The Quick Read: The new loan pays off the maturing note when the property has been on title long enough, appraises high enough to cover the payoff inside the leverage cap, and carries rent that covers the new loan’s full monthly obligation, with each test reviewed separately and all of it subject to lender guidelines. Hard money notes carry a fixed end date, so the application has to be built backward from that date.
- Cash-out leverage tops out around 75% of appraised value on a standard rental across most of the network, and a seasoning period of about 6 months is the common expectation.
- Coverage is tested on the new loan’s payment, never on the old interest-only hard money payment.
- The smaller of the value-based loan and the rent-based loan controls the loan amount.
- A payoff-only refinance is usually treated differently from a cash-out, which matters if the note is young.
- A bridge sized on project cost can leave little or no room under a cap that is sized on appraised value.
Does This Refinance Fit Your Situation?
Most investors in this spot fall into one of five situations. Each has a different first move.
| Situation | Likely path | First move |
|---|---|---|
| Rehab done, leased, past seasoning | Cash-out or payoff-only | Order the payoff statement |
| Rehab done, leased, title is young | Payoff-only | Confirm seasoning rules by program |
| Rehab done, vacant | Appraiser market rent sets coverage | Confirm the unit is rent-ready |
| Appraisal risk on after-repair value | Smaller cash-out or cash to close | Model the payoff against 75% of value |
| Note already at maturity | Extension and application in parallel | Ask the hard money lender for terms |
Hard money terms typically run 6 to 18 months, interest-only, so the maturity date is a hard wall. Hard money lending varies by lender, property, and experience. A DSCR loan trades that wall for a long-term structure, and the 30-year fixed is the spine of most programs. Lendmire brokers this exit, arranging the new loan through select lenders in its wholesale network.
How the Lender Qualifies the File
The file clears four gates: ownership time, value, rent, and the borrower profile. The loan amount is the smaller of what value allows and what rent supports. Across the wholesale network, most files fail on one of those gates, not all of them.
Value. The new appraisal sets value, and the cash-out cap applies to that figure. The cap tops out around 75% of value on most standard rentals. Hard money sizing does not carry over. A hard money loan is sized to project cost and after-repair value, and a DSCR lender only looks at what the appraiser supports today.
Rent. The appraisal also sets market rent. Single-family appraisals typically use Fannie Mae’s comparable rent schedule, Form 1007, and 2-4 unit properties use the multifamily income form. DSCR lenders borrow the form but are not bound by agency rules. Most programs use the lower of the in-place lease and the appraiser’s market rent. If the lease is above market, expect a request for proof that the rent is actually being collected.
Coverage. Divide rent by the new loan’s full monthly obligation: principal, interest, taxes, insurance, and any HOA dues. A ratio of 1.00 is where select 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. No-ratio structures exist only through select lenders, generally for borrowers who already own a primary residence.
Clearing 1.00 is not the same as positive cash flow. The ratio compares rent to the housing payment only. Repairs, vacancy, management, utilities, and capital expenses sit outside it.
Borrower profile. A 620 score floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers. Reserves vary by lender, leverage, loan size, and transaction type. Around 6 months of PITIA is common on a cash-out, and loans above roughly $1,500,000 typically step up toward 9 months. Standard loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures. DSCR typically covers 1-4 unit properties, and some programs take small multifamily. Manufactured homes, log homes, and barndominiums are not offered.
Cash-Out or Payoff-Only?
A new loan that covers only the payoff, accrued interest, fees, and closing costs is generally treated as payoff-only, also called rate-and-term. Cash back to the borrower makes it a cash-out. That label drives leverage, seasoning, and pricing.
| Factor | Payoff-only | Cash-out |
|---|---|---|
| Cash to borrower | None or minimal | Yes |
| Seasoning | Usually lighter, varies by program | About 6 months from title recording |
| Leverage | Set by program | Around 75% on standard rentals |
| Coverage test | New loan payment | New loan payment, larger |
The decision test is simple. Ask why you want the cash. If the cash funds the next acquisition, a cash-out is worth the lower coverage. If you only need the exit, payoff-only keeps the new payment smaller and the ratio stronger. Taking out more cash always raises the payment and lowers the ratio. Tax treatment varies; consult a qualified professional.
The seasoning clock generally runs from the recorded title date. It does not run from the hard money funding date, the date rehab finished, or the payoff date. Lenders vary on how they treat payoff-only on a young note, so confirm the program before assuming there is no waiting period.
The Application, Step by Step
1. Pull the payoff early. Request a payoff statement from the hard money lender. It should itemize principal, accrued or per-diem interest, exit fees, and any extension fees. Have ready: the note and the most recent loan statement.
2. Choose payoff-only or cash-out. Decide how much cash you want back, if any. Have ready: a target amount and what it funds.
3. Confirm seasoning. Check the recorded title date against the program’s clock. Have ready: the purchase closing statement and the recorded deed.
4. Line up the rent evidence. Provide the signed lease if the unit is leased. If it is vacant, the appraiser’s market rent is used. Have ready: the lease and proof of collected rent where the lease sits above market.
5. Order the appraisal. One report sets both value and market rent, so it controls two of the four gates. Have ready: access to the property and a list of completed improvements with receipts.
6. Run coverage on the new loan. Gross rent divided by the new loan’s full monthly obligation. The old interest-only payment does not count.
7. Match entity to title. The borrowing entity on the new loan generally must match the entity on title, subject to lender program eligibility. Have ready: articles of organization, operating agreement, and good standing evidence.
8. Clear title and close. The title company pays the hard money lender from the new loan’s proceeds, the lien is released, and any surplus goes to you. Settlement reconciliation is where the payoff statement matters, because per-diem interest and its expiration date have to line up with the settlement date.
