The renovation is done, the tenant has signed, and the short-term loan that paid for it all is still charging interest every month. For most Durham investors, the rate-and-term refinance is the step that turns a project into a long-term rental.
In short: LendingStreet offers DSCR rate-and-term refinances on Durham rentals to pay off hard money, bridge loans or an existing mortgage and replace it with a long-term loan qualified on the rent. Rate-and-term goes up to 80% LTV on some programs, loans start at $150,000, the standard minimum DSCR is 1.0x and the minimum credit score is 620. No W-2s or tax returns are required.
A rate-and-term refinance replaces an existing loan with a new one without taking significant cash out. The new balance covers the payoff, closing costs and little else. Because no equity is being pulled, programs often allow higher leverage than a cash-out refinance.
In Durham, the most common reasons are ending a hard money or bridge loan after a renovation, moving off a balloon or adjustable loan, or replacing a loan held in your personal name with one held in your LLC.
Each situation calls for slightly different paperwork. The table shows what we usually look at.
| Situation | What you are replacing | What we focus on |
|---|---|---|
| Finished rehab in East Durham or Old North Durham | Hard money or fix and flip loan | Signed lease, after-repair appraisal, rehab receipts |
| Stabilized small multi-unit | Bridge loan used during lease-up | Rent roll, unit leases, current tax bill |
| Long-held rental near Duke | Older mortgage with a balloon or adjustment | Payoff letter, lease, insurance |
| Seller-financed purchase | Owner-carry note | Note terms, payment history, title |
This example is illustrative and not a quote. An investor bought and renovated a house in Old North Durham with a short-term rehab loan. The payoff is $318,000, and the interest-only payment on it is about $3,048 a month. The renovated house appraises at $440,000 and is leased for $2,650 a month.
A rate-and-term refinance of $318,000 is about 72% LTV. Estimated principal and interest on a 30-year loan is about $2,169. With taxes of $340 and insurance of $130, the total payment is about $2,639, a DSCR of about 1.00x.
The investor now has a fixed long-term payment, starts paying down principal, and no longer faces a maturity date on the short-term loan.
Most programs want a signed lease, or at least a market rent estimate the appraiser supports, and a finished property. In Durham, where many leases start in summer around the Duke calendar, finishing a rehab in spring and signing a lease before the August rush often lines up the refinance well. Refinancing too early, before the lease or the last punch-list items, can lead to a lower appraisal and a lower loan.
Watch your short-term loan's maturity date and extension fees. Start the refinance 45 to 60 days before you need it, especially if title has to be updated by a North Carolina closing attorney.
Durham's high prices relative to rents mean some refinances do not clear 1.0x at the full payoff amount. Options include paying down part of the balance at closing, using a sub-1.0 DSCR program where it fits, or waiting until the rent reflects the renovation.
Check the current Durham County tax bill rather than the one from when you bought. A higher post-revaluation assessment can change the ratio more than the rent does.
If the appraisal comes in well above your payoff, you may be able to take some equity out with a cash-out refinance instead. Cash-out is capped at 75% LTV, and seasoning rules can limit it on recent purchases. Rate-and-term is simpler when the goal is to replace a loan, not to pull cash.
Rate-and-term also tends to be the cleaner choice right after a BRRRR-style renovation, because the appraisal and the payoff are both fresh and the file does not have to explain a large cash disbursement. Some investors refinance rate-and-term first and come back for a cash-out later, once seasoning is met and the rent has had time to rise.
If you plan to keep several Durham rentals for the long term, consider how each refinance fits the whole portfolio. Staggering maturities and keeping each loan's ratio healthy gives you more room to buy, sell or cash out later.
A refinance moves fastest when the file is complete on day one.
Some Durham rentals were bought from long-time owners who carried the financing themselves, or with money from a private lender. These notes often have balloon dates that arrive sooner than expected. A rate-and-term DSCR refinance can pay off the note before the balloon comes due.
Bring the note, the payment history and the recorded deed of trust. Title needs to show the existing lien clearly so the closing attorney can arrange the payoff and release. If the note holder is a relative or a former owner, make sure they are ready to sign the release at closing.
Investors who completed a string of renovations often have more than one short-term loan maturing in the same year. Refinancing each property into its own DSCR loan keeps them separate, which can help if you later sell one. A blanket portfolio loan combines five or more into one loan and one payment, with release provisions when you sell. Which is better depends on your plans for each property.
Send the address, current payoff, estimated value and rent. We will show you the new payment and ratio. Use the form below or call (877) 298-1001.
Up to 80% LTV on some programs, subject to the rent covering the new payment at the program minimum.
Yes, once the work is complete and the property is leased or ready to lease. Seasoning rules vary by program.
A signed lease helps. Some programs can use a market rent estimate from the appraisal, but a lease usually produces a cleaner file.
No. We qualify on the property rent and your credit, with a 620 minimum score.
Often, yes. LLC borrowers are standard. Discuss titling with us and your attorney before closing.
It depends mostly on the appraisal and title. Starting 45 to 60 days before your current loan matures gives room for both.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
Vacancies lower the rent we can count. If units are empty, it usually pays to lease them first, or to extend the short-term loan briefly, before refinancing.
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