Hartford, New Haven, Bridgeport and Waterbury are full of two- and three-family buildings that investors buy with short-term money and renovate. A DSCR rate-and-term refinance moves that debt into a long-term loan qualified on the building's rent.
In short: Yes, LendingStreet finances DSCR rate-and-term refinances on 1-8 unit investment properties in Connecticut, up to 80% LTV on some programs, qualified on the property's rent with no W-2s or tax returns. The new loan pays off your existing hard money, bridge or higher-rate loan plus closing costs, with only a small amount of cash back allowed on most programs. Our investor loans are business-purpose loans on non-owner-occupied property, starting at $150,000 with a 620 minimum credit score. In Connecticut, high town property taxes and the condition of older foundations and heating systems are the items to price early.
A rate-and-term refinance pays off the loan you have now and replaces it with a new one, changing the rate, the term or both, without pulling out equity. The new balance usually covers the payoff plus closing costs, and most programs allow only a small amount of cash back at closing. The exact allowance varies by program.
Because you are not taking cash out, some programs allow a higher ceiling than a cash-out refinance, up to 80% LTV on some programs. Qualification runs on the debt service coverage ratio, the property's rent divided by the new monthly payment including principal, interest, taxes, insurance and any HOA dues. The standard minimum is 1.0x.
Connecticut's cities have a deep stock of early 1900s two- and three-family houses, many with separate heat and utilities, that cash flow well on rent but often need work after purchase. Investors use hard money to buy and renovate, then refinance into a 30-year DSCR loan. Rate-and-term also helps owners holding a commercial-style bank loan with a short balloon.
In each case the goal is the same: a stable, long-term payment the rent can carry, without raising the balance. Keeping the loan close to the payoff also leaves more room under the ratio if taxes or insurance rise after closing.
Hard money and bridge loans are built to be replaced. Once the rehab is done and the unit is leased, a rate-and-term DSCR refinance pays off the short-term loan and sets a 30-year payment. Start the refinance a couple of months before maturity so appraisal and title do not run up against the deadline.
If you bought recently, expect the lender to look at your purchase price and documented improvements, not just the new appraisal. Seasoning requirements differ by program, and they can change how much of the after-repair value you can use.
Connecticut charges state and municipal conveyance taxes on deeds, which apply to sales rather than a standard refinance. There is no state mortgage tax, so the refinance costs are mostly recording fees, title, appraisal, attorney and lender charges. Connecticut closings typically involve an attorney.
If you are deeding the building into an LLC as part of the refinance, conveyance tax treatment can vary, so confirm it with your closing attorney before you change title.
Property taxes are set by each town through its mill rate, and Connecticut's rates are among the higher ones in the country, especially in the larger cities. On a multifamily rental, the tax bill can be a large share of the payment, so use the actual current bill and watch for revaluation years.
In parts of northeastern and north-central Connecticut, some homes built with certain concrete have foundation cracking problems, and appraisers and insurers may ask about it. Older buildings can also have oil heat, aging boilers and lead paint, which matter for both condition and insurance.
This example is illustrative and not a quote. An investor owns a three-family house in Hartford appraised at $375,000. The existing hard money loan used for the purchase and renovation has a payoff of $270,000, costs about $2,470 a month interest-only and matures in 3 months. Rent is $4,200 a month, and taxes, insurance and any HOA dues run $1,050 a month.
Rolling about $8,000 of closing costs into the loan gives a new balance of $278,000, or about 74.1% LTV, inside the 80% ceiling some programs allow. On a 30-year term, principal and interest is about $1,920, so the full payment is about $2,970 and the DSCR is about 1.41x. The short-term maturity is gone and the payment is fixed. The rent could fall by about $1,230 a month before the ratio hit 1.0x.
| Item | Amount |
|---|---|
| Appraised value | $375,000 |
| Existing loan payoff | $270,000 |
| Closing costs rolled in | $8,000 |
| New loan amount | $278,000 |
| Loan-to-value | 74.1% |
| Principal and interest (30 years) | About $1,920 |
| Taxes, insurance and HOA | $1,050 |
| Total monthly payment | About $2,970 |
| Monthly rent | $4,200 |
| DSCR | About 1.41x |
If you need equity out of the property, a cash-out refinance is the tool. If you only need to retire the existing loan, rate-and-term usually offers more leverage room and a lower balance.
The underwriting is the same, but the outcome is not. A larger cash-out balance raises the payment and lowers the ratio, so ask for both options on the same property and compare the payment, the DSCR and the cash you would net side by side.
| Feature | Rate-and-term | Cash-out |
|---|---|---|
| Purpose | Pay off existing loan and costs | Pay off loan and take equity |
| Maximum LTV | Up to 80% on some programs | Up to 75% |
| Cash at closing | Small allowance, varies by program | Up to the LTV limit |
| Minimum DSCR (standard) | 1.0x | 1.0x |
| Minimum credit score | 620 | 620 |
| Income documents | Rent only, no W-2s or tax returns | Rent only, no W-2s or tax returns |
Hartford, New Britain and East Hartford have large numbers of two- and three-family rentals at moderate prices. New Haven draws renters tied to the university and hospitals. Bridgeport, Waterbury and Norwalk offer older multifamily, while Stamford and the Fairfield County shoreline carry higher prices and tighter ratios. Small 5-8 unit buildings are common in older neighborhoods and may see lower maximum LTV.
Having these ready keeps the appraisal, title and underwriting moving, especially if a short-term loan is nearing maturity. Call (877) 298-1001 or use the form below to get a quote.
Yes. LendingStreet refinances non-owner-occupied 1-8 unit rentals in Connecticut with DSCR loans starting at $150,000, up to 80% LTV on some programs.
Conveyance taxes apply to deed transfers, so a standard refinance usually avoids them. Deeding the property into an LLC at the same time can change that, so ask your closing attorney.
Most programs allow a small amount of cash back at closing, but the limit varies. Taking more turns the loan into a cash-out refinance, which has a 75% LTV ceiling.
Town mill rates are high in many cities, and the tax bill is part of the DSCR payment. On a three-family, taxes can rival the principal and interest.
Seasoning varies by program. Recently purchased properties may be sized on purchase price plus documented improvements rather than the new appraised value.
Yes. Two- to four-family buildings are standard residential DSCR properties, and the rent from all units counts toward the ratio.
Standard programs need at least 1.0x. Sub-1.0 DSCR programs exist, or you can lower the balance by bringing cash to closing.
Yes. LLC borrowers are standard on DSCR loans. Expect to provide the operating agreement, articles of organization and an EIN letter, and to sign for the loan personally.
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