Not every refinance is about a lower payment. On Oahu, many investors refinance to get rid of a balloon date, an adjustable payment or a short-term loan, and lock in a 30-year term the rent can support.
In short: LendingStreet refinances 1-8 unit rentals in Honolulu and across Oahu with DSCR rate-and-term loans that pay off hard money, bridge loans, seller financing, balloon notes and other existing debt, qualified on rent. Rate-and-term goes up to 80% LTV on some programs, but on Oahu the rent usually sets the loan size. Loans start at $150,000 and 30-year terms are available.
Rate-and-term refinances on Oahu tend to come from a handful of situations.
In each case the existing loan has a date or a payment change you do not control. A DSCR refinance trades that for a long-term fixed schedule, qualified on what the property earns.
Because Oahu prices are high, some sellers carry part or all of the financing, often with a short term and a balloon payment. That works until the balloon date, when the buyer needs a new loan. A DSCR refinance can pay off the seller using the property's rent to qualify, without relying on your personal income documents.
Start well before the balloon date. Appraisals, title work and escrow on Oahu take time, and you want room to resolve any issues.
Review the note for any clause that requires notice before an early payoff, and confirm how the seller wants to receive funds. A clean payoff letter from the seller keeps escrow on schedule and avoids last-minute changes to the closing figures.
This example is illustrative and not a quote. An investor bought a duplex with seller financing. The $640,000 balance is interest-only, with estimated payments of about $4,267 a month, and a balloon is due in six months. The units rent for $3,100 and $2,700, for $5,800, and the property appraises at $1,000,000.
A DSCR loan of $650,000 pays off the seller and covers closing costs, about 65% of value. Estimated principal and interest on a 30-year loan is about $4,434. With $320 in taxes and $240 in insurance the payment is about $4,994, a DSCR of about 1.16x. The new payment is slightly higher than the old one, about $4,827, but it amortizes, and the balloon is gone.
If the new payment had come in below 1.0x, the investor could have brought cash to reduce the loan, used a sub-1.0 program or timed the refinance after a rent increase. Running these numbers months before the balloon gives you room to choose.
| Item | Seller financing | DSCR refinance |
|---|---|---|
| Loan balance | $640,000 | $650,000 |
| Loan payment | $4,267 interest-only | $4,434 principal and interest |
| Taxes and insurance | $560 | $560 |
| Total monthly | $4,827 | $4,994 |
| Balloon | Due in 6 months | None; 30-year term |
Rate-and-term pays off existing debt and closing costs without significant cash to you. It can allow higher leverage than cash-out on some programs, up to 80% LTV compared with 75%. On Oahu, that extra room rarely matters because the rent limits the loan first, but it can help on properties with strong rents, like a well-located duplex or a home with a permitted ohana.
If you have both a first loan and a second loan or line of credit on the property, a rate-and-term refinance can often pay off both, as long as the second was used to buy or improve the property. Tell us how each loan was used.
If you bought with hard money or a bridge loan and renovated, refinance once the units are leased. Have the permits for the work closed out, since unpermitted improvements may not count toward value. Keep invoices and photos to show the appraiser what was done.
Some programs require a minimum ownership period before using the new appraised value rather than your cost. Rules vary by program.
Interest-only hard money is expensive to keep once a property is stable, so do not wait for the maturity date. Each month of delay is money that could have gone to principal on a long-term loan.
For a condo, the building has to qualify too. Leasehold units are not eligible on many programs, and buildings with low reserves, litigation or large pending special assessments can be harder. AOAO dues count in the payment. Gather the AOAO's budget, reserve study and insurance certificate early.
Some older buildings also need life safety upgrades under the city's high-rise fire ordinance, which can lead to assessments that affect eligibility.
Insurance premiums in Hawaii have risen, and some carriers have cut back on new policies. Get a current landlord policy and hurricane policy quote before you apply. Property taxes for a rental are in the non-homeowner class; we use the current bill in the ratio.
Hawaii escrows can take longer than mainland closings, especially when a seller-held note needs a formal payoff and release. Ask the noteholder for a written payoff early so escrow can record the release promptly.
If the rent does not support a loan large enough to pay off the existing debt, you have options: bring cash to closing, look at a sub-1.0 DSCR program, or refinance several properties together on a blanket loan so stronger rentals help carry a weaker one.
A blanket loan can also hold rentals in more than one state on some programs, which helps Oahu investors who also own mainland properties with stronger cash flow.
Send the address, payoff statement or note terms, leases, tax bill and insurance through the form below, or call (877) 298-1001. Our investor loans are business-purpose loans on non-owner-occupied property. We will compare your current loan with a DSCR refinance and show the balloon-free payment.
Yes. A DSCR loan can pay off a seller-held note, qualifying on the property's rent.
Not always. On Oahu, the main benefit is often removing a balloon or adjustable payment and getting a fixed 30-year term.
Up to 80% LTV on some programs, but the rent must cover the payment at the program's DSCR minimum.
Leasehold units are not eligible on many programs. Ask about the building.
Several months ahead, to allow for appraisal, title and escrow.
Unpermitted work may not count in the value. Close out permits before refinancing if you can.
Yes; max LTV can be lower on 5-8 units and varies by program.
No. These are business-purpose loans on non-owner-occupied property.
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