The Quick Read: At maturity, the lender expects the full principal, all accrued interest, and any fees or extension charges to be paid through a funded exit, usually a sale or a long-term refinance, and the payoff figure is only good through the date stated on the written payoff statement.
- Hard money is a short, interest-only bridge, so the whole balance comes due at once. Market terms often run 6 to 24 months, per FCTD, and Lendmire’s hard money program runs 6 to 18 months with no prepayment penalty. Terms vary by lender, property, and experience.
- The payoff is more than principal. It also includes accrued interest, a per diem (daily interest), fees, and any extension or default charges.
- The exit must be lined up before maturity. A new lender’s appraisal, not your projected value, sets how much the takeout loan can be.
- A DSCR loan is the usual long-term exit once a rental is stabilized. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
Key Terms Defined
Maturity is the date the note requires the loan to be paid in full.
Balloon payment is the lump sum due at maturity, because the monthly payments covered only interest.
Payoff statement is the lender’s written figure for what it takes to retire the loan through a stated date.
Per diem is the daily interest that keeps accruing until the funds actually arrive.
Lien release is the lender’s recorded document showing the debt is satisfied and the property is free of its claim.
Takeout loan is the new, longer-term loan whose proceeds pay off the hard money note.
Seasoning is the length of time a new lender wants you to have owned or held the property before it lends against appraised value.
DSCR Cash-Out Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
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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.
Two Meanings of “Payoff Requirements”
The phrase means two different things, and mixing them up causes confusion. Entry requirements are what a lender wants to see before it makes the loan: credit, equity, experience, and a plan. On Lendmire’s hard money program, for instance, the minimum credit score is 620, with additional conditions below 660, and underwriting stays asset-based. Those figures vary by lender, property, and experience.
Payoff requirements are what must happen to retire the loan. They are the focus here. The two meet at one point, because a credible exit plan is part of getting approved in the first place.
What the Payoff Amount Includes
The payoff is a sum of parts, and the note controls each one. The table shows the usual components and where to confirm them.
| Component | What it is | Where to verify |
|---|---|---|
| Principal | Funded balance, including drawn rehab money | Draw history |
| Accrued interest | Interest owed through the payoff date | Payoff statement |
| Per diem | Daily interest after the statement date | Payoff statement |
| Fees | Exit, extension, or servicing charges | The note |
| Default charges | Late fees or default interest, if any | The note |
Run a worked example in words rather than dollars. Start with the full amount drawn, add interest accrued through the statement date, add each fee the note names, and then add per diem for every day between the statement date and the day the wire lands. Anything that slips adds a line. Interest-only loans can also surprise borrowers who expected interest to be paid monthly, since some structures roll all interest into the final payoff.
A common mistake is working from a figure remembered from months ago. Ask for a fresh statement every time the closing date moves.
How to Get and Read a Payoff Statement
Request the statement in writing. Title or escrow usually collects it, and the refinancing lender’s closing agent can request it for you. The statement should show a good-through date, the per diem, every fee, and wire instructions.
If closing slips past the good-through date, per diem is added, or the lender issues an updated statement, and the new figure is usually somewhat higher. Read the statement against the note. A line you cannot find in the note is worth questioning before the wire goes out.
Your Exit Options at Maturity
You have five realistic paths. Each carries a different cost and a different risk.
| Exit | What it requires | Main risk |
|---|---|---|
| Sell | A buyer and a sale that nets the payoff | Price or timing miss |
| Refinance to DSCR | Appraisal, coverage, seasoning | Appraisal or seasoning gap |
| Pay with cash | Liquidity | Capital tied up |
| Extend | Lender consent, usually a fee | Not automatic |
| Default | Nothing from you | Foreclosure exposure |
Extensions deserve a closer look. Hard money lenders are not obligated to extend unless the note has renewal provisions, according to Note Servicing Center, and they weigh collateral value, borrower performance, and market conditions. Performing loans get extensions far more readily than delinquent ones. Asking before maturity is a negotiation. Asking after maturity is a default conversation.
Balloon loans carry a known hazard: the collateral can lose value after the loan is made, and they are usually refinanced before the balloon comes due, as Cornell’s Legal Information Institute explains.
Sizing the DSCR Takeout
For stabilized rentals, a DSCR loan is the long-term loan that most often pays hard money off, and Lendmire arranges that path through select lenders in its wholesale network across 41 markets, including Washington, D.C. The hard money exit refinance program page covers that route in full. The complete DSCR loans guide covers the loan type itself.
Here is how the takeout is tested. The DSCR loan compares monthly rent to the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues. Coverage is measured on the new loan, not on the old hard money carry. The numbers that matter on most files are these:
- A DSCR loan on an investment property can return cash at up to 75% LTV on a cash-out refinance, while a rate-and-term DSCR refinance with no cash back has a higher ceiling of 85%.
- A DSCR cash-out generally expects about 6 months of seasoning, measured from title recording.
