The Quick Read: Line up a long-term DSCR loan while the property is leased, your note terms are in hand, and the appraisal can support the payoff. The maturity date does not move when underwriting runs long. The new lender pays off the hard money lender at closing, and the lien releases.
- A hard money exit is a payoff: the new loan retires the old one, so the new loan has to be big enough to cover it.
- A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Credit and reserves still apply.
- Two tests decide the outcome: value (appraisal or cost basis) and rent coverage.
- Seasoning, the new lender’s waiting period, can cap the loan below the appraisal.
- Start before the date is close, and keep an extension request and a backup exit running alongside the refinance.
Key Terms Defined
Balloon payment: the large lump sum due when a short-term loan matures, because the monthly payments never paid the balance down.
DSCR: debt service coverage ratio, which is the property’s monthly rent divided by its full monthly housing obligation.
PITIA: principal, interest, taxes, insurance, and any association dues, which together make up that monthly obligation.
Seasoning: the waiting period a lender wants between buying (or recording title to) a property and sizing a loan off its new value.
Cost basis: what you paid for the property plus documented rehab spending.
Rate-and-term refinance: a new loan that pays off the old balance and returns no cash at closing.
Cash-out refinance: a new loan larger than the payoff, with the difference paid to you.
LTV: loan-to-value, the loan amount as a percentage of the property’s value.
DSCR Cash-Out Calculator
Run the cash-out numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
What Does the New Lender Actually Check?
The new lender checks two things: how much the property is worth, and whether its rent covers the new payment. Both have to clear. Strong rent with a weak value leaves you short at closing, and a strong value with thin rent leaves you short on coverage.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The lender looks at the property, your credit, and your reserves. It does not run your personal income through a debt-to-income test.
On value, the lender uses the appraisal, or your cost basis if the property is unseasoned. Seasoning is the piece that surprises people. If you bought the property recently and the appraisal shows a big jump, many lenders cap the loan at the lower of appraised value or documented cost. Real repositioning, such as a documented rehab, usually fares better than a purchase where you assumed an instant value jump. Your own labor typically does not count toward cost basis.
On coverage, the lender compares rent to PITIA. Across the wholesale network Lendmire works with, 1.00 is where select DSCR programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
One warning: clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. A property can clear the lender’s test and still be thin once you pay for those.
Pick Your Exit by Property State
The right exit depends on where the property stands today, not where your pro forma said it would be. Here is how the paths usually sort out.
| Property state | Likely exit | Main risk |
|---|---|---|
| Leased and stable | DSCR loan | Value or seasoning cap |
| Rehab done, no tenant | Lease it, then DSCR | Rent unsupported |
| Rehab unfinished | Extend or sell | Nothing to refinance yet |
| Thin equity | Sell, or bring cash | Payoff exceeds new loan |
Hard money is short-term, interest-only paper. On Lendmire’s hard money program the term typically runs 6 to 18 months, which varies by lender, property, and experience. There are no multi-year options on that program, so investors who need a longer runway refinance into long-term rental financing.
Leverage on the way in matters more than most borrowers expect. Fix-and-flip hard money runs up to 93%, 90%, or 85% of project cost depending on completed projects, always capped at 75% of after-repair value. Bridge purchases without rehab go up to 80% of purchase price, and refinances go up to 65% of value. These tiers vary by lender, property, and experience, and nothing here is a commitment to lend.
Step by Step: What to Do Before Maturity
Work through these in order. Each step protects the next one.
1. Read your note. Find the maturity date, extension options, extension fees, and default language. Check for a prepayment penalty on the old loan. Lendmire’s hard money program carries none, but your existing note may.
2. Request a written payoff statement. It shows principal, accrued interest, and any exit or other fees. That total is the number your new loan has to cover.
3. Choose the refinance type. A payoff-only refinance is rate-and-term. If you want cash back, it is a cash-out refinance, and that carries the stricter leverage cap and the seasoning clock.
4. Get the property rent-ready. Sign a lease if the property is vacant, or plan for an appraisal rent schedule. Appraisers use Form 1007 for single-family rent estimates and Form 1025 for 2-4 unit income properties.
5. Gather documents. Expect the payoff statement, the original settlement statement, rehab invoices and draw history, the lease, insurance, and entity documents if the property sits in an LLC.
6. Talk to a lender early. Ask how they treat seasoning, whether they will size on cost or appraised value, and what reserves they want.
7. Close and release. The new lender pays the hard money lender at closing. The lien is released, and the balloon is gone.
Lead time depends on the file, so build in more than you think you need. Appraisals, title work, and a missing document can each add delay you cannot control.
For a dedicated path out of short-term paper, see Lendmire’s hard money exit refinance program. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that route.
The Numbers: How a Payoff Falls Short
A payoff falls short when the new loan is sized below what you owe. The usual culprits are leverage, seasoning, and fees. This worked example uses modeled assumptions, not market data.
Say a rehab project was funded at 90% of project cost on a hard money loan, within the 75% of after-repair value cap. The investor now wants a DSCR rate-and-term refinance on that investment property. A DSCR rate-and-term refinance on an investment property can reach up to 85% LTV, subject to lender guidelines.
If the lender sizes on a seasoned appraisal, the new loan may cover the payoff with room to spare. If the lender sizes on cost basis, the loan tops out at 85% of cost. That leaves a gap between the hard money payoff and the new loan, plus closing costs, for you to bring in cash.
Now take the same investor who wants cash out. A DSCR cash-out refinance on an investment property tops out at 75% LTV, and the network generally expects about 6 months of seasoning from title recording. A hard money loan at 90% of cost already sits above that ceiling. Unless the appraisal runs far above cost, the refinance returns nothing and may need cash in.
