The Quick Read: Start by learning which balance your lender charges interest on, then model each month of the hold. The monthly payment is the balance times the annual rate, divided by 12. Build that payment across a realistic timeline, add the other carrying costs, and keep cash set aside for delays and the balloon payoff at the end.
- Interest-only means the principal never shrinks. The full balance comes due as one balloon at maturity.
- The key question is “which balance?” Interest may run on drawn funds only or on the full commitment.
- Interest is usually the largest carry line, but taxes, insurance, utilities and fees sit on top of it.
- Time is the biggest swing variable. Plan for more than the national average, not less.
- Your exit, a sale or a refinance, is the real repayment plan.
Interest-only sounds cheap. It isn’t. It is a cash-flow tool. Your monthly outlay is lower, and the whole balance is still waiting at the end. A budget that treats the payment as the whole story will miss the real costs.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Key Terms Defined
Interest-only payment: a monthly payment that covers only the interest accrued, with no principal reduction.
Balloon payment: the lump sum that repays the full remaining balance at maturity.
Draw: a release of rehab money from the lender after work is completed and inspected.
Holdback: the part of the loan reserved for rehab and paid out through draws.
Carry: every recurring cost of owning the property during the flip, including interest, taxes, insurance and utilities.
Loan-to-cost: the loan amount as a share of total project cost (purchase plus rehab).
What Is the Payment Formula?
The monthly interest-only payment equals the loan balance times the annual rate, divided by 12. That is the entire formula. The hard part is knowing which balance to plug in and for how many months.
Lenders also differ on collection. Some want the payment monthly. Others let interest accumulate until payoff or sale. Total interest owed doesn’t change much between the two, but the cash you need during the hold does.
Your first job is to read the term sheet and the note before modeling anything. Confirm three things: the interest basis, whether interest is paid monthly or accrues, and the prepayment terms.
Which Balance Does the Lender Charge Interest On?
This is the question that decides your budget. A typical flip loan funds the purchase at closing and holds the rehab money back for draws. Lenders then charge interest one of two ways, as Yieldstack’s explainer on draw schedules describes.
| Method | When interest starts | Effect on budget |
|---|---|---|
| Drawn-only | Purchase portion at closing; rehab portion as each draw funds | Payments ramp up over time |
| Full-commitment | Entire loan from day one | Flat, higher payment from month one |
Under drawn-only, early months cost less because most of the rehab money hasn’t been released. Under full-commitment, you pay interest on money you haven’t touched. The gap grows with the size of the rehab. On a light cosmetic job it is small. On a gut renovation it is meaningful.
Many lenders use drawn-only, but never assume. A flat “payment times months” estimate overstates early cost on a drawn-only loan. It understates cost if you assume drawn-only and the lender actually charges on the full commitment.
Lendmire’s piece Does a Hard Money Fix and Flip Loan Allow Interest Only Payments? covers how that structure works in more detail.
How Do You Build the Month-by-Month Budget?
Split the loan into two buckets, then model each month. Here is the sequence a broker walks through with a flipper before the file goes anywhere.
1. Separate the buckets. The acquisition amount funds at closing. The rehab holdback releases in draws.
2. Map the draw timeline. Work gets done, you submit a draw request, the lender inspects, and funds release. Some lenders reimburse you after the contractor is paid. Others pay contractors directly.
3. Expect to front the first phase. You typically cover the first stretch of work, plus carry, until the first reimbursement lands. That cash is part of your real equity requirement.
4. Compute interest each month. Use balance times annual rate, divided by 12. On a drawn-only loan, the balance steps up after each draw. On a full-commitment loan, use the full amount every month.
5. Add the other carry. Taxes, insurance, utilities, HOA dues and upkeep all continue. Vacant-property or builder’s-risk coverage often belongs on the list too.
6. Add one-time costs. Points, draw and inspection fees, and any extension fees are separate from monthly interest. Ask for every fee in writing.
7. Multiply by a realistic hold. Then add a buffer.
Picture a flip with a modest purchase balance and a large holdback released in four draws. Under drawn-only, month one carries interest on the purchase portion alone. By month four, the payment has stepped up to near the full loan. Under full-commitment, month one already looks like month four. Same loan, very different early cash needs.
How Long Should You Plan to Hold?
Plan for more than five months. ATTOM’s year-end flipping report found the average flip took 163 days from purchase to sale, one day longer than the prior year. Real Estate Skills reports a similar figure for a later quarter, attributed to ATTOM.
That is an average, so half of flips take longer. ATTOM’s clock also runs only from purchase to resale. Time spent sourcing the deal and waiting on post-sale items isn’t counted. A plan that assumes a much shorter timeline leaves no cushion.
Build three versions: on schedule, a couple of months late, and a long slip. Compute total carry for each. If the deal only works in the first version, the deal is thin.
What Does a Delay Actually Cost?
Every extra month adds interest at full balance, plus taxes, insurance and utilities. Draw inspections that stall also extend the hold without adding progress. A hiccup in the renovation can balloon holding costs fast.
