The Quick Read: A twelve-month hard money note leaves roughly six usable months for your DSCR exit once the typical six-month seasoning wait is subtracted, and that cushion has to absorb rehab overruns, lease-up, the appraisal, underwriting, and any title surprise before the balloon comes due.
- Seasoning is lender policy, and it starts when the deed is recorded, not when the rehab ends.
- Seasoning runs at the same time as your rehab, so a slow rehab does not lengthen the wait. It can leave you with no tenant when the wait ends.
- On most files across our wholesale network, a DSCR cash-out refinance tops out around 75% LTV on standard rentals, so the new appraisal has to clear your payoff by a wide margin.
- Strong rent coverage does not shorten the wait. Rent and time are two separate tests.
What “Runway” Means on a Twelve-Month Note
Runway is the number of months between today and the maturity date that you can actually use for the exit. It is not twelve. The note’s term minus the lender’s waiting period minus the time you need to build a clean exit file is what you really have.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Hard money notes are interest-only, so the full balance comes due at maturity. That is the balloon. You pay it with a refinance or a sale. On the hard money program Lendmire places files with, terms run 6 to 18 months, interest-only, with no prepayment penalty. Every note is different, so read yours. Terms vary by lender, property, and experience.
DSCR stands for debt service coverage ratio. The lender divides the property’s monthly rent by its monthly PITIA (principal, interest, taxes, insurance, and association dues). The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. For the full picture, see the complete DSCR loans guide.
Key Terms Defined
- Seasoning: the waiting period a lender wants between buying a property and refinancing it based on its new value.
- Maturity: the date the hard money balance is due in full.
- Payoff amount: what the hard money lender needs on the payoff date, including drawn principal, accrued interest, and any fees.
- Cash-out refinance: a new loan sized on appraised value that returns equity beyond the payoff.
- Payoff-only (rate-and-term) refinance: a new loan that covers the payoff and closing costs, and returns little or no cash.
- ARV: after-repair value, your estimate of the finished property’s worth. The lender’s appraisal, not your estimate, sets the loan.
How Do You Calculate the Runway?
Work backward from maturity. The sequence below treats the six-month seasoning wait as the common expectation across the programs we see. Market surveys report a wider range: Lofty’s BRRRR guide says many lenders want 6 to 12 months of ownership before a cash-out on appraised value. On the DSCR files we place, about six months is the common expectation, and it varies by lender. If your lender wants longer, the cushion shrinks month for month.
| Step | Months used | Overlaps? |
|---|---|---|
| Note term | 12 | Starting point |
| Seasoning wait | About 6 | Runs alongside rehab |
| Rehab and lease-up | Your schedule | Same months as seasoning |
| Appraisal, underwriting, title | Cushion needed | Starts after the wait |
| Safety buffer | Your call | Last in line |
The math looks like this: 12 months of note, minus about 6 months of seasoning, leaves about 6 months of cushion. That is a planning calculation, not a program promise. Everything that can go wrong has to fit in that cushion.
What Starts the Clock (and What Doesn’t)
The clock starts when you take title. For most lenders, that means the recorded deed. Several events people assume matter do not start it:
- Finishing the rehab. It does not start the clock.
- Signing a lease. It does not start the clock either.
- First rent collected. It matters for the exit file, not for seasoning.
- Closing date versus recording date. These can differ by a few days. Use the recorded date and confirm it with the lender.
PropertyReach’s BRRRR guide makes the related point that the lender wants time before refinancing on appraised value instead of purchase price. The wait protects the lender from loaning on a number nobody has tested.
Here is the catch. Because seasoning runs alongside your rehab, a slow rehab does not extend it. It does something worse. The wait ends and you have no finished unit, no tenant, and no rent evidence. A DSCR exit tests a rented, finished property.
