Sacramento investors often renovate a midcentury house, add an ADU, and finance the work with short-term money. A DSCR rate-and-term refinance replaces that loan with a long-term payment based on the property's rent, including the ADU.
In short: Yes. LendingStreet refinances 1-8 unit rentals in the Sacramento region with DSCR rate-and-term loans that pay off hard money, a bridge loan or an existing mortgage, up to 80% LTV on some programs. The loan qualifies on the property's rent, not your tax returns, with a 620 minimum credit score, LLC borrowers and 30-year terms available.
The Sacramento region has a mix of older bungalows and Tudors in Land Park, East Sacramento and Curtis Park, post-war ranch homes in Oak Park, Del Paso Heights and North Sacramento, and newer tract homes in Natomas, Elk Grove and Rancho Cordova. Value-add investors focus on the older neighborhoods, where homes often need full systems work.
California has made it easier to add accessory dwelling units, and many Sacramento investors build a backyard ADU or convert a garage before refinancing. State government employment, UC Davis Health and Sacramento State keep rental demand broad, and the second unit can raise the rent the refinance is sized on.
Each part of the Sacramento region brings a different refinance profile.
| Area | Typical rental stock | Refinance angle |
|---|---|---|
| Oak Park, Curtis Park, Land Park | Bungalows and Tudors | Renovation plus ADU, then refinance on combined rent |
| Del Paso Heights, North Sacramento | Post-war single-family | Lower prices; rehab with short-term money first |
| Natomas, Elk Grove, Rancho Cordova | Newer tract homes | Mello-Roos assessments in many subdivisions |
| Citrus Heights, Carmichael, West Sacramento | Ranches and small multi-unit | Replace adjustable or maturing loans |
A rate-and-term refinance replaces the loan you have with a new one, without taking equity out as cash beyond small amounts allowed by the program. The new balance covers the payoff of the existing loan plus closing costs. The goal is a lower payment, a fixed rate in place of an adjustable one, or a 30-year term in place of a short-term interest-only loan.
Because it pulls no equity out, rate-and-term can go up to 80% LTV on some programs, higher than the 75% cash-out limit. Qualification runs on the debt service coverage ratio: monthly rent divided by the full payment, including principal, interest, taxes, insurance and any HOA dues.
Under Proposition 13, a property is reassessed when it changes hands and new construction, such as an ADU, is added to the assessed value. A refinance itself does not trigger reassessment. Use the tax bill that reflects your purchase and any new construction, not the prior owner's.
Many newer subdivisions in Natomas, Elk Grove, Folsom Ranch and Rancho Cordova carry Mello-Roos or other special assessments on the tax bill. They count in the payment. Insurance can also be harder to place on homes near wildfire-prone foothills or in flood zones, so get a quote before you apply.
The City of Sacramento runs a rental housing inspection program, and California's statewide rent cap and just-cause rules apply to many rentals, with exemptions that depend on the property and owner. Leases in place at refinance should reflect those rules.
Sacramento requires a permit for short-term rentals, and its rules favor hosts who live on site. Our refinances in the city are usually underwritten on long-term leases.
This example is illustrative and not a quote. An investor owns a Oak Park bungalow with a new backyard ADU, financed with a bridge loan. It appraises at $520,000, the payoff on the existing loan is $380,000, and estimated closing costs of $9,000 are rolled into the new loan, for a balance of $389,000, about 74.8% LTV. Rent is $3,400 a month.
Estimated principal and interest on a 30-year loan comes to about $2,654. Adding taxes of $450 and insurance of $160 gives a total payment of about $3,264, for a DSCR of about 1.04x, above the 1.0x standard minimum. Compared with the old loan, the monthly payment drops by about $831, and the balance now amortizes.
Two quick stress tests are worth running on any Sacramento refinance. If the appraiser's market rent came in at $3,264 instead of $3,400, the ratio would sit right at 1.0x. And holding everything else the same, this rent supports a balance of roughly $409,000 at 1.0x, which shows how much room the file has.
| Item | Bridge loan (interest-only) | New DSCR loan |
|---|---|---|
| Appraised value | $520,000 | $520,000 |
| Loan balance | $380,000 | $389,000 |
| LTV | 73.1% | 74.8% |
| Principal and interest (or interest-only) | $3,485 | $2,654 |
| Taxes, insurance and HOA | $610 | $610 |
| Total monthly payment | $4,095 | $3,264 |
| DSCR at $3,400 rent | About 0.83x | About 1.04x |
Seasoning varies by program. Some programs will use the new appraised value soon after a renovation; others cap the loan at the purchase price plus documented improvements for the first several months. Keep receipts, permits and before-and-after photos.
Start the refinance well before a hard money or bridge loan matures. Extension fees are expensive, and appraisal, title and underwriting take time. A signed lease, or a market rent estimate from the appraiser, is what the DSCR is built on.
If the property is still being leased up, some programs can use the appraiser's market rent estimate instead of a signed lease, but terms may differ. A signed lease at or above market rent is the cleanest path.
A complete file keeps the appraisal and underwriting on schedule.
Our investor loans are business-purpose loans on non-owner-occupied property. Send the address, current payoff, rent and what you want to improve, whether that is payment, term or getting off a maturity date. We run the DSCR at a few balances and come back with options, including sub-1.0 programs where they fit.
If you own five or more rentals, a blanket portfolio loan can refinance them together under one loan with one payment, qualified on the portfolio's combined cash flow.
For statewide details, see our California rate-and-term refinance page. Use the form below or call (877) 298-1001.
Yes, if it is permitted. The appraiser can count rent from a legal ADU along with the main house, which often raises the DSCR.
No. A refinance alone is not a change in ownership. Adding new construction, like an ADU, does add to the assessed value.
Yes. We refinance 1-8 unit rentals across Sacramento, Placer, El Dorado and Yolo counties when rent and value support the loan.
Up to 80% LTV on some programs, enough to pay off the existing loan and closing costs. The rent also has to cover the new payment at the program minimum.
No. The loan qualifies on the property's rent. You need a 620 or higher credit score, reserves and entity documents if the property is in an LLC.
You can lower the balance, or look at sub-1.0 DSCR programs, which accept rent slightly below the payment on some files.
Yes. LLC borrowers are standard on DSCR loans, and you sign for the loan personally where the program requires it.
It depends on the goal. Rate-and-term allows higher leverage on some programs and focuses on terms; cash-out lets you take equity out up to 75% LTV.
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