A rate-and-term refinance is the quiet step in a Des Moines investment plan. No cash comes out. Instead, a short-term rehab loan or a bank note with a looming balloon is replaced by a long-term loan that qualifies on the rent.
In short: LendingStreet's DSCR rate-and-term refinance pays off an existing loan on a Des Moines 1-8 unit rental, such as hard money, a bridge loan or a maturing bank note, with a new loan that qualifies on the property's rent. Some programs go up to 80% LTV on rate-and-term, and 30-year terms are available. The rent needs to clear the 1.0x standard minimum at the new payment.
The most common case in Des Moines is the end of a rehab. You bought a house with a short-term loan, fixed it up, and now it is leased. The short-term loan is interest-only and has a maturity date. A rate-and-term refinance replaces it with a long-term, fully amortizing loan.
Other cases include a rental held on a local bank loan with a five-year balloon, a loan in your personal name that you want in your LLC, or a loan whose payment is higher than the rent can comfortably carry.
Because no cash comes out, rate-and-term refinances often allow higher leverage and lighter seasoning than cash-out, which helps when the rehab loan is close to maturity.
The two refinances follow the same DSCR rules. The difference is what the loan pays for.
| Feature | Rate-and-term | Cash-out |
|---|---|---|
| What the loan pays | Existing loan and closing costs | Existing loan, costs and cash to you |
| Maximum LTV | Up to 80% on some programs | Up to 75% |
| Seasoning | Usually lighter | Varies by program |
| Best for | Retiring short-term debt | Pulling equity for the next deal |
This example is illustrative and not a quote. An investor finished renovating an Oak Park bungalow bought with a short-term rehab loan. The balance is $165,000, and the interest-only payment on that loan is about $1,512 a month. The house now appraises at $230,000 and leases for $1,700.
A rate-and-term refinance of $170,000 covers the payoff and about $5,000 in costs, about 74% of value. Estimated principal and interest is about $1,160. With taxes of $330 and insurance of $125, the payment is about $1,615, for a DSCR of about 1.05x. The balloon risk is gone, and the loan now pays itself down every month.
The appraisal on a freshly renovated house is where the rehab pays off. Give the appraiser your scope of work, permits and photos.
| Item | Before: rehab loan | After: DSCR loan |
|---|---|---|
| Balance | $165,000 | $170,000 |
| Payment type | Interest-only | Principal and interest |
| Monthly loan payment | About $1,512 | About $1,160 |
| Maturity | Short term | 30-year term |
A lower payment matters most when the existing loan is interest-only at short-term pricing or carries a balloon. Compare the full monthly payment before and after, including taxes and insurance, and check the DSCR on the new loan.
On many Des Moines rentals, moving from an interest-only rehab loan to a 30-year amortizing loan lowers the monthly cost even though principal is now being paid down. If your current loan is already long-term, the refinance may still be worth it to remove a balloon or move the loan into an LLC.
Iowa has many community banks, and a lot of local landlords hold rentals on bank loans with three- or five-year terms and a balloon at the end. When the balloon comes due, the bank may re-price the loan, ask for updated tax returns and financial statements, or decline to renew.
A DSCR refinance looks at the property instead of your personal income. Start the process several months before the maturity date so there is time for the appraisal and title work.
Bring the note, the maturity date and any letter from the bank. If the bank has offered a renewal, compare its terms with a DSCR loan side by side before you decide.
Iowa uses abstracts and attorney title opinions rather than standard private title policies. At refinance, the abstract has to be updated and reviewed, which takes time. Start it early.
If the property is in your personal name and you want it in an LLC, the refinance is a natural time to make the change. Your attorney can prepare the deed, and the new loan closes in the LLC's name.
We use the current lease to figure the ratio. Have a signed lease and proof the tenant is paying, such as bank deposits. In the city of Des Moines, the property also needs a current rental certificate. If the rehab changed the layout or added a bedroom, make sure the certificate and the permits reflect the finished house.
If a tenant moved in recently, a few months of payment history helps. If the property is between tenants, tell us; a market rent estimate may be used on some programs, or a short delay to sign a lease may produce a better result.
Because Iowa property taxes are paid in arrears in two installments, the timing of your refinance relative to the due dates affects how much has to be collected for escrow at closing. Bring a recent tax statement so the closing figures are accurate.
If you plan to keep paying taxes yourself instead of through escrow, ask whether your program allows it; many require escrow for taxes and insurance.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the payoff letter, lease and property details through the form below, or call (877) 298-1001. We will check whether rate-and-term or cash-out fits better.
If you have several rentals coming off short-term loans around the same time, we can line up the refinances together, or look at a blanket loan once you have five or more.
A refinance that pays off your existing loan and closing costs, with no cash out, using a loan that qualifies on the property's rent.
Up to 80% LTV on some programs, as long as the rent clears the program minimum at the new payment.
Often, yes, once the property is leased. Seasoning rules are usually lighter for rate-and-term than for cash-out, but they vary by program.
Yes. A DSCR loan with a 30-year term can pay off a maturing bank note without personal income documents.
Abstract updates and the attorney's review can take longer than title work in other states. Start them as soon as you apply.
Yes. The new loan can close in the LLC's name once the deed is transferred.
Then a cash-out refinance, up to 75% LTV, is the better fit. We can compare both.
It matters to the city, and it confirms the units are legal. Keep it current.
2-3 competing quotes from 30+ capital sources. No credit pull. No commitment.
By clicking, you provide express written consent to be contacted by LendingStreet (NMLS #1734316) via SMS, phone, or email, possibly using automated technology, regarding your loan inquiry. Reply STOP to opt out. Consent is not required to obtain services. See our Privacy Policy and Terms.