The rehab is finished, the city signed off and the tenants are in. Now the expensive short-term loan has to go. A rate-and-term DSCR refinance replaces it with a 30-year payment the rent can carry.
In short: LendingStreet refinances 1-8 unit Rochester rentals out of hard money, bridge loans, maturing balloon notes and other existing loans with a DSCR loan that qualifies on rent. Rate-and-term refinances go up to 80% LTV on some programs, loans start at $150,000, and 30-year terms are available. The goal is a lower payment, a fixed term or both, without pulling extra cash.
Most rate-and-term refinances we see in Monroe County fall into a few groups.
Each of these has the same problem: the loan was meant to be temporary. Once the property is leased and stable, keeping short-term debt usually costs more and adds the risk of a maturity date you have to meet.
A rate-and-term refinance pays off the existing loan plus closing costs and does not put significant cash in your pocket. Because it is lower risk than a cash-out, leverage is higher on some programs, up to 80% LTV versus 75% on cash-out.
If you want equity back for the next deal, see our Rochester cash-out page instead.
A rate-and-term refinance can also roll closing costs into the new loan, so you are not writing a large check to move from short-term to long-term debt.
This example is illustrative and not a quote. An investor bought and renovated a three-unit building using a $210,000 interest-only hard money loan, with estimated payments of about $2,100 a month. Now each unit rents for $1,175, for $3,525 a month, and the building appraises at $300,000.
A DSCR loan of $216,000 pays off the hard money and the closing costs, about 72% of value. Estimated principal and interest on a 30-year loan is about $1,474. With $560 in taxes and $210 in insurance, the payment is about $2,244, down from about $2,870 with the hard money, and the DSCR is about 1.57x.
The table assumes the same taxes and insurance before and after. In practice, your insurance may change when the property moves from a renovation policy to a standard landlord policy, so get the new quote.
| Item | Hard money | DSCR refinance |
|---|---|---|
| Loan balance | $210,000 | $216,000 |
| Monthly loan payment | $2,100 interest-only | $1,474 principal and interest |
| Taxes and insurance | $770 | $770 |
| Total monthly | $2,870 | $2,244 |
| Term | Short, maturing | 30 years available |
In the City of Rochester, a rental needs a current certificate of occupancy, so finish the inspection before you apply. Have signed leases for every unit, or expect the appraiser to estimate market rent for any vacant ones.
Keep receipts and photos of the rehab. They help the appraiser see what was done, which supports the value and the loan size.
If any unit is still being turned, the appraiser will use market rent for it. A unit rented well below market can also hold down the ratio, so consider timing the refinance after leases renew.
Insurance should also switch from a builder's risk or vacant policy to a standard landlord policy before closing. Ask your agent to have the new policy ready so it does not delay the payoff.
Many Rochester investors financed rentals through local banks and credit unions with five- or seven-year terms and a balloon at the end, or a rate that resets. When that date gets close, the choice is to renew on the bank's new terms or refinance.
A DSCR loan can replace that note with a 30-year term that qualifies on rent, not on your personal income or the bank's view of your global cash flow. Start the process a few months before the maturity date so you are not negotiating under a deadline.
Refinances in New York pay mortgage recording tax on the new loan. In some cases, a CEMA can assign the existing mortgage and limit the tax to any new money, but many short-term lenders and investor programs do not use it. Ask your attorney early, since it affects how much you need to roll into the loan.
Some programs have minimum ownership periods before the appraised value can be used instead of your purchase price plus rehab cost. Rules vary by program, so tell us when you bought and what you spent, and we will match you to the right one.
If you are refinancing soon after buying, keep your closing statement, the rehab invoices and before-and-after photos together. That package helps show why the property is worth more today than what you paid for it.
A major renovation can lead to a higher assessment in the city or in your town. If you expect an increase, budget for it now. The refinance is sized on today's bill, but your cash flow will be measured on next year's.
Ask the assessor's office whether a building permit on file has triggered a review. Permits are one way assessors learn about renovations, so a reassessment after a large rehab should not come as a surprise.
Send the address, payoff letter, leases and tax bills 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 payment to the new one.
If you are not sure whether rate-and-term or cash-out makes more sense, send both goals and we will show the numbers side by side.
Yes. That is the most common rate-and-term refinance we see. The DSCR loan pays off the hard money once the property is leased.
Up to 80% LTV on some programs, enough to pay off the existing loan and closing costs.
For a city rental, yes. A property that cannot legally be rented is hard to refinance on rent.
Yes. The minimum score is 620, and stronger credit can improve terms.
Yes. Max LTV can be lower on 5-8 units and varies by program.
Usually, if you are coming from interest-only short-term debt at a higher cost. Your new payment includes principal, so compare the full amounts.
A payoff statement, leases, tax bills, insurance, LLC documents and bank statements for reserves.
Yes. Starting a few months early gives you time to compare options before the balloon is due.
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