Three Rehab Scenarios on a Twelve-Month Note
Treat these as modeled assumptions, not market data. They show how the cushion behaves.
| Scenario | Rehab and lease-up | Cushion left | Verdict |
|---|---|---|---|
| Light cosmetic | Done and leased by month 3 or 4 | About 6 months | Comfortable |
| Moderate | Done and leased by month 6 to 8 | 3 to 4 months | Tight |
| Heavy | Runs past month 8 | Little or none | Collision |
Light rehab. The wait is the only constraint. You can order the appraisal as soon as the clock clears, and a title delay or reorder will not threaten maturity.
Moderate rehab. Seasoning clears around the time the unit rents. Any slip in lease-up or a single appraisal reorder starts eating the buffer. Plan the exit lender before closing the bridge.
Heavy rehab. This is where twelve months stops looking generous. A permitting stall or contractor delay pushes lease-up to the end of the term. The exit file then competes with the balloon. For a scope like this, many rehabbers choose a longer term within the 6 to 18 month range instead of betting on a perfect schedule.
Payoff-Only or Cash-Out: Which Exit Fits the Runway?
Many lenders treat a payoff-only refinance more lightly than a cash-out. A new loan that covers only the payoff and closing costs leaves equity in the deal. Whether a given program applies its seasoning wait to a payoff-only exit is program-specific, so confirm it in writing before you rely on it.
| Factor | Payoff-only | Cash-out |
|---|---|---|
| Waiting period | Often lighter, confirm | About 6 months is common |
| Equity returned | Little or none | Beyond payoff |
| Value test | Must still cover payoff | Sized on appraised value |
| Best fit | Runway running short | Runway intact |
Watch for the fee-rollover trap. If you roll draws, fees, or extension charges into the new loan on a payoff-only exit, some lenders may see it as cash-out and apply the longer wait. Ask how your lender defines it before you structure the payoff.
One more option: do a payoff-only exit now and a cash-out later. That works, but you pay closing costs twice.
The Payoff Grows While You Wait
An interest-only note never shrinks. Principal stays put, accrued interest keeps building, and fees or an extension charge can add to the total. The new DSCR loan must cover that whole payoff, and the property’s rent must cover the new, larger monthly obligation.
On a standard rental, DSCR cash-out refinances top out around 75% LTV on most programs. So the break-even appraisal is simple:
Break-even appraisal = (payoff + exit costs) ÷ 0.75
That means the appraised value must be about 1.33 times your payoff plus exit costs just to retire the note. Compare that number to a conservative value, not your best-case ARV. Lofty advises modeling ARV, refinance LTV, cash left in the deal, and post-refinance coverage before you buy.
Short-term rental collateral works differently. Cash-out tops out at 70% on short-term rental collateral versus 75% on standard rentals. Lenders also want roughly 12 months of hosting history, with a 640+ score typical. That history is separate from title seasoning. A twelve-month note rarely leaves room to build it from scratch. 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.
One honest point on coverage. A DSCR of 1.00 is where many select programs start. 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. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it.
Month-by-Month Back-Plan
Use this as a checkpoint list, not a schedule anyone can promise.
| Month | Action | Risk if it slips |
|---|---|---|
| 0 | Record deed, choose exit lender, confirm seasoning rule | Surprise wait later |
| 1 to 2 | Start rehab, build draw records | Scope creep |
| Mid-rehab | Re-forecast finish date and lease date | Runway shrinks silently |
| Rehab finish | Market the unit, collect lease application | Vacant at exit |
| Seasoning clears | Order appraisal and rent schedule | Wasted cushion |
| Latest safe start | Submit full exit file | Balloon collides with underwriting |
Set your latest safe start date by counting back from maturity and leaving room for one appraisal reorder. If you cannot name that date today, your runway is shorter than you think.
Fannie Mae’s agency rules make a useful contrast. Fannie Mae’s Selling Guide requires six months on title and an existing first mortgage that is at least 12 months old for a cash-out. A hard money first lien generally can’t be refinanced out of quickly under those rules. Its delayed financing exception waives only the clock for cash purchases, and it returns documented cost, not post-rehab value. A purchase financed by a hard money lien generally fails that fact pattern. These are agency rules, not DSCR rules, and that gap is why investors use DSCR as the exit.
