The overall costs of flipping a house varies based on a number of components. These include:
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Purchase price and closing costs during property acquisition
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Cost for renovating the house, such as materials and labor
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Carrying costs (interest on financing and financing fees)
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Marketing and sales
Of course, there are ways you can cut costs in some areas. You may decide to do the bulk of the labor and renovations yourself. The goal of any house flipper is to turn a profit after all, but you should have a solid idea of the total price to flip a house before looking for ways to fund the project.
HELOCs for flipping houses
Prior to the crash of 2008, many homeowners used HELOCs as a means of investing in rental properties and home flipping projects. At a time when real estate prices are soaring, it is a good way to finance a house flip. However, once the market crashed many people ended up owing more on their home than it was previously worth. This example is not meant to scare you away from your flipping aspirations, but you should be cautious. Using equity in your home cannot be taken lightly. It is crucial to weigh every pro and con, do the research, and take a conservative approach.
Pros:
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Financial flexibility
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Interest rates are generally lower than hard money loans
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Interest payments may be tax deductible
Cons:
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Amount you can borrow depends on your home’s value (plus other factors)
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Your home is your collateral
It is important to feel confident that you can pull off a flip successfully. Leveraging your home’s equity can be a great means of house flipping if you or someone you can work with has experience with prior house flips or rental properties. That said, it is best not to take big risks. It is probably not a good idea to invest in a property that needs significant renovations before you can sell or rent it. This is especially true if you do not have the ability or skills to perform the construction yourself, or if the experienced labor you need to hire pushes you over budget.
Consider working with a real estate agent that knows the market first. You will be able to utilize their knowledge to help you make the best choices.
Is it a good idea to use a HELOC to flip a house?
While a HELOC is similar to a home equity loan, in that you may be able to borrow up to 85% of the home’s value, the key difference is their variable interest rates. Like credit cards, your interest rate may change month to month depending on the current economic trends. This may lead to lower payments one month, but higher payments the next.
Another great aspect of a HELOC that differs from home equity loans is the credit limit. You can use the credit you need and make payments only on the amount you borrow. That way, you can withdraw credit as your home flip project progresses and costs come up.
If you are financially secure and interested in house flipping for profit, it is worth researching HELOCs and learning how much equity you have available to use.
SIMILAR ARTICLES
What Is Home Equity?
There is a lot to know about home equity. We will answer: What is it, and how is it calculated? How can you use home equity to your advantage? And, can you use it for anything you choose?
What Are the Pros and Cons of a HELOC?
A HELOC (home equity line of credit) has some advantages and disadvantages other equity loans do not. Find out what they are so you can decide if a HELOC is right for you.
Home Equity Loan or HELOC: What’s the Difference?
There are two different types of home equity loans: a line of credit or a lump sum loan. Discover the pros and cons of each and which one is best suited for what you need.
Top 10 Home Improvements
Whether you want to add landscaping, new windows, or an addition to your house, find out what the top 10 home renovation projects are.
Home Buying Steps
Mortgage Products
Disclosures
*Prime Rate is 6.750% as of December 12, 2025. The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 6.750% for primary residences and second homes.
- Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
- Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.
Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:
For all loans with a loan amount greater than $400,000.
If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).
- Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.
Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 6.750% for primary residences and second homes.
Property Insurance: Property insurance is required.
Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.
PenFed does not lend on:
- Mobile homes
- Co-ops or time-shares
- Properties that are currently listed on the market for sale
- Commercial property or property used for commercial purposes, even if a residence is part of the property
- Undeveloped property (land only)
- Properties with more than 4 units
Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).
- Additional limitations may apply
Home Equity Line of Credit:
- This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
- If only minimum payments are made during the draw period, the loan balance will not decrease.
- In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
- In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
- Property type of Condo has a maximum CLTV of 80%.
- The maximum CLTV available is dependent on credit qualification.
- Rates vary depending on owner occupancy and CLTV and other loan criteria.
Minimum Loan Amount Requirements in all States:
- For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.
Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.
Routing #256078446
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