Many St. Paul rentals start life on short-term money: a hard money loan on a Frogtown duplex, a bridge loan on a vacant East Side fourplex. Once the work is done and the units are leased, a rate-and-term DSCR refinance replaces that debt with a long-term loan.
In short: LendingStreet's rate-and-term DSCR refinance pays off an existing loan on a St. Paul 1-8 unit rental and replaces it with long-term financing that qualifies on the property's rent. Rate-and-term goes up to 80% LTV on some programs, the standard minimum DSCR is 1.0x and 30-year terms are available. The goal is a lower or more stable payment, not cash in your pocket.
Rate-and-term means the new loan pays off existing debt and closing costs, with little or no cash back. In St. Paul it is most often used to:
This example is illustrative and not a quote. An investor renovated a Frogtown duplex and leased both units for $2,500 a month in total. The hard money balance is $240,000, with an interest-only payment of $2,200 a month. The property appraises at $340,000. Taxes are $370 a month and insurance is $160.
A rate-and-term refinance of $246,000 covers the payoff and about $6,000 of closing costs, about 72% LTV. Estimated principal and interest is about $1,699, the total payment is about $2,229 and the DSCR is about 1.12x. The total monthly payment falls from about $2,730 to about $2,229, and every payment now reduces the balance.
| Item | Hard money loan | DSCR refinance |
|---|---|---|
| Loan balance | $240,000 | $246,000 |
| Monthly principal and interest | $2,200 (interest only) | $1,699 |
| Taxes and insurance | $530 | $530 |
| Total payment | $2,730 | $2,229 |
| DSCR at $2,500 rent | 0.92x | 1.12x |
The appraisal and the underwriter want to see a finished, leased property. In St. Paul that also means the rental has the inspections it needs under the Fire Certificate of Occupancy program, and any vacant building registration has been cleared. Get those done before you apply, because open city items can hold up the appraisal or the closing.
Signed leases at market rent are the strongest evidence. If one unit is still vacant, ask whether the program can use market rent for it.
St. Paul's rent stabilization ordinance generally limits increases on covered units to 3% a year, with exceptions. Since your refinance qualifies on the rent in place when you apply, set the first leases carefully and confirm with the city how the rules treat units that were vacant during a renovation.
If you bought recently, some programs size the loan on the lower of appraised value or your total cost until the property is seasoned. Because a rate-and-term refinance only needs to cover the payoff, it often works even when cash-out would not. Rate-and-term reaches 80% LTV on some programs, compared with 75% for cash-out.
Expect title insurance, appraisal, recording fees and Minnesota's mortgage registry tax on the new loan, which applies to the amount of new debt. Your title company can estimate it from the loan amount. Ramsey County property taxes are paid in May and October halves, so ask how escrow will be set up at closing.
Older St. Paul duplexes with owner-paid heat sometimes produce a thin ratio after a high non-homestead tax bill. Options include a slightly smaller loan, paying down part of the balance at closing, or a sub-1.0 DSCR program where it fits. Run the numbers in our DSCR calculator first.
Short-term loans are built for speed, not for holding. Interest-only payments mean the balance never shrinks, and a maturity date forces a decision on the lender's schedule rather than yours. Moving a finished St. Paul rental to a 30-year DSCR loan removes that deadline and starts paying down principal every month.
It also simplifies your planning. With a fixed long-term payment, you know what the property must earn each month, and you can measure cash flow after heat, water, snow removal and repairs. That clarity matters in St. Paul, where rent growth on covered units is limited by the stabilization ordinance and operating costs on older buildings can rise quickly.
If you own several finished rentals on short-term debt, ask about refinancing them together. Once you have five or more, a blanket portfolio loan can replace them with one loan and one payment.
Insurance is one more item to settle before closing. A property that was insured under a builder's risk or vacant policy during the rehab needs a standard landlord policy once tenants move in, and the new lender will need to be named on it. Older St. Paul homes with updated electrical, plumbing and heating often quote better than they did before the work, so share the renovation details with your agent. A lower premium raises the DSCR and can make the difference on a file that is close to the 1.0x line.
Send your payoff statement, leases, insurance and tax bill through the form below or call (877) 298-1001. We will size the refinance and compare your current payment to the new one. Our investor loans are business-purpose loans on non-owner-occupied property. See also our Minnesota rate-and-term page.
A refinance that pays off existing debt and closing costs on a rental, qualifying on the property's rent, with little or no cash back. It is the usual next step after a rehab or a lease-up on short-term debt.
Up to 80% LTV on some programs. Cash-out refinances top out at 75%.
Yes, once the property is finished and leased. Some programs use cost instead of appraised value until the property is seasoned.
It helps. Resolve Fire Certificate of Occupancy items and any vacant building registration before the appraisal.
No. DSCR loans qualify on the property's rent, not W-2s or tax returns. Our investor loans are business-purpose loans, so the property's income is what matters.
Ask about using market rent for the vacant unit. Signed leases are always stronger. A unit that is leased but not yet occupied should still have a signed lease and deposit on file.
Yes. Paying off bridge and hard money loans is one of the most common uses.
Non-owner-occupied 1-8 unit rentals in St. Paul and the surrounding east metro suburbs. We also lend across Ramsey, Washington and Dakota counties.
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