Run the stress test this way: take your monthly carry at full drawn balance, multiply by the extra months, and add any extension fee. Extension fees are typically a percentage of the outstanding balance for each additional period. They vary widely by lender, so get the number from your term sheet.
On thin deals, this is where profit disappears. ATTOM’s 2023 report notes its gross profit figures exclude rehab, financing, holding and selling costs, and that veteran flippers estimate rehab and other costs at 20% to 33% of after-repair value. When margins are that tight, a carry error matters.
Where Does the Payment Money Come From?
It comes from your cash, so set it aside before closing. Many flips have no income, because the property is unfinished and vacant. Treat the payment as an expense funded from reserves.
A practical approach: hold enough liquid cash to cover several months of full-balance carry, over and above your down payment and rehab overruns. How much depends on your timeline risk and your contractor’s reliability.
On the leverage side, the hard money program Lendmire brokers works on loan-to-cost. Across the wholesale network, fix-and-flip leverage typically runs 85% of project cost with fewer than two completed projects, 90% at two or more, and 93% at five or more. Every tier is capped at 75% of after-repair value. Up to 100% of the rehab budget funds in draws against completed work. Terms run 6 to 18 months, interest-only, with no prepayment penalty. All of this varies by lender, property and experience, and nothing is a commitment to lend.
That means you bring the rest. Your equity, plus cash between draws, plus carry reserves, is your real capital requirement. The borrower with experience gets the higher tiers. A first-time flipper should budget for the lower tier.
Where Does the General Rule Break?
Several edge cases change the math. Check each one against your term sheet.
- Interest basis varies. Drawn-only is common, but full-commitment loans exist.
- Accrual versus monthly pay. Accruing interest changes cash timing, not total owed.
- Early payoff. With no prepayment penalty, interest stops at payoff. If your note carries one, a quick sale may not save what you expect. Always ask.
- Running past maturity. Extension fees plus continuing interest, taxes and insurance stack up.
- Light versus heavy rehab. The drawn-versus-full gap barely matters on cosmetic work and matters a lot on big jobs.
- Flip loan versus rental loan. A flip loan is a short interest-only bridge on a property that can be unfinished. A DSCR loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, is a long-term hold product on a rentable property. Don’t apply flip carry math to a DSCR loan.
What Are the Common Budgeting Mistakes?
- Assuming interest-only means cheap. The monthly payment is lower, but the principal is untouched. The exit pays the whole balance.
- Charging yourself interest on money not yet spent. On a drawn-only loan, interest typically runs only on funds already disbursed, so budgeting interest on the full renovation amount from day one overstates the carry. Check your loan terms to confirm how interest is calculated.
- Budgeting twelve months of interest on a twelve-month loan. Without a prepayment penalty, interest typically stops at payoff.
- Treating the loan payment as the whole carry. Taxes, insurance, utilities and dues come on top, plus points and fees.
- Using the term as the timeline. The loan term is your outer limit, not your plan.
- Expecting the lender to fund everything. Lenders don’t fund 100% of price, closing costs and repairs together. You bring cash.
What Is the Go/No-Go Test?
Stretch the carry, then see whether the deal survives. Take your expected sale price, subtract purchase, rehab, selling costs and total carry at the long-slip timeline. If profit is still acceptable, proceed. If it only works on the best case, pass or renegotiate.
Also confirm the exit before you close. A balloon repays the full balance whatever your monthly payment was. If the sale stalls, you need either extension room or a refinance. Many investors who decide to keep a stabilized flip as a rental refinance out of hard money into long-term DSCR financing, which Lendmire brokers. Read the complete DSCR loans guide to see how that path works. Plan that refinance before the balloon date, not after.
Frequently Asked Questions
Is the interest-only payment fixed for the whole loan?
Not necessarily. On a drawn-only loan, the payment rises as each draw releases, because interest runs on a growing balance. On a full-commitment loan, it is flat from day one. Check the note to see which applies.
Does the payment change as draws are funded?
Yes, under drawn-only interest. Interest on the rehab portion starts as each draw funds. Under full-commitment interest, the payment doesn’t move, because the undrawn holdback was already accruing.
What if the flip runs long?
You keep paying interest, taxes and insurance, and you may owe an extension fee once you pass maturity. Stress-test a slip of a few months before you buy. Keep reserves for it.
Can I prepay without a penalty?
On the program Lendmire brokers, terms are interest-only with no prepayment penalty, though details vary by lender, property and experience. Confirm it on your specific term sheet before relying on it.
How much cash should I keep in reserve?
Enough to cover several months of full-balance carry beyond your down payment and rehab overruns. The right number depends on your timeline risk and your contractor. Thin-margin deals need a larger cushion.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Yieldstack: Fix and flip draw schedules
2. attomdata.com: Year End Home Flipping Report
3. Real Estate Skills: How long to flip a house
4. attomdata.com: Home Flipping Plummets Across U.S. in 2023 as Profits Slump Again
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Get a Hard Money Loan for a First Flip With No Track Record · Hard Money Fix and Flip Minimum Loan Amount Requirements · Can a Business Owner Qualify for a Hard Money Fix and Flip Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.