You are not looking for cash. You want a better loan: a lower rate, a longer term, or a way off a short-term note that is about to come due.
In short: A DSCR rate-and-term refinance replaces your existing rental loan with a new one that pays off the old balance and closing costs, with little or no cash back to you. It is used to lower a rate, move from a short-term or adjustable loan to a 30-year fixed, or change the borrowing entity. Because no equity is being pulled, rate-and-term refinances often get better pricing and shorter seasoning than cash-out.
The exact limits depend on the program, but the pattern holds across most DSCR lending.
| Feature | Rate-and-term | Cash-out |
|---|---|---|
| Purpose | Pay off existing loan and costs | Pull equity out as cash |
| Cash to borrower | None or a small amount | Up to the program’s limit |
| Max leverage | Often closer to purchase limits | Up to 75% LTV |
| Seasoning | Often shorter | Commonly 3–12 months |
| Pricing | Usually better | Usually a small premium |
This example is illustrative. You finished a light renovation on a single-family rental financed with a short-term loan. The balance is $210,000 and the note matures in four months. The property now appraises at $300,000 and rents for $2,500.
A rate-and-term refinance pays off the $210,000 and rolls in about $5,000 of closing costs, for a new loan of $215,000. That is roughly 72% LTV.
At an assumed illustrative rate on a 30-year fixed, principal and interest are about $1,505. With $420 for taxes and insurance, the payment is $1,925. DSCR is about 1.30, and the maturity date problem is gone.
When the goal is a lower payment, compare savings to costs. If a refinance saves $180 a month and costs $6,000, it takes about 33 months to break even.
If you plan to sell within two years, that refinance may not be worth it. If you will hold for ten, it probably is. Also check for a prepayment penalty on your current loan, since that adds to your cost.
Seasoning is how long you have owned the property or held the current loan. Rate-and-term programs are often more lenient here than cash-out programs.
Some will refinance a recently purchased property based on its new appraised value if renovations are documented. Others use the lower of cost or value for a period. Ask how your program handles it before ordering the appraisal.
Two offers with the same rate can differ in fees, prepayment terms and term length. A lower rate with a heavy prepayment penalty may cost more if you sell early.
Our financing team can lay out 2–3 options side by side, showing payment, costs and prepayment terms, so you can choose the structure that fits how long you plan to hold.
It is a refinance that pays off your existing loan and closing costs without pulling meaningful cash out. The goal is a better rate, term or structure.
Usually only a small amount, often limited to a modest figure or percentage. If you want real cash, the loan would be treated as cash-out.
Often, yes. Seasoning is commonly shorter, leverage limits can be higher and pricing is typically better, though the property still needs to meet DSCR.
Yes. Moving from a short-term hard money or bridge loan to a long-term DSCR loan is one of the most common uses of a rate-and-term refinance.
It depends on the program. Some allow it shortly after purchase, especially after documented renovations, while others require several months of ownership.
Yes. A 30-year fixed term is available on many DSCR programs and is a common reason to refinance out of an adjustable or balloon loan.
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