Many Madison landlords financed their rentals through local banks on short amortizations with balloons after five or ten years. When the balloon comes due, or when a bridge or hard money loan needs to be paid off, a DSCR rate-and-term refinance offers a long-term payment built on the rent.
In short: LendingStreet refinances 1-8 unit rentals in Madison and across Dane County with DSCR rate-and-term loans that pay off bank balloons, bridge, hard money or other existing loans, with up to 80% LTV on some programs and 30-year terms available. Qualification is based on the property's rent, with a 1.0x standard minimum DSCR and a 620 minimum credit score. No W-2s or tax returns are needed.
A rate-and-term refinance pays off existing debt and closing costs with little or no cash back. It is the right tool when you want a lower or more predictable payment, a longer term or relief from a maturity date, and you do not need to pull equity out. If you want cash as well, compare a cash-out refinance, which goes up to 75% LTV.
In Madison, the most common triggers are a bank balloon coming due, a short amortization that makes the payment too high for the rent, and short-term debt left over from a purchase or renovation. Some owners also refinance to remove a partner, change the borrowing entity or consolidate a property into an LLC.
A loan amortized over 15 or 20 years carries a much larger payment than the same balance over 30 years. With Madison's high property taxes already taking a big share of rent, a short amortization can push the ratio below 1.0x even when the property is well run. Moving to a 30-year term is often the single biggest improvement in monthly cash flow.
Bank loans also tend to be tied to your personal finances and banking relationship, with covenants and personal financial statements reviewed at renewal. A DSCR loan qualifies on the property's rent instead, which appeals to investors whose tax returns show heavy depreciation or who want each property to stand on its own.
This example is illustrative and not a quote. An investor owes $372,000 on a local bank loan for a three-unit building in Tenney-Lapham, with about 15 years left on the amortization and a balloon due this year. The current principal and interest payment is about $3,609. All three units lease at $1,550, for $4,650 a month. Taxes are $1,050 and insurance is $210 a month.
The building appraises at $590,000. A new DSCR loan of $378,000, about 64% LTV, pays off the bank and about $6,000 in closing costs. Estimated principal and interest falls to about $2,643, and DSCR improves from about 0.96x to about 1.19x.
| Item | Current bank loan | DSCR refinance |
|---|---|---|
| Loan balance | $372,000 | $378,000 |
| Amortization | About 15 years remaining | 30 years available |
| Principal and interest | $3,609 | $2,643 |
| Taxes and insurance | $1,260 | $1,260 |
| Total monthly payment | $4,869 | $3,903 |
| DSCR at $4,650 rent | About 0.96x | About 1.19x |
| Balloon | Due this year | None on a 30-year term |
Investors who bought a building with vacancies on a bridge loan, or renovated with hard money, can refinance once the units are leased. In Madison, that often means waiting until leases for the August 15 cycle are signed, so the refinance can use full rent.
Interest-only short-term loans are easy to carry for a few months but expensive over time, and extension fees add up. Start the refinance 60 to 90 days before maturity to leave room for the appraisal and title work. The same advice applies to bank balloons: ask for the bank's renewal terms early so you can compare them with a DSCR refinance.
Many programs use the lower of actual lease rent and the appraiser's market rent. Signed leases for the coming year, a rent roll and deposit history help. If you refinance in spring or summer, have next year's leases ready, since Madison landlords often sign them months in advance.
If a unit is vacant at the time of the appraisal, the appraiser's market rent estimate will carry more weight. A clean, ready-to-lease unit with recent comparable leases nearby supports a stronger estimate.
The City of Madison updates assessments frequently, and the refinance will be underwritten on your actual current tax bill. If your assessment rose recently, use the new figure. Suburban municipalities have their own assessors and rates, so check those separately.
If your tax bill is very high relative to rent, a rate-and-term refinance may still leave the ratio tight. In that case, a sub-1.0 DSCR program or a small paydown at closing can make the numbers work.
Wisconsin has no mortgage recording tax and the transfer fee applies to sales, not refinances. A rate-and-term refinance mostly costs title insurance, appraisal, recording and lender fees, which are usually small enough to roll into the new loan without hurting the ratio much.
Some programs size a refinance soon after purchase on cost rather than full appraised value; our seasoning guide explains the common rules. If waiting a few weeks changes how the loan is sized, we can show both versions so you can decide.
Send LendingStreet the address, payoff letter or statement, leases and photos. We will show the new payment and ratio at a few loan amounts. Statewide information is on our Wisconsin rate-and-term page. If your balloon date is close, tell us the date so we can plan the appraisal and closing around it.
Yes. A DSCR rate-and-term refinance can pay off a maturing bank loan and replace it with a 30-year term qualified on rent rather than personal income.
Up to 80% LTV on some programs, with lower limits on some 5-8 unit properties and larger balances. It varies by program.
Usually because of amortization. Moving from a 15- or 20-year amortization to a 30-year term spreads principal over more years, which lowers the monthly payment and improves the ratio.
Often, yes. Madison leases commonly turn over around August 15, and signed leases for the coming year document the rent.
No. Wisconsin has no mortgage recording tax. Expect title, appraisal, recording and lender fees, which are usually modest enough to roll into the new loan.
No. Qualification is based on the property's rent, your credit (620 minimum) and reserves, not on your personal income or the business financial statements a bank may ask for at renewal.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
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