New Jersey investors often buy two- to four-family houses with bridge or hard money, renovate them and lease them up. A DSCR rate-and-term refinance replaces that short-term loan with long-term financing sized on the rent.
In short: Yes, LendingStreet offers DSCR rate-and-term refinances on 1-8 unit investment property in New Jersey, up to 80% LTV on some programs, qualifying on the property's rent instead of your income. It is the standard way to pay off a hard money, bridge or higher-rate loan and move into a long-term payment, with cash back limited to a small allowance. The rent has to cover the new payment at 1.0x on standard programs, the minimum credit score is 620, LLC borrowers are standard and loans start at $150,000.
With a rate-and-term refinance, the new loan pays off the old one and covers closing costs, and that is about it. You are not pulling equity out, so programs allow higher leverage: up to 80% LTV on some programs, versus up to 75% for cash-out. Any cash you receive at closing is capped at a small amount that varies by program.
Qualification runs on the property, not your income. The debt service coverage ratio compares monthly rent with the new payment, including taxes, insurance and HOA dues, and standard programs want at least 1.0x. You need a 620 or higher credit score, but no tax returns or W-2s, and the loan can close in your LLC on a 30-year term.
| Rate-and-term | Cash-out | |
|---|---|---|
| Max LTV | Up to 80% on some programs | Up to 75% |
| Cash to borrower | Small allowance only | Equity above payoff |
| Typical goal | Lower rate or payment, exit short-term debt | Pull equity for the next deal |
| Qualifies on | Rent (DSCR) | Rent (DSCR) |
Hard money and bridge loans are interest-only and short, and the clock keeps running after the work is done. The usual exit is a refinance into a DSCR loan once the property is leased, which turns a maturity date into a 30-year payment.
North Jersey's rental stock is heavy on older two- to four-family houses in Jersey City, Newark, Paterson, Elizabeth and nearby towns. South and Central Jersey add row homes and single-family rentals around Camden, Trenton and the suburbs, and the Shore has seasonal properties.
Many New Jersey municipalities require a certificate of occupancy or rental inspection when tenants change, and some cities have local rent control ordinances. Have those items squared away before you refinance, since they can affect both the appraisal and the lease review.
New Jersey's realty transfer fee and its separate tax on higher-priced sales above $1 million are tied to sales, so a straight refinance where the owner stays the same usually avoids both. You will still pay lender's title insurance, county recording fees and settlement charges.
New Jersey closings often involve attorneys and a title company. If there are open municipal liens, unpaid water or sewer charges or open permits from the renovation, title will flag them, so close out permits before the refinance.
Get a written closing estimate early, since these items can usually be financed into the new loan as long as the total stays within the program's LTV.
New Jersey has some of the highest property taxes in the country, and on a DSCR loan the full bill sits in the payment. On many New Jersey rentals, taxes are the single largest line after principal and interest. Flood zones along the Shore and in parts of North Jersey require flood insurance, which counts too.
Lenders escrow these costs and count them in the payment, so an outdated tax bill or a stale insurance quote can make the ratio look better than it will be. Use current figures from the start.
This example is illustrative and not a quote. An investor bought and renovated a Newark-area two-family using a hard money loan that now has a payoff of $438,000 interest-only, or about $4,198 a month in interest. The property now appraises at $600,000 and rents for $4,600 a month, with taxes and insurance of about $1,450 a month.
A rate-and-term loan of $450,000 covers the payoff plus $12,000 of closing costs, which is about 75.0% LTV, inside the 80% limit some programs allow. On 30-year amortization, principal and interest is about $3,100, so the total payment is about $4,550 and the DSCR is about 1.01x, above the 1.0x standard minimum. The investor stops paying short-term interest and starts paying down principal, with no cash taken out.
| Item | Amount |
|---|---|
| Appraised value | $600,000 |
| Hard money payoff | $438,000 |
| Closing costs financed | $12,000 |
| New loan amount | $450,000 |
| Loan-to-value | About 75.0% |
| Principal and interest | About $3,100 |
| Taxes and insurance | $1,450 |
| Total monthly payment | About $4,550 |
| Monthly rent | $4,600 |
| DSCR | About 1.01x |
How soon you can refinance depends on the program. Some use the new appraised value right away, while others look at purchase price plus documented rehab costs until you have owned the property for a set period. Rate-and-term loans tend to be more flexible here than cash-out.
Rent is usually taken from the signed lease and checked against the appraiser's market rent estimate. A lease well above market may be cut back to the estimate, so price the lease realistically.
Hudson and Essex counties, including Jersey City and Newark, are the core of the state's multi-family rental market, with demand from commuters into New York City. Paterson, Elizabeth and the surrounding towns offer older two- and three-family stock at lower prices.
The Jersey Shore has a large seasonal rental market, and some towns regulate short-term rentals. In South Jersey, Camden County suburbs and the Trenton area draw investors looking for lower entry prices.
Having these ready before you apply keeps the appraisal and underwriting moving.
Rate-and-term is the right tool when the goal is a lower, longer payment. If you want equity out, a cash-out refinance up to 75% LTV is the better fit. If a unit is still vacant, it often pays to finish leasing before you apply. On 5-8 unit buildings, maximum LTV can be lower and varies by program.
Yes. Our investor loans are business-purpose loans on non-owner-occupied property, and we offer DSCR rate-and-term refinances on 1-8 unit rentals across New Jersey, starting at $150,000.
No. The loan qualifies on the property's rent. You need a 620 or higher credit score, reserves and entity documents if you use an LLC.
Yes. LLC borrowers are standard. We will ask for the operating agreement, formation documents and good standing for the entity.
Usually not. The realty transfer fee and the separate tax on sales above $1 million are tied to sales, not refinances where the owner stays the same. Confirm with your title company.
Where a local ordinance limits rent increases, the appraiser and underwriter will look at the actual lease rent. The ratio has to work at the rent you can legally collect.
Yes. Residential DSCR programs cover 1-8 units. Maximum LTV may be lower on 5-8 units and varies by program.
Up to 80% LTV on some programs. Maximum LTV can be lower on 5-8 unit properties and larger balances, and it varies by program.
2-3 competing quotes from 30+ capital sources. No credit pull. No commitment.
By clicking, you provide express written consent to be contacted by LendingStreet (NMLS #1734316) via SMS, phone, or email, possibly using automated technology, regarding your loan inquiry. Reply STOP to opt out. Consent is not required to obtain services. See our Privacy Policy and Terms.