The Document Checklist
Group the packet so nothing is chased one item at a time.
- Old loan: the hard money note, the payoff statement, draw history, and the lien-release terms.
- Property: purchase closing statement, rehab receipts or budget, the lease, insurance evidence, and the HOA questionnaire if it is a condo.
- Borrower: government ID, credit authorization, and proof of reserves.
- Entity: articles, operating agreement, good standing, and a signer authorization where needed.
The most common preventable gap is the payoff statement. A payoff dated before the expected settlement date will lapse, and a new one has to be issued. The second most common gap is the entity: documents filed under one name and title held under another stall a file.
Counting Back From the Maturity Date
Plan the file in reverse order, starting from the date the note comes due. Appraisal and title are the two steps with no slack, because other people control their schedules.
| Step | Why it comes where it does |
|---|---|
| Payoff statement and extension terms | Everything else sizes off the payoff figure |
| Lease and rent evidence | Needed before the appraiser and underwriter review rent |
| Entity documents and title search | Surfaces name mismatches and liens early |
| Appraisal | Sets value and rent; outside your control |
| Underwriting and reserves proof | Lender review follows the appraisal |
| Title instructions and payoff reissue | Payoff has to match the settlement date |
If the date is close, ask the hard money lender about an extension in parallel with the new application. Extension fees and accrued interest are a real cost, and a low appraisal can force cash to the table. Start the application well before maturity.
When the Numbers or Timing Break
Hard money near the top of its range. Hard money sizes to project cost, with fix-and-flip leverage up to 93% of project cost for experienced investors, always capped at 75% of after-repair value, and it varies by lender, property, and experience. A DSCR cash-out sizes to appraised value at around 75%. A bridge sized near its own ceiling can leave no room under the DSCR cap. Your options are a payoff-only structure, bringing cash to closing, taking a smaller cash-out, or extending the bridge. Lendmire’s piece on cash-out refinance requirements when a super jumbo note is coming due covers the larger-balance version of this problem.
A young note. If title is recent, payoff-only is usually the cleaner route because it generally avoids the cash-out clock.
Delayed financing. That is an agency concept for cash purchases. A hard money lien at purchase generally breaks it, and it is not a DSCR rule.
An appraisal miss. The cash-out shrinks, or you bring cash. Rehab overruns make it worse because hard money interest keeps accruing while you wait.
Short-term rentals. The 1007 is built on monthly-lease comparables, and short-term income is handled differently, usually through platform data by program. Cash-out on short-term-rental collateral tops out around 70%, with a 640+ score and about 12 months of hosting history expected.
Prepayment penalty. The new loan may carry one, so factor it into any plan to sell or refinance again soon.
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 business-purpose exemption is set out in Regulation Z § 1026.3, and that is the reason the file is built around the property and the entity instead of consumer disclosures.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Myths That Derail the Exit
Paying off hard money is always a cash-out. It is generally payoff-only when nothing comes back to the borrower.
The old hard money payment hurts coverage. Coverage is tested on the new loan only.
I can refinance at my after-repair value or full rehab cost. The cap is based on the lender’s appraised value, not on what you spent or projected.
The lease rent is what counts. Programs typically use the lower of the lease and the appraiser’s market rent.
Agency seasoning rules apply here. They do not. DSCR programs set their own, and the common expectation is about 6 months from title recording.
DSCR means no underwriting. The file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, and credit, reserves, entity, and title still matter. Most files are full-recourse to the borrower or guarantor.
Key Terms Defined
Payoff statement: The hard money lender’s itemized figure for principal, interest, and fees due on a given date.
Seasoning: The ownership period a lender requires before it will release cash-out, generally measured from the recorded title date.
Payoff-only refinance: A new loan that covers only the payoff, interest, fees, and closing costs, with no cash back.
DSCR: The ratio of rent to the new loan’s full monthly obligation, and not a measure of profit.
After-repair value: The projected value of a property once rehab is finished, which a DSCR lender does not use for sizing.
Appraisal reconsideration: A request that the appraiser revisit value using better comparable sales.
Frequently Asked Questions
Does paying off hard money count as a cash-out refinance?
Generally not, if nothing comes back to the borrower. A new loan that covers the payoff, accrued interest, fees, and closing costs is usually treated as payoff-only. Cash back to you makes it a cash-out, and that triggers the lower leverage cap and the seasoning check.
How soon can I refinance after buying with hard money?
On a cash-out, about 6 months of seasoning from the recorded title date is the common expectation across the network. Payoff-only files are often reviewed under lighter rules, but programs vary. Confirm the specific program before relying on any shorter period.
Does my hard money payment count toward the coverage ratio?
No. The ratio uses the rent divided by the new loan’s full monthly obligation. The old interest-only payment disappears when the note is paid off.
What if the note has already matured?
Run the extension request and the new application at the same time. Extension fees and accrued interest add cost, and the new appraisal may still miss. A payoff-only structure or cash to close can protect the exit if value comes in low.
Can an LLC borrow on the new loan?
Yes, subject to lender program eligibility. The entity on the new loan generally has to match the entity on title, so an entity mismatch is worth catching before the file goes in.
Next Step
For the underlying program mechanics, see Lendmire’s complete DSCR loans guide. 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, with DSCR investor financing arranged through select lenders across 41 markets, including Washington, D.C. Every file is underwritten individually, and nothing here is a commitment to lend.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Single-Family Comparable Rent Schedule (Form 1007), Fannie Mae
2. Regulation Z § 1026.3, Consumer Financial Protection Bureau
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 Get Approved for a DSCR Cash-Out Refinance Twice in Twelve Months? · How to Qualify and Apply for a Super Jumbo DSCR Cash-Out Refinance With 90% Rent Coverage · Does a Withdrawn Listing Delay a DSCR Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.