Penalties for Using Conventional (non investment) loans for Flips

[Jamarla Edwards]

Hi,

I am about to purchase my first home, using conventional financing, and I plan to flip it within 3 months.  Are there any legal restrictions or financial penalties for using conventional financing (non investment) to flip a house? Are there  penalties for repaying the loan quickly? 

I want to make sure I consider all the drawbacks to using this financing option before moving forward. Thanks!

[Upen Patel]

@Jamarla Edwards If you are getting an investment loan, then you are fine. Usually there is no pre-payment penalty.

Though your mortgage banker will be super pissed. When you pay off the loan within 6 months, it triggers EPO (early pay-off) and the bank will claw back the mortgage banker's earning. The mortgage banker will refuse to work with you in the future (I would if were them).

So be careful before you burn bridges.