With so much building in Northwest Arkansas, many investor rentals start life on a construction loan, then need a permanent home. Others were bought on bridge or hard money loans. A rate-and-term DSCR refinance replaces that short-term debt with a 30-year loan sized on rent.
In short: LendingStreet refinances 1-8 unit rentals across Fayetteville, Rogers, Bentonville, Springdale and the rest of Northwest Arkansas into DSCR loans that pay off construction, bridge, hard money or existing loans, with up to 80% LTV on some rate-and-term programs and 30-year terms available. Qualification is based on rent, with a 1.0x standard minimum DSCR and a 620 minimum credit score.
Most rate-and-term refinances here fall into a few patterns.
The goal in each case is the same: a predictable payment, no maturity date hanging over the property and a loan that qualifies on the rent you are actually collecting.
This example is illustrative and not a quote. An investor finishes a duplex in Rogers and owes $472,000 on the construction loan, paying about $4,130 a month in interest. Both units lease at $2,050, or $4,100 a month.
The duplex appraises at $655,000. A DSCR loan of $481,000 covers the payoff and about $9,000 in closing costs, about 73% LTV. Estimated principal and interest is about $3,363; with taxes of $360 and insurance of $215, the payment is about $3,938 and the DSCR is about 1.04x. The investor keeps the equity created by building and holds the duplex on a long-term loan.
| Item | Construction loan | New DSCR loan |
|---|---|---|
| Balance | $472,000 | $481,000 |
| Structure | Short-term, interest-only | 30-year amortizing |
| Monthly loan payment | $4,130 | $3,363 |
| Taxes and insurance | $575 | $575 |
| Total payment | $4,705 | $3,938 |
| DSCR at $4,100 rent | About 0.87x | About 1.04x |
A newly built rental may have been taxed as land only, or at a partial value, during construction. Once the county adds the finished improvements, the bill can rise sharply. With Arkansas's 20% assessment ratio, model taxes on the finished value rather than using the construction-year bill. Confirm the estimate with the county assessor.
Ask the assessor when the improvements will be added, so your first full-year bill is not a surprise.
Rate-and-term programs go up to 80% LTV on some programs; cash-out tops out at 75% LTV. If the goal is to retire the construction or bridge loan with the most comfortable payment, rate-and-term is usually cleaner and often faces fewer seasoning questions. If you built substantial equity and want capital for the next project, compare a cash-out refinance.
A rate-and-term refinance can also roll in closing costs, as in the example above. The exact limit on cash back to the borrower varies by program.
The new loan is underwritten on rent, so signed leases and deposit records matter. For a new build, leases signed before the refinance make the strongest file. Near campus, per-bedroom leases are fine; the rent used is what the leases support.
Appraisers will estimate market rent too. Northwest Arkansas has many newer rentals, so comparables are usually available, but unusual layouts or cottage courts may need extra support.
If a property manager handles leasing, a current rent roll from the manager is also useful, along with the move-in dates for each unit.
Start 60 to 90 days before your short-term loan matures. Construction loans often have firm maturity dates, and extensions cost money. Appraisal, title and insurance all take time, and the certificate of occupancy has to be issued before most permanent loans can close.
Appraisers in the region stay busy, so schedule early in the summer leasing season.
A low appraisal or slower lease-up does not have to sink the plan. You can bring cash for a smaller loan, extend the short-term loan to finish leasing, provide better comparables or ask about sub-1.0 DSCR programs where they fit. Talk to us early so you choose the option before the maturity date forces it.
A low appraisal is not always final. If you have better comparable sales or leases that the appraiser missed, provide them promptly.
During construction, the property was covered by a builder's risk policy. The permanent loan needs a landlord policy on the finished rental, and the carrier will ask about roof material, construction type and the wind and hail deductible.
Newer construction often prices better than older homes, which helps the ratio. Get the landlord quote before you schedule closing so the payment you planned matches the one you get, and make sure the builder's risk policy stays in force until the new policy starts.
Use the form below or call (877) 298-1001 with the address, payoff figure and current rents. Our investor loans are business-purpose loans on non-owner-occupied property.
We also refinance rentals in Little Rock, Conway, Fort Smith and elsewhere in the state. See our Arkansas rate-and-term refinance page.
If you build in more than one Arkansas market, we can look at each refinance on its own or, with five or more completed rentals, discuss a blanket portfolio loan.
Yes. Once the property is complete, has its certificate of occupancy and is leased, a rate-and-term DSCR refinance is a common exit. Start the process before the construction loan matures.
Up to 80% LTV on some programs, often enough to cover the payoff and closing costs. The final amount depends on the appraisal and the rent.
The county adds the finished improvements to the assessment. Model taxes on the finished value at the 20% assessment ratio. Confirm with the county assessor.
Signed leases make the strongest file. Vacant units lower the qualifying rent. You can also extend the short-term loan and finish leasing first.
Yes. Per-bedroom and joint student leases are fine; the rent used is what the leases support. Signed leases for the coming year make the file stronger.
Timing depends on the appraisal and title. Start 60 to 90 days before your current loan matures. The certificate of occupancy has to be issued first on a new build.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
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