The Quick Read: Exiting a hard money loan means closing a new long-term loan whose proceeds pay off the bridge, and for a rental the usual exit is a DSCR loan that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The new lender sizes the loan from its own appraisal, not your after-repair estimate. The old lien is then released through the county Public Trustee.
- A DSCR loan’s rate-and-term refinance can go up to 85% LTV with no cash back, while its cash-out refinance tops out at 75% LTV, subject to lender guidelines.
- Cash-out generally wants about 6 months of ownership, measured from the recorded deed, not from the end of the rehab.
- The DSCR loan typically starts at a 1.00 coverage floor on select programs. Sub-1.00 coverage is available through select lenders in the network, with leverage and terms adjusted.
- Colorado is a deed-of-trust state, so the payoff ends with a recorded release, not just a wire.
- Hard money loans have no multi-year runway, so the exit has to be modeled before you buy.
Hard money is a bridge. It is built to be replaced. On the files a broker sees, the loan itself is rarely the problem. The exit math is. The sections below walk through how the exit works in Colorado, step by step. For the wider picture on rent-qualified financing, see the complete DSCR loans guide.
DSCR Cash-Out Calculator
Run the cash-out numbers in Colorado
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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.
Key Terms Defined
Payoff statement: A written figure from the old lender showing what it takes to clear the loan on a given date.
Deed of trust: The security instrument in Colorado that pledges the property, held through the Public Trustee.
Release of deed of trust: The recorded document that removes the old lender’s lien after payoff.
Seasoning: The ownership period a lender wants to see before it will cash you out.
Rate-and-term refinance: A new loan that pays off the old one and closing costs, with no cash back to the borrower.
DSCR: rent used for lender review divided by the full monthly obligation (principal, interest, taxes, insurance, and any HOA dues).
ARV: Your own estimate of value after repairs. A new lender does not have to accept it.
What Does Refinancing Out Mean in Colorado?
Refinancing out means a new lender wires a payoff amount to your hard money lender, and the old lien comes off title. The title company collects a written payoff statement, closes the new loan, and pays the old one.
Two Colorado details matter. First, the payoff number is not fixed. It includes principal drawn, accrued interest, and any extension or exit fees, so it grows each day the exit slips. Second, the lien does not clear itself. The Denver Public Trustee processes releases of deeds of trust on payoff or refinance. The package includes a signed and notarized release form, the deed of trust, and the original promissory note marked paid or cancelled.
Here is the catch with private lenders. Ask early whether the old lender holds the original note. A private lender may need time to find the note and sign the release. Smaller shops sometimes do not know where it is until someone asks.
Investors weighing a purchase-then-exit structure can also read how Lendmire’s hard money exit refinance path is organized.
What Does the Hard Money Side Look Like Before the Exit?
Hard money terms are short, interest-only, and asset-based. Across lenders that place these files, terms run roughly 6 to 18 months, with no multi-year option on current programs. Fix-and-flip leverage is measured against project cost, and every tier is capped at 75% of after-repair value. Cash-out and rate-and-term refinances on hard money go up to 65% of value. Figures vary by lender, property, and experience, and nothing here is a commitment to lend.
That short runway is why the exit has to be modeled before purchase. Price the extension fees you would pay if the exit slips. Then work backward from maturity. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path.
How Does Underwriting Treat the Exit? (Step by Step)
Underwriting looks at four things: how long you have owned it, what it appraises for, whether rent covers the payment, and whether the file is clean. Take them in order.
1. Seasoning clock. Cash-out on a DSCR loan generally wants about 6 months of ownership, measured from the recorded deed. Finishing the rehab or signing a lease does not start it. Inside the window, a lender may cap the loan at purchase price rather than appraised value.
2. Appraisal. The new lender sizes the loan from its own appraised value. Your ARV is a planning number. Break-even value equals your payoff plus exit costs, divided by the LTV cap. Below that value, you bring cash to closing.
3. Coverage test. The DSCR compares rent used for lender review to PITIA on the new, larger loan. A property can appraise well and still miss if market rent does not cover the payment. Many select programs start at 1.00, while a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the ratio.
4. Documents. Expect the payoff letter, entity documents, the lease, an appraisal with a rent schedule, insurance, and verified reserves. Reserves vary by lender, leverage, and loan size, and run about 6 months of PITIA on most files, stepping up to about 9 months above $1,500,000.
For credit, the network has a 620 floor in parts, most programs want around 660, and 700 and above opens the strongest tiers. Loan sizes run up to $3,000,000 on standard programs.
Payoff-Only, Cash-Out, or Extend?
The choice depends on your seasoning date and the appraisal. This is the decision table most investors need.
| Option | Fits when | Watch-outs |
|---|---|---|
| Rate-and-term DSCR refinance | Payoff plus costs fit under the cap | No cash back; up to 85% LTV |
| Cash-out DSCR refinance | About 6 months owned; equity above payoff | Capped at 75% LTV; rent must cover PITIA |
| Extend the bridge | Seasoning or lease-up is short | Extension fees keep adding to payoff |
| Sell | Appraisal and rent both miss | Ends the hold, so confirm it still fits your plan |
Whether a refinance counts as payoff-only or cash-out is set by lender policy. As a rule, if the new loan covers only the payoff and closing costs, it is rate-and-term. Once cash goes to you, it is cash-out. Paying off other debt from proceeds, such as rehab credit cards, generally turns the file into a cash-out. Get the treatment in writing.