- Coverage of 1.00 is where select DSCR programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- A DSCR loan commonly wants a 620 score at the floor, with most programs closer to 660 and the strongest leverage at 700 or higher.
- Reserves on a DSCR loan commonly run about 6 months of PITIA, stepping up to about 9 months above $1,500,000.
- Standard DSCR loan sizes run up to $3,000,000.
All of this is subject to lender guidelines, and each file is reviewed individually. The sizing math is simple. The break-even appraisal equals your payoff plus exit costs, divided by the LTV cap. Cash back equals the new loan, less the payoff, less exit costs.
Notice what the formula implies. Value falls and the payoff does not move, so cash back shrinks faster than value does. Also remember that clearing 1.00 on a DSCR loan is not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it.
Where the General Rule Breaks
No extension and no exit. Once maturity passes, the loan is in default. Default interest, set in the loan documents and above the note rate, typically begins accruing from the maturity date, and the lender can start foreclosure under its state’s process. Some notes treat the unpaid balloon as a late payment, which can put a late charge on the entire balance. A deed in lieu of foreclosure is sometimes used as a quieter alternative.
Seasoning clash. A short hard money term can end before a takeout lender’s seasoning period does. Seasoning is lender policy, not law, and the clock runs from title recording. If the clocks cross, the options are a payoff-only refinance, an extension if the note allows one, or waiting. Lendmire covers this squeeze in its piece How to Bridge the Gap When Hard Money Matures Before DSCR Closes.
The hard money lender is not your takeout. Some hard money lenders pause or drop their own long-term refinance programs. Line up the takeout independently rather than assuming the same lender will roll you over.
The property is not ready. An unfinished rehab, a vacant unit, or an appraisal miss all break the plan. The options are an extension, a bridge-to-bridge loan, a smaller takeout, bringing cash to the table, or a sale. On a finished but vacant property, some DSCR programs can use a market rent schedule for coverage.
Ineligible collateral. Manufactured homes, log homes, and barndominiums fall outside the network’s DSCR programs, so a hard money loan on one of them needs a different exit.
Does Federal Payoff-Statement Law Apply?
Often it does not, and that surprises many borrowers. The federal payoff-statement rule in CFPB Regulation Z § 1026.36 requires an accurate statement within seven business days of a written request. It is written for consumer-purpose credit, and a true business-purpose hard money loan sits outside it. The related servicing rules also exempt business-purpose loans, as Cornell’s text of 12 CFR 1024.5 shows.
So the payoff mechanics usually come from the note itself and from any state payoff-statement law that applies. The test looks at the loan’s purpose, not simply at whether the property is an investment. Read your note, and ask the lender in writing what it will provide and when.
What the Decision Looks Like in Practice
Work backward from maturity. The bridge has to outlast the rehab, the lease-up, the seasoning period, the appraisal, and the takeout review. Start the refinance application well before the balloon is near, and request an extension in parallel if the schedule looks tight.
Build the exit file early:
- The hard money note, with the maturity and extension terms.
- The settlement statement and draw history.
- Rehab invoices and proof of completion.
- A signed lease, or a market rent schedule if the unit is vacant.
- Current insurance.
- The lender’s payoff statement with a good-through date.
If the numbers clear, the order of operations is simple. The DSCR loan funds, title wires the old lender its balance, and the old lender records the lien release. Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
What happens if a hard money loan matures and I cannot pay it off?
The loan goes into default unless the lender agrees to an extension. Default interest usually begins at maturity, and the lender can start foreclosure under state rules. Contact the lender before the date, ask for an extension in writing, and have a takeout application already in progress.
Does the payoff include more than the principal?
Yes. It adds accrued interest, per diem, fees, and any extension or default charges. Lendmire’s hard money program has no prepayment penalty, though terms vary by lender, property, and experience, so always confirm what your own note says.
Will the hard money lender automatically extend the loan?
No. Unless the note includes a renewal provision, the lender has no obligation to extend. Performing loans with a clear exit plan are the most likely to be granted more time, and asking before maturity helps.
Can a DSCR loan pay off a hard money loan?
Often, yes, if the property is stabilized. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Seasoning, appraisal value, credit, reserves, and the leverage caps all still apply.
Is a payoff statement required by federal law?
It depends on whether the loan is consumer-purpose or business-purpose. Most hard money loans on rentals are business-purpose, so the payoff terms come from the note and any state law.
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. Nothing here is a commitment to lend, and every file is reviewed individually.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 41 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
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References
1. FCTD, Hard Money Loan Balloon Payment
2. noteservicingcenter.com: Hard Money Loan Renewals Extensions a Practical Guide for Borrowers
3. Cornell LII Wex, Balloon Payment
4. CFPB Regulation Z § 1026.36
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Buy a Flip in an LLC With a Hard Money Loan? · Can a First-Time House Flipper Get a Hard Money Loan? · Does a Hard Money Bridge Loan on a 2-4 Unit Need a Down Payment?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.