This is where selling can beat refinancing. If the gap between your hard money balance and the new maximum is large, you may be better off selling and walking away with the equity. Tax treatment can depend on how the funds are used and how the property is held. Investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Cash-in is not failure. It is the price of the exit, and you should know the number before you buy.
Takeout Options Compared
Three routes show up most often. Only one is designed to be permanent for a stabilized rental.
| Route | Reviewed on | Watch-out |
|---|---|---|
| DSCR loan | Rent, credit, reserves | Seasoning, appraisal |
| Conventional | Personal income, assets | Documents, title in your name |
| Another bridge | Property and plan | Only a temporary patch |
Conventional debt can carry the best terms, but it asks for more documentation. It may also require moving title out of an LLC into your own name. A DSCR loan can often stay in the entity, subject to lender program eligibility. Another bridge loan buys time if the property is not stabilized, but you are back at a maturity date.
A DSCR loan generally uses a 620 credit floor, with tiers at 660, 680, and 700. Reserves run about 6 months of PITIA, stepping up to about 9 months above $1,500,000. Loan sizes on standard programs go up to $3,000,000, and smaller balances route through select lenders in the network. Terms typically center on a 30-year fixed, with 40-year terms, interest-only periods, and ARMs available through select lenders.
Read the complete DSCR loans guide for the full qualification picture.
Where the Rule Breaks
The general path works for a leased, stabilized property with real equity. These situations break it.
The property is not leased. An unstabilized property that is not cash-flowing may only qualify for another bridge. Some hard money lenders will roll a rehab loan into a longer bridge so you can build seasoning.
Seasoning varies by lender. There is no universal rule. The new lender sets it, and it is often stricter at banks than at private or non-QM lenders. The network’s DSCR cash-out expectation is about 6 months from title recording, but payoff-only files can be treated differently.
Prepayment penalties. Your old note may carry one. Your new loan may too. Check both before you sign.
Valuation shortfall. If the rehab ran over or the appraisal comes in under your assumed value, the loan shrinks. Plan to bring cash or push closing back.
Ineligible property types. The network’s DSCR programs do not offer loans on manufactured homes (single- and double-wide), log homes, or barndominiums. If your hard money collateral is one of those, a DSCR exit is not available, and you need a different plan.
Deals financed near 100%. If you borrowed nearly everything, a refinance into long-term debt with little cash is possible only with the right lender, enough added value, and the seasoning clock run out. Note that there is no true 100% purchase hard money program, so a deal that looked fully financed usually had cash or other collateral behind it.
If the Date Is Slipping
If you cannot close before maturity, run three tracks at once. Start the extension request, keep the refinance moving, and line up a backup exit such as a sale. Do not wait for the extension to be denied before you start the others.
Understand what you are up against. The Consumer Financial Protection Bureau describes a balloon payment as a large one-time payment at the end of a loan term, which can still leave a big amount owed even when earlier payments were lower. Its rules on loan disclosures define a balloon payment as any payment more than two times a regular periodic payment. Those disclosure rules are written for consumer credit, so whether they apply to a business-purpose investor note is a separate question your note and counsel can answer.
Extensions are at the lender’s discretion and cost money. Treat them as a fallback, not a plan. If you ask for one, ask in writing and explain where the refinance stands. A lender who sees an appraisal ordered and a lease in place is more likely to say yes than one who hears a vague promise.
Missing the date outright can bring default interest and, eventually, a foreclosure process. The exact sequence depends on your note and your state. The practical lesson is simple: the cost of starting too early is small, and the cost of starting too late can be large.
Is the Refinance Worth It?
Compare three outcomes: refinance, extend, or sell. Refinancing wins when the property is stabilized, coverage clears, and the new loan covers the payoff with limited cash in. Extending wins when the property is close to stabilized and the extension cost is smaller than the cost of a rushed refinance. Selling wins when the gap is large and the equity is real.
Run the break-even honestly. Add your cash to close, any shortfall, and refinance costs. Weigh that against the cost of holding or extending. If the refinance leaves you with a property that covers its payment and a loan with no balloon, the cash you bring in is often a fair price. If it leaves you with thin coverage, a large cash-in, and no reserves, selling may be the cleaner move.
Frequently Asked Questions
Can I refinance before the hard money loan matures?
Yes. Business-purpose hard money notes can usually be paid off early, and Lendmire’s hard money program carries no prepayment penalty. Check your existing note, because older notes may charge one. The new lender pays off the old loan at closing.
How early should I start?
Start as soon as the rehab is substantially done and the property can be leased, and well before maturity. The appraisal, title work, and documents all take time you do not control. Starting early also leaves room to fix a problem, such as a low appraisal, without hitting the maturity date.
What if the appraisal comes in low?
The loan amount shrinks, because the lender sizes on the lower of appraised value or cost. You can bring cash to close, pay down principal, appeal the appraisal with better comps, or switch lenders. Your own labor does not typically count toward cost basis, so document paid invoices and draws.
Can I refinance a property with no tenant?
Sometimes. A lender may use market rent from an appraisal rent schedule instead of a lease, subject to program guidelines. But an unstabilized property may only qualify for another bridge, so getting a lease signed strengthens the file.
What if I miss the balloon date?
Expect default provisions in your note to apply, which can include default interest and fees. Contact the lender before the date and ask for a written extension. Run a parallel refinance and a backup sale plan in the meantime.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire is a mortgage broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. Consumer Financial Protection Bureau: What is a balloon payment?
2. Consumer Financial Protection Bureau: Regulation Z, section 1026.37
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Should a Homeowner Use a Cash-Out Refinance to Buy a Rental Outright? · Hard Money Leverage vs DSCR Cash-Out Leverage on the Same Rehab · DSCR Refinance Loans for Landlords Weighing a Rental Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.