You bought the two-family with short-term money, renovated it and signed new tenants. Now the hard money loan is costing interest-only payments every month and its maturity date is closing in. In Bridgeport, that is exactly where a rate-and-term DSCR refinance comes in.
In short: LendingStreet's DSCR rate-and-term refinance replaces hard money, a bridge loan or an existing mortgage on a Bridgeport rental with a long-term loan qualified on the property's rent. Rate-and-term goes up to 80% LTV on some programs, with a 1.0x standard minimum DSCR, a 620 minimum credit score and no W-2s or tax returns required.
Rate-and-term pays off debt rather than pulling equity. Bridgeport investors use it to:
In Bridgeport, these refinances most often follow a renovation of a two- or three-family bought below market from an estate or a tired landlord. The short-term loan paid for the purchase and the work; the DSCR loan turns the finished, leased building into a long-term hold.
This example is illustrative and not a quote. An investor renovated a West End two-family with a short-term loan that now has a balance of $398,000. Estimated interest-only payments are about $3,814 a month, and maturity is a few months away.
The renovated building leases for $4,650 a month combined and appraises at $550,000. The program allows up to 80% LTV, or $440,000. A new loan of $410,000 covers the payoff and about $12,000 in estimated closing costs, about 75% of value.
Estimated principal and interest on a 30-year term is about $2,797. With $1,275 in taxes and $290 in insurance, the payment is about $4,362 and the DSCR is about 1.07x.
| Short-term loan | DSCR refinance | |
|---|---|---|
| Balance | $398,000 | $410,000 |
| Structure | Interest-only | 30-year, amortizing |
| Estimated debt payment | $3,814 | $2,797 |
| Qualifies on | Project plan | Rent |
| Maturity | Months away | 30 years |
Start as soon as the renovation is complete and units are leased. Appraisal, title and lease review take a few weeks, and Connecticut closings run through attorneys. Close out building permits with the city before applying; open permits can delay both the appraisal and title. Ask your short-term lender for a payoff statement early.
Check whether your short-term loan has an extension option and what it costs, so you know your fallback if the appraisal or title takes longer than planned. Knowing that in advance takes pressure off the closing date.
A renovated building can be reassessed at a higher value, especially at the city's next revaluation, and Bridgeport's mill rate makes that increase significant. Run the ratio on a realistic tax figure rather than the bill from before the work. If the ratio is just below 1.0x, sub-1.0 DSCR programs may still work.
Connecticut owners who disagree with a new assessment can appeal to the town's board of assessment appeals within the deadline after the grand list is published. A successful appeal helps cash flow, but underwrite on the current bill.
Give the appraiser a list of improvements with costs, before-and-after photos, permit sign-offs and copies of new leases. Comparable sales matter a great deal in Bridgeport, where values can shift across neighborhood lines, so share the best renovated multi-family sales you know of nearby.
If the best comparable sales are in a nearby neighborhood or just over the line in Stratford or Fairfield, share them with us so the appraiser has the full picture.
Most programs qualify on the lower of actual lease rent and market rent, so fresh leases at market rent are the strongest support. If a unit is still vacant, some programs can use the appraiser's market rent estimate, but signed leases are better. Keep security deposits handled under Connecticut rules, since lease files can be reviewed.
Bridgeport's renter pool, from hospital staff to Metro-North commuters, supports steady leasing in most neighborhoods, which helps a refinance because the building can show signed leases instead of relying on a market rent estimate.
If you want to pull money out, cash-out goes up to 75% LTV, with seasoning that varies by program. Rate-and-term can go up to 80% on some programs because no equity is taken. Some investors refinance rate-and-term now and do a cash-out later once seasoning is met.
The choice often comes down to timing. A rate-and-term refinance retires the short-term loan before it matures, and a later cash-out, once seasoning is met, can return more of the cash you invested in the renovation.
A rate-and-term refinance is a natural time to move a rental from your personal name into an LLC, since the new DSCR loan can close in the LLC and you sign for the loan personally. Coordinate the deed transfer with your Connecticut attorney so it happens with the refinance.
The LLC also simplifies future growth. Keeping each rental, or the whole portfolio, in an entity makes later refinances, a blanket loan or a sale cleaner.
Send the address, current balance and maturity, renovation summary, leases and tax bill through the form below, or call (877) 298-1001.
We will compare the new payment and ratio with your current loan and flag any tax or insurance issues before you order an appraisal.
Yes. Paying off hard money or a bridge loan after renovation is the most common use of a rate-and-term DSCR refinance. Two-families, three-families and buildings up to 8 units all qualify.
Up to 80% on some programs; leverage varies by program, property type and size. 5-8 unit buildings can have lower caps.
No. The loan qualifies on the property's rent. Expect to provide leases, bank statements for reserves and entity documents.
Typically the new loan covers the payoff and closing costs within the LTV limit. Rolling costs in keeps cash in your pocket for reserves.
Some programs can use market rent, but signed leases make the file stronger. Market rent from the appraisal is used on some programs.
Ideally 45 to 60 days before the current loan matures. Ask your current lender for a payoff letter early, too.
They can, especially at revaluation. Use a realistic tax figure in your ratio. Taxes are often the biggest surprise in Bridgeport refinances.
No. Rate-and-term pays off existing debt and costs; cash-out provides extra money up to 75% LTV. Rate-and-term usually does not put cash in your pocket beyond small closing adjustments. Pick the one that matches your goal.
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