Purchase-Only Hard Money Loans vs Fix & Flip Loans: Which One Do You Actually Need?

The Difference in One Sentence

A fix and flip loan finances the purchase plus your rehab budget: typically 90% to 100% of the purchase price and 100% of the rehab, with the rehab money held in escrow and released as work gets done. A purchase-only hard money loan finances just the purchase, typically 80% to 90% of the purchase price, and the rehab is on you.

That one difference changes the cost, the speed, and the paperwork of your entire deal.

When Purchase-Only Makes Sense

I reach for purchase-only in three main situations:

1. The rehab is light and you can self-fund it. Paint, flooring, fixtures, the kind of budget you can float from cash without sweating.

2. You are buying to resell without touching it. Wholetail deals, auction wins, estate purchases where the spread is in the buy, not the renovation.

3. The property is already in good shape and you need to close fast. Sometimes the plan is to refinance into a DSCR loan afterward and hold it as a rental.

Here is the Houston deal from last week. First-time investor, single family house already in good condition, and the plan is to put it right back on the market:

The purchase was just over $170K on a house he expects to resell around $235K. He got in for roughly $25K total at the closing table, the rest of his cash stays in his own account, and there are no draw fees, no inspections, and no escrow paperwork for the life of the loan. Credit was a soft pull only.

One reason I am glad I got to work with this investor on this deal: two other lenders looked at this exact same file. One wanted 40% down because a small purchase-only bridge is not their typical deal. Another quoted a decent rate but stacked roughly five points of total fees on it. Same borrower, same numbers, same week. That is exactly why I shop every deal across 350+ lenders and hand you a comparison report with the best options side by side, what makes each one stronger or weaker spelled out line by line.

If this investor had walked through either of those doors and taken what was in front of him, door number one meant coming up with roughly $68K down instead of $21K, three times the cash for the same house. Door number two meant more than $7,500 in points and fees before the loan even started. Neither lender was lying to him. Each one priced what they wanted to price, and no direct lender will ever tell you the shop down the street beats them. The only way to know a quote is good is to see it standing next to nine others. That is the whole job.

When Fix & Flip Wins (The Counterintuitive Part)

You would think the bigger loan with rehab money attached costs more to get into. It is usually the opposite.

A fix and flip lender underwrites against your after-repair value, not just the purchase price. Since they are lending on the future value of the property, most good deals can close with 5% down on the purchase, sometimes even 0% down when your all-in costs sit comfortably under 70% of ARV. Purchase-only lenders do not have that cushion, so 10% down is the floor and 12.5% is typical for a first-timer.

Let's put real numbers to this with a round-number example. Say it is a $200,000 purchase:

Purchase-only at 12.5% down: $25,000 down.
Fix and flip at 5% down: $10,000 down.

Yes, the fix and flip loan carries a higher rate and an extra point or so of origination, call it $2,000 to $4,000 more in fees, and the rehab money arrives through a draw process instead of your checking account. But the down payment gap is $15,000. If cash is your constraint, the more expensive loan is the one that actually lets you do the deal.

That is the honest framing, and it is the sentence I use with every borrower. Decide which one your situation actually needs, then pick the loan that matches.

Speed: Where Purchase-Only Wins Outright

Purchase-only is the fastest version of hard money because there is no scope of work, no budget review, and sometimes no appraisal. The Houston deal came in on a Thursday around noon and had to close by the contract date the following Wednesday. It did: 5 business days from application to closing. A 72-hour close is genuinely possible with the right lender when the file is clean.

Two things I tell every borrower up front. First, the clock starts when your documents are complete, not when you apply. If the bank statements or the purchase contract are missing, no lender on earth is fast. Second, speed and shopping pull against each other. Give me three days and I will get you closed with a lender I trust. Give me two weeks and I can put your file in front of more lenders and play them against each other, which is usually where the best terms come from. You can max one, not both.

If you have a property under contract and you are not sure which structure fits, send it to me. I will run both versions and show you the numbers side by side, with a term sheet in minutes, not days. Start at CapitalKings.Co.