The rehab is done, the tenant has moved in and the short-term loan is still charging interest-only every month. In Stockton, where many investors buy distressed houses with hard money, the rate-and-term refinance is the step that turns a project into a long-term rental.
In short: LendingStreet's DSCR rate-and-term refinance replaces hard money, a bridge loan or an existing mortgage on a Stockton 1-8 unit rental with a long-term loan that qualifies on the property's rent. Rate-and-term goes up to 80% LTV on some programs, 30-year terms are available, the minimum credit score is 620 and LLC borrowers are standard. The goal is a lower or more stable payment and a loan that does not come due in a year.
The most common Stockton case is the investor who bought a distressed house with a short-term loan, renovated it and leased it. Others have a bridge loan that is approaching maturity, a private loan from a seller or a partner, or an older rental loan with an adjustable payment or a balloon.
Stockton is one of the most active BRRRR markets in Northern California because purchase prices on distressed homes leave room for renovation, and finished homes rent to a deep pool of local and commuting tenants. The refinance is where that strategy either recycles your capital or traps it, so plan it from the day you buy.
A rate-and-term refinance pays off the existing loan and closing costs without putting significant cash in your pocket. Because of that, some programs allow higher leverage than a cash-out, up to 80% LTV, and seasoning is often less of an issue. If you need to pull equity out, a cash-out refinance goes up to 75% LTV.
In Stockton, where rehabbed values often exceed purchase price plus rehab cost, investors sometimes do a rate-and-term refinance right after lease-up and come back for cash later.
This example is illustrative and not a quote. An investor finished a rehab on a Weston Ranch home and leased it for $2,600 a month. The hard money balance is $305,000, with estimated interest-only payments of about $2,923 a month and a maturity date six months away.
The home appraises at $425,000, so the payoff is about 72% of value, inside the 80% rate-and-term limit on some programs. A 30-year DSCR loan for $305,000 has an estimated principal and interest payment of about $2,101. Adding taxes of about $321 (reassessed on the investor's purchase) and insurance of $150, the payment is about $2,572 and DSCR is about 1.01x, above the 1.0x standard minimum. The loan no longer comes due in six months.
What the refinance changes is the shape of the payment, not just its size.
| Item | Hard money loan | DSCR rate-and-term |
|---|---|---|
| Payment type | Interest-only | Principal and interest, 30-year |
| Estimated monthly debt payment | $2,923 | $2,101 |
| Maturity | About 6 months away | 30 years |
| Qualification | Asset and project based | Property rent, 1.0x standard minimum |
Your tax bill was reassessed when you bought, so use the current bill, including the supplemental assessment, not the prior owner's. Newer subdivisions such as parts of Weston Ranch and Spanos Park may also carry special assessments.
If you raised the rent after renovating, AB 1482 does not usually limit the first rent you set with a new tenant, but it can limit later increases. The DSCR uses the lease in place or market rent, depending on the program, so a full-market lease helps.
Check that every permit for the rehab has been finaled. An appraiser who sees a new HVAC system, new windows or a converted garage will often ask whether permits were pulled, and an underwriter may ask for proof. Open permits with the City of Stockton or San Joaquin County can delay a refinance by weeks.
Flood status matters here too. If the property is in a mapped flood zone, the new loan will require flood insurance, and that premium is part of the DSCR payment even if your short-term loan did not require it.
Start the refinance 45 to 60 days before your short-term loan matures. You will need a signed lease, a finished property, any permit sign-offs from the City of Stockton or San Joaquin County and an insurance policy that reflects a rented home rather than a vacant rehab.
If the hard money loan has an extension option, know its cost before you need it. An extension fee plus another month or two of interest-only payments can be more expensive than a slightly smaller refinance today.
If the property lands just under 1.0x, a sub-1.0 DSCR program may fit, or a small paydown can bring the ratio over the line. A longer interest-only period on some programs can also help early cash flow.
Another option is to wait for a lease renewal at market rent if the current lease is below market and expires soon. That can add enough rent to clear 1.0x without bringing cash to closing.
Investors who have bought and renovated several Stockton homes with short-term money sometimes refinance them together. Each property can get its own DSCR loan, or five or more rentals can go into one blanket portfolio loan with one payment, qualified on combined cash flow. The portfolio route can help when one house is strong and another is just under 1.0x on its own.
Our investor loans are business-purpose loans on non-owner-occupied property. Send your payoff statement, lease, estimated value and maturity date through the form below or call (877) 298-1001, and we will show you the refinance options side by side.
A refinance that pays off your current loan and closing costs without taking significant cash out. It is used to get a better payment or longer term.
Up to 80% LTV on some programs. Larger loans and 5-8 unit buildings may have lower limits.
Yes, once the property is finished and leased. Rate-and-term refinances usually have less seasoning friction than cash-out.
No. Under Prop 13, a refinance does not trigger reassessment. Your tax base was set when you bought.
The standard minimum is 1.0x. Sub-1.0 programs exist for properties that come in slightly under.
Yes. That is one of the most common exits. Our bridge-to-DSCR guide explains the steps.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
They can. Appraisers and underwriters may ask about permits on renovated systems or additions, so finalize permits before you apply.
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