A rental financed with a bridge or hard money loan is built for a short stay. Once the work is done and the tenant is in, a rate-and-term DSCR refinance replaces that loan with long-term financing that qualifies on the rent.
In short: LendingStreet's rate-and-term DSCR refinance pays off the existing loan on a Rochester-area 1-8 unit rental and replaces it with long-term financing, with little or no cash back. It goes up to 80% LTV on some programs, uses the property's rent instead of your income, requires a 1.0x standard minimum DSCR and offers 30-year terms. Rochester investors use it most after a rehab, a lease-up or when an older loan is maturing.
Rate-and-term refinances cover the payoff and closing costs. Rochester investors use them to:
The biggest benefit is removing a maturity date. Bridge and hard money loans typically run for months, not years, and an extension can cost money or require new terms. A long-term DSCR loan lets you hold the property through the medical hiring cycles that drive Rochester rents, without a payoff deadline hanging over the investment.
This example is illustrative and not a quote. An investor bought a dated home in Kasson with a bridge loan, renovated it and leased it to a family for $2,150 a month. The bridge balance is $222,000, with an interest-only payment of $1,850. The home appraises at $305,000. Taxes are $300 a month and insurance is $135.
A rate-and-term refinance of $228,000 pays off the bridge loan and about $6,000 of closing costs, about 75% LTV. Estimated principal and interest is about $1,575, the total payment is about $2,010 and the DSCR is about 1.07x. The payment drops from about $2,285 to about $2,010, and the balance now shrinks every month.
| Item | Bridge loan | DSCR refinance |
|---|---|---|
| Balance | $222,000 | $228,000 |
| Principal and interest | $1,850 (interest only) | $1,575 |
| Taxes and insurance | $435 | $435 |
| Total payment | $2,285 | $2,010 |
| DSCR at $2,150 rent | 0.94x | 1.07x |
The underwriter wants a finished, leased property. Before you apply, close out permits for the renovation, make sure any rental license or registration the city requires is in place and collect signed leases and proof of the security deposit and first rent payment.
If the property is in Kasson, Byron, Stewartville or another nearby city, check that city's rental requirements, which may differ from Rochester's.
Appraisers will compare your finished home to recent sales nearby, so give them a list of everything the renovation included: new roof, windows, furnace, kitchen, baths and flooring, with dates and costs. Photos from before the work can help show the scope. The stronger the support for value, the more room you have between the loan amount and the LTV limit.
If you bought recently, some programs size the loan on the lower of your total cost or the appraised value until the property is seasoned. A rate-and-term refinance only needs to cover your payoff, so it often works when a cash-out would not. Rate-and-term reaches up to 80% LTV on some programs, compared with 75% for cash-out.
If the appraisal comes in above your cost, you may later qualify for a cash-out refinance once the property is seasoned. Some investors refinance rate-and-term first to get out of short-term debt quickly, then return for a cash-out when the seasoning period has passed. Ask how that path works for your property.
Newer Rochester homes can carry higher taxes and HOA dues, and older homes can carry higher insurance after hail claims. If the ratio comes in below 1.0x, you can pay down part of the balance at closing, choose a smaller loan or look at a sub-1.0 DSCR program where it fits. Run your numbers in our DSCR calculator first.
Shopping your insurance can also help. A new roof installed during the rehab often lowers the premium.
If you set the property up as a furnished rental for traveling staff or patient families, tell us before you apply. Some programs qualify on projected short-term revenue, while others use long-term market rent. The city's short-term and furnished rental rules apply, and a compliant operation is part of the review.
Mid-term furnished rentals for traveling staff fall between a standard lease and a nightly rental. Underwriting treatment varies, so share your booking history, average stay length and the platform or agency you use. That detail helps decide which program fits before the appraisal is ordered.
Expect title insurance, appraisal and recording fees, plus Minnesota's mortgage registry tax on the new loan amount. Olmsted County property taxes are paid in May and October halves, and your escrow will be set up around that schedule at closing.
If you finished several properties with short-term debt, refinancing them one at a time works, and once you have five or more, a blanket portfolio loan can combine them into one loan with one payment and release provisions for future sales. Our investor loans are business-purpose loans on non-owner-occupied property.
Send your payoff statement, lease, tax bill and insurance through the form below or call (877) 298-1001. We will size the refinance and compare the new payment to what you pay now. See also our Minnesota rate-and-term refinance page.
The new loan pays off existing debt and closing costs, with little or no cash back, and qualifies on the property's rent.
Up to 80% LTV on some programs. Cash-out refinances are capped at 75%.
Yes, once the property is finished and leased. Some programs use cost instead of appraised value until seasoned. Signed leases and finished permits help the most.
No. DSCR loans qualify on the property's rent. The loan qualifies on the property's rent, so self-employed investors do not need to document income.
Yes. Paying off bridge, hard money and fix and flip loans is one of the most common uses.
Options include a smaller loan, a paydown at closing or a sub-1.0 DSCR program where it fits. A new roof or lower insurance quote can also lift the ratio.
Yes, across Olmsted and Dodge counties and the rest of Minnesota. We also lend in Stewartville, Pine Island and other nearby towns.
No. Our investor loans are business-purpose loans on non-owner-occupied property. Each city sets its own rental rules, so confirm compliance first.
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