Where the General Rule Breaks
Payoff-only before seasoning. If the bridge matures before the seasoning window, a rate-and-term DSCR loan first and a cash-out later is one path. It means two sets of closing costs, and you should check for prepayment terms and whether the first refinance restarts the clock.
Low appraisal. If value lands below break-even, your options are to bring cash, switch to payoff-only, extend the bridge, or sell. Lenders do not use ARV, so a thin margin on the purchase is the real risk.
Rent short of the payment. The bigger new loan raises PITIA. A property that cleared coverage on paper at a smaller loan can miss at the cash-out size. Dropping the loan amount, or moving to rate-and-term, often fixes it. Where coverage still falls under 1.00, a select-lender path exists with leverage and terms adjusted.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered through the network’s DSCR programs, so a hard money loan on one of these has no DSCR exit.
Agency shortcuts do not carry over. The delayed-financing idea from the agency world waives seasoning for cash purchases. A hard money loan secured by the property generally breaks that exception, and DSCR lenders set their own seasoning policies. Do not assume agency rules apply.
Business-purpose status. The Colorado Division of Real Estate defines the mortgage loan originator license by reference to residential mortgage loans. Investment loans are business-purpose, and they are reviewed differently from a standard owner-occupied mortgage. This is a note on definitions, not legal advice.
Colorado Release Mechanics After Payoff
Payoff is not the finish line. The release is. Douglas County’s Public Trustee notes that paying off a loan does not create a new deed, because your ownership deed was recorded at purchase. It suggests keeping your payoff statement and checking that the release was recorded.
Practical habits for a hard money exit:
- Ask the old lender for the original note status before the payoff statement is ordered.
- Confirm the release is signed, notarized, and sent to the Public Trustee at closing or right after.
- Counties charge small recording fees, which vary by county.
- Colorado sets a statutory window for the lender to file the release after payoff. Confirm the details with your title company.
- Keep the recorded release with your file. The next lender will see the old lien in title work if it is missing.
On Front Range files, title work is routine. On mountain and resort-area files, rent support and appraisal comps tend to need more documentation, and local rental registration or short-term rental rules can change what income a lender will count. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
Entity Title and Vesting
Many investors close the hard money loan in an LLC. Entity documents are a quiet friction point at the exit, because the operating agreement, good standing, and signer authority must match the vesting on title. Loans to LLC-titled borrowers are subject to lender program eligibility, so confirm that early. If vesting needs to change, talk to counsel first.
A Worked Example (Percentages and Ratios Only)
Consider a rehabbed duplex bought with a hard money loan and now stabilized. Assume the lender’s appraisal supports the property’s value, you have owned it past the seasoning window, and rent clears the coverage floor on the new loan at roughly 1.2x. A cash-out DSCR refinance would cap at 75% LTV. If the payoff is well under that cap, the gap comes back as proceeds, subject to reserves and lender review.
Now change one input. The appraisal comes in below your ARV, and the payoff sits closer to the cap. The deal may shift from a cash-out refinance to a rate-and-term refinance, where the cap rises to 85% LTV but no cash returns. Coverage tightens if the loan stays the same size and the rent number does not move. Run the numbers at three appraisal outcomes before you buy, and treat the weakest case as your plan. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
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.
Common Mistakes
- Assuming the seasoning clock starts when the rehab ends. It runs from the recorded deed.
- Using ARV as the loan basis. The new lender uses its own appraisal.
- Treating the payoff as fixed. It grows with interest and fees.
- Using asking rent. Lenders use their own rent figure.
- Reading a 1.00 ratio as proof of profit. It shows only that rent covers the payment.
- Skipping the note check. A missing original note can hold up the release.
- Waiting for the last month. Appraisal, title, and entity work all need room.
For related reading, Lendmire has a piece Can I Refinance A Hard Money Loan?.
Frequently Asked Questions
Can I refinance out of a hard money loan before 6 months?
Often yes, as a rate-and-term DSCR refinance with no cash back. Cash-out generally wants about 6 months of ownership from the recorded deed. Rules vary by lender and file.
Will paying off hard money count as a cash-out?
Not if no cash comes back to you. If the new loan covers only the payoff and closing costs, it is typically rate-and-term. Cash to you, or paying off other debts from proceeds, usually makes it cash-out.
What does the payoff statement include?
Principal drawn, accrued interest, and any extension or exit fees. The number grows with time, so request an updated statement near closing.
Does a Colorado hard money lien need a Public Trustee release?
Yes. A deed of trust held by a private lender is still released through the Public Trustee after payoff, with a signed release and the note marked paid or cancelled.
What if the appraisal comes in low?
Options are to bring cash, switch to payoff-only, extend the bridge, or sell. The new lender sizes the loan from its own value, so build a margin into the plan.
Investors who want to see how the numbers work on a rental can compare DSCR loan options with Lendmire, a mortgage broker arranging financing through select lenders across 41 markets, including Washington, D.C. Programs vary by lender, property, and borrower, and nothing here is a commitment to lend.
Colorado’s recorded-release process rewards the investor who asks about the original note on day one.
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 program review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. Denver Public Trustee – Releases
2. Colorado Division of Real Estate – MLO Rules, Chapter 9
3. Douglas County Public Trustee – I Paid Off My House
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Refinance Out of a Hard Money Loan in Florida · How to Refinance Out of a Hard Money Loan in Wyoming · How to Refinance Out of a Hard Money Loan in Indiana
Guides: Hard Money Loans in Colorado
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.