Glossary
Holdback (rehab holdback)
A rehab holdback is the portion of a fix and flip loan that the lender keeps back at closing and pays out later through draws as the renovation is completed.
A rehab loan has two parts: money for the purchase, paid at closing, and money for the work, held back. The holdback protects the lender. It only releases funds once the work that adds value is in place.
How it works
The lender sizes the loan, sets aside the rehab portion, and funds the rest toward the purchase. You bring the gap between the purchase funding and the price, plus closing costs.
- Total loan
- $221,000
- Rehab holdback (100% of a $50,000 rehab)
- $50,000
- Funded at closing toward the purchase
- $171,000
- Purchase price
- $190,000
If the loan is cut by an ARV cap, Run The Deal keeps the rehab holdback whole and reduces the purchase funding, so the shortfall shows up as a bigger down payment.
What to watch
- Points are charged on the full loan, holdback included. See points.
- With Dutch interest, you pay interest on the holdback before you draw it.
- The holdback covers the budget you submitted. Overruns and contingency you did not include are on you.
- Unused holdback is usually just never drawn, but check how the lender handles it at payoff.
See how the money moves stage by stage on the draws page.
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