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.
What the Exit File Needs
Start collecting these in month one, not month ten:
- A payoff letter with a valid-through date.
- Entity documents, subject to lender program eligibility if the property sits in an LLC.
- A signed lease, or a market rent schedule if the unit is vacant.
- Rehab and draw records.
- Verified reserves, commonly around 6 months of PITIA, though they vary by lender, leverage, loan size, and transaction type.
- The appraisal and rent schedule ordered by the lender.
Credit still matters. A 620 floor exists in parts of the network, most programs want around 660, and 700+ opens the strongest leverage tiers. Vacant units usually rely on the appraiser’s market-rent estimate for coverage.
What If the Runway Runs Short?
You have four options. None is free.
| Option | Cost | Risk | Fits when |
|---|---|---|---|
| Ask for an extension | Usually a fee | Lender may decline | Delay is small and documented |
| Payoff-only now, cash-out later | Closing costs twice | Equity stays locked | Rent and value clear, wait doesn’t |
| Cash-in refinance | Your own cash | Ties up capital | Appraisal falls short |
| Sell | Selling costs | Gives up the hold | Numbers no longer work |
Treat an extension as a safety valve, not a plan. Extensions are discretionary, and fees and terms vary by lender, so ask your lender for the terms in writing. Do not assume a hard money lender will refinance you into another hard money loan. Many will not.
If you want to see what an early takeout involves, Lendmire’s piece Can a DSCR Loan Take Out a Twelve-Month Hard Money Note Early? covers it.
One planning point on pricing: the permanent loan is priced when your rehab finishes, not when you underwrote the deal. Lofty flags that a move in the market can erase projected cash flow. Build slack into your coverage assumption.
How Should You Decide Before Closing the Bridge?
Make three choices in order, before you sign the note:
1. Pick the note term. Hard money terms run 6 to 18 months. If the rehab is heavy, price the longer term against the risk of a collision.
2. Pick the rehab scope. Match it to the runway, not the other way around.
3. Pick the DSCR path. Confirm the seasoning rule, the LTV cap, and the reserve requirement with the exit lender. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
The strongest files clear both tests: enough equity and enough rental coverage. A larger down payment on the original deal can lower the new payment and lift coverage, but it never erases leverage caps, credit floors, reserve rules, or property eligibility. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path through select lenders in its wholesale network across 41 markets, including Washington, D.C.
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.
Frequently Asked Questions
Can I refinance before month 12?
Yes, if the exit lender’s waiting period has cleared. On the hard money program Lendmire places files with, there is no prepayment penalty, but your own note may differ, so read it. A payoff-only exit may be available sooner than a cash-out, depending on the program.
Does a twelve-month note mean twelve months of interest?
Not necessarily. Interest accrues on the drawn balance while the note is outstanding. If the note carries a minimum-interest clause, you owe at least that amount even if you pay off early. Check the note and get a written payoff statement.
When should I start the DSCR application?
Start choosing the exit lender before you close the bridge, and submit the full file once seasoning clears. Count back from maturity and leave room for one appraisal reorder. If you wait until the last stretch of the term, a single delay can collide with the balloon.
Does finishing the rehab start the seasoning clock?
No. Seasoning generally runs from the recorded deed. Finishing the rehab or signing a lease does not start it. Those events matter for the appraisal and the rent evidence, not for the wait.
Does strong rent shorten the wait?
No. Rent coverage and seasoning are separate tests. A property can clear coverage comfortably and still be inside the waiting period. Only the lender’s own policy, or a payoff-only structure where the program allows it, changes the timing.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
3. Fannie Mae Selling Guide B2-1.3-03
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money Leverage for the Top Experience Tier Versus the DSCR Takeout · Hard Money Refinance Documentation Before Moving Into a DSCR Loan · Vacant Rental DSCR Payoff Requirements After Hard Money
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.