Houston has no traditional zoning, a huge rental market, and two cost lines that decide most DSCR refinances: property taxes and flood risk. A rate-and-term refinance replaces short-term or high-cost debt on a leased Houston rental with long-term financing sized on the rent.
In short: LendingStreet's DSCR rate-and-term refinance replaces short-term or older debt on a Houston rental with a long-term loan qualified on rent, not tax returns. Loans start at $150,000 with up to 80% LTV on some programs, a 1.0x standard minimum DSCR, 620 minimum credit, and LLC borrowers are standard. Houston investors build new townhomes inside the Loop, renovate older homes in the East End and Near Northside, and buy newer homes in Katy, Cypress and Pearland.
Houston investors build new townhomes inside the Loop, renovate older homes in the East End and Near Northside, and buy newer homes in Katy, Cypress and Pearland. When a bridge, construction or hard money loan matures, a rate-and-term refinance sets a long-term payment without taking cash out.
With rate-and-term, the new loan covers the payoff and closing costs and nothing more. The payoff is a predictable long-term payment instead of a looming balloon or an extension fee.
Investors buy in the Heights, Montrose, EaDo, the East End, Third Ward, Near Northside, Spring Branch, Garden Oaks, Oak Forest, Alief and Sharpstown, and across Katy, Cypress, Spring, Humble, Pearland, Sugar Land, Pasadena and Baytown. Each suburb has different school districts and tax rates.
Inside the Loop, three-story townhomes have replaced many older bungalows. Suburbs are dominated by brick homes from the 1980s onward. Elevation, foundation movement and roof age are common appraisal items.
Houston appraisals in newer suburbs have plenty of comps, but flood history affects value. Inside the Loop, new townhomes compare with other new townhomes nearby. Rent comps are plentiful across the metro, and homes in the most popular school districts lease fastest. Expect the appraiser to note elevation and any prior flooding.
If the goal is ending a short-term loan, rate-and-term is usually the cleaner path. If you want equity out for another purchase, a cash-out refinance is the tool, at a lower max LTV.
Before choosing, compare the payoff with what the appraisal is likely to show. If the loan you need is under 75% of value, either option works; if it is closer to 80%, rate-and-term may be the only fit.
| Item | Rate-and-term | Cash-out |
|---|---|---|
| Purpose | Pay off existing debt and closing costs | Pull equity out as cash |
| Max LTV | Up to 80% on some programs | Up to 75% |
| Cash to you | Little or none | Equity above the payoff |
| Seasoning | Varies by program | Varies by program; often longer |
| Best fit | Ending hard money or bridge debt | Funding the next purchase |
This example is illustrative and not a quote. An investor owns a 2015 four-bedroom in a Cypress subdivision with a MUD, appraised at $315,000, with a $205,000 balance on a short-term loan. Rent is $2,400 a month. The new loan pays off the existing balance and rolls in about $5,200 of closing costs, for a loan of $210,200, or about 67% of value.
On 30-year amortization, estimated principal and interest is about $1,434 a month. Adding taxes of about $650, insurance of about $210 and HOA dues of $50 brings the total to about $2,344, so the DSCR is about 1.02x against the 1.0x standard minimum. Taxes and flood-aware insurance make up more than a third of the payment here, which is typical for Houston suburbs.
| Item | Amount |
|---|---|
| Appraised value | $315,000 |
| Existing loan payoff | $205,000 |
| Closing costs rolled in | $5,200 |
| New loan amount | $210,200 (about 67% LTV) |
| Estimated principal and interest | $1,434 |
| Taxes, insurance and HOA | $910 |
| Total monthly payment | $2,344 |
| Monthly rent | $2,400 |
| DSCR | About 1.02x |
Texas investors pay full property taxes without a homestead exemption, and many suburban subdivisions add MUD taxes. Harris Central Appraisal District reappraises regularly and owners can protest each spring.
Texas has no state transfer tax or mortgage tax, so refinance costs are mainly title, recording, appraisal and lender fees.
Flooding drives Houston insurance. After Hurricane Harvey, the city and county tightened floodplain building rules. Flood insurance is generally required in mapped flood zones, and many investors carry it outside them too. Wind and hail add to the premium.
Houston has no zoning, but deed restrictions control land use in many neighborhoods, including leasing. The city has adopted short-term rental registration rules; check the current status before relying on short-term income. Investors should also check whether a property sits in a city limited-purpose annexation area, a MUD, or unincorporated Harris County, because that decides which rules apply to permits and rentals. Neighborhood deed restrictions can bar duplex conversions or short-term leasing even where the city would not.
Our investor loans are business-purpose loans on non-owner-occupied property. Most borrowers close in an LLC and sign for the loan personally.
The appraisal includes a rent schedule, which sets market rent. The ratio uses the lower of the lease and market rent on many programs, so a lease well above market may not count in full.
Use the form below to get a quote, or call (877) 298-1001. Share the payoff, the leases and your tax and insurance numbers, and we will run the ratio and tell you what the appraisal needs to show. Our Texas rate-and-term page covers the statewide rules.
We look at the whole picture, including whether a sub-1.0 DSCR program, a lower loan amount or a blanket loan across several rentals would fit better than a single refinance.
No, but flood insurance is generally required in mapped zones, and that premium counts in the payment.
Many subdivisions are in municipal utility districts that fund water and sewer. Their taxes count in the payment.
Yes, once it is complete and leased. Construction loans often refinance into DSCR loans this way.
Not necessarily. The property must be repaired and insurable, and the appraiser will note flood history. Disclosure rules apply to leases, too.
Seasoning rules vary by program. Some allow a refinance soon after purchase if the property is leased.
Up to 80% LTV on some programs, with loans from $150,000 and no stated maximum. The rent must cover the payment at the program minimum, usually 1.0x.
The minimum is 620. Higher scores can improve terms.
The DSCR basics are the same, but max LTV can be lower on 5-8 units and larger balances; it varies by program.
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