Sioux Falls and Rapid City investors often buy and update rentals with short-term money. A DSCR rate-and-term refinance swaps that loan for long-term financing based on the property's rent.
In short: Yes, LendingStreet offers DSCR rate-and-term refinances on 1-8 unit investment property in South Dakota, 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.
A rate-and-term refinance replaces the loan you have now with a new one, usually to get a lower rate, a longer term or a fixed payment. The new balance is sized to pay off the existing loan plus closing costs, and it can go up to 80% LTV on some programs, compared with up to 75% on a cash-out. Cash back at closing is limited to a small amount set by the program.
The loan qualifies on the debt service coverage ratio, the property's rent divided by the full monthly payment: principal, interest, taxes, insurance and any HOA dues. Standard programs look for 1.0x or better, and sub-1.0 programs exist for rentals that fall a little short. There are no W-2s or tax returns, the minimum credit score is 620, LLC borrowers are standard and 30-year terms are available.
| 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) |
Short-term loans are built to be replaced. They are interest-only, priced higher and due on a short maturity. Once the rehab is finished and a tenant is signed, a rate-and-term DSCR loan pays off that balance and puts the property on a long-term amortizing payment.
South Dakota's rental stock includes older single-family homes and duplexes in Sioux Falls, Rapid City, Aberdeen and Brookings, with newer construction on the edges of Sioux Falls. Black Hills properties include cabins and vacation homes.
Black Hills cabins and rural properties may have wells, septic and seasonal access issues that affect the appraisal. Share those details early.
South Dakota's real estate transfer fee applies to deeds on a sale, so a refinance where the owner stays the same usually avoids it. Expect lender's title insurance, county recording fees for the new mortgage and settlement charges.
Your title company will handle the payoff and recording. Ask for an estimate early.
Your term sheet will show lender costs separately from title and government charges. Confirm the final figures with your title company or closing attorney.
South Dakota has no state income tax, and property taxes are a larger part of local funding, with owner-occupied homes classified at a lower rate than rentals. Use the investor bill. Hail is common, so roof condition and the wind and hail deductible affect insurance quotes.
Every dollar of tax and insurance lowers the ratio the same way a higher rate would. If the numbers are tight, a better insurance quote or a corrected tax figure can be the difference between clearing 1.0x and falling short.
This example is illustrative and not a quote. An investor bought and renovated a Sioux Falls duplex using a hard money loan that now has a payoff of $252,000 interest-only, or about $2,415 a month in interest. The property now appraises at $360,000 and rents for $2,650 a month, with taxes and insurance of about $700 a month.
A rate-and-term loan of $260,000 covers the payoff plus $8,000 of closing costs, which is about 72.2% LTV, inside the 80% limit some programs allow. On 30-year amortization, principal and interest is about $1,774, so the total payment is about $2,474 and the DSCR is about 1.07x, 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 | $360,000 |
| Hard money payoff | $252,000 |
| Closing costs financed | $8,000 |
| New loan amount | $260,000 |
| Loan-to-value | About 72.2% |
| Principal and interest | About $1,774 |
| Taxes and insurance | $700 |
| Total monthly payment | About $2,474 |
| Monthly rent | $2,650 |
| DSCR | About 1.07x |
Seasoning varies by program. Some will refinance soon after purchase using the new appraised value; others want several months of ownership or cap the loan at purchase price plus documented improvements. On a rate-and-term refinance this matters less than on a cash-out, but it can still limit the loan if you bought recently.
The appraiser will also estimate market rent. Underwriting generally uses the lease rent, the market rent estimate or the lower of the two, depending on the program, so a signed lease at a realistic rent helps.
Sioux Falls is the state's largest rental market, with strong job growth in healthcare and financial services. Rapid City has demand from Ellsworth Air Force Base and tourism. Brookings and Vermillion have university demand.
The Black Hills, including areas near Mount Rushmore and Custer State Park, have vacation rental demand. Local rules vary, so confirm before relying on nightly income.
Having these ready before you apply keeps the appraisal and underwriting moving.
If the property has gained a lot of value and you want to fund the next purchase, a cash-out refinance up to 75% LTV may fit better. If the rent does not yet cover the payment, finishing the lease-up first, or looking at a sub-1.0 DSCR program, is usually smarter than forcing the numbers. Larger 5-8 unit properties may also see lower maximum LTV, which 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 South Dakota, starting at $150,000.
Only a small amount set by the program. If you want to pull equity out, a cash-out refinance up to 75% LTV is the better option.
It depends on the program. Some use the new appraised value soon after purchase; others base the loan on purchase price plus documented improvements until a seasoning period passes.
Generally not. It is tied to deeds on a sale. A refinance where the owner stays the same usually avoids it.
Possibly. Seasonal access, wells and septic can affect the appraisal. Share those details up front.
Standard programs look for 1.0x, meaning rent at least equals the full payment. Sub-1.0 programs exist for rentals that fall slightly short.
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.
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