The Quick Read: The right provider for a maturing hard money note is the one whose program fits the property, the seasoning clock, and the amount of cash you want back, and a broker that shops a wholesale network of DSCR lenders can match those three. No single lender is the answer for every file. Lendmire is a mortgage broker, so it does not rank lenders. It explains what decides the outcome.
- Cash-out is a separate transaction from a payoff-only refinance. It carries a seasoning clock, a lower leverage ceiling, and reserve rules.
- Across most of the wholesale network, DSCR cash-out refinances top out around 75% LTV on standard rentals, with about 6 months of seasoning as the common expectation.
- The new lender’s appraisal sets both value and market rent, so your own estimate does not size the loan.
- The maturity date fixes your timeline, so plan backward from it and keep a fallback ready. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
What Happens When a Hard Money Note Comes Due?
A hard money note is interest-only and short-term, so the entire principal is due at maturity. On the network’s hard money program, terms run 6 to 18 months with no prepayment penalty, which means paying the note off early costs nothing extra. The risk sits at the end of the term.
A balloon payment is a refinancing-risk problem. Motley Fool’s balloon payment explainer notes that borrowers usually plan to sell or refinance before the balloon is due, and that the secured property can be foreclosed if they cannot pay. Missing maturity can bring extension fees, default terms, or a lien action. The deadline decides the order of operations, not your preference.
Most investors in this spot hold a rehabbed or stabilized rental and want to move into long-term financing. A DSCR loan is built for that exit. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The complete DSCR loans guide covers the basics. This article covers the takeout itself.
Key Terms Defined
Balloon: The lump sum of principal due when the hard money note matures.
Payoff-only refinance: A new loan that covers the hard money payoff, accrued interest, fees, and closing costs, with no cash returned to you.
Cash-out refinance: A new loan that pays off the note and returns cash to you above those costs.
Seasoning: The ownership period a lender requires before it sizes a loan on appraised value instead of cost.
DSCR: Monthly rent divided by the full monthly obligation, meaning principal, interest, taxes, insurance, and any HOA dues.
Per diem interest: Daily interest that accrues on the hard money payoff until the day it is paid.
Why Can’t One List of Top Providers Answer This?
Because provider quality depends on your file. A lender that suits a stabilized single-family rental with a long ownership history may not suit a freshly rehabbed duplex with a young title. The best program for your situation turns on property type, credit profile, leverage need, documentation, and how close the maturity date is.
That is why a broker model fits this problem. A broker that works with many wholesale lenders sees the real spread in seasoning rules, leverage caps, and reserve requirements. It then matches the scenario to the program. The lenders that write a given file depend on the scenario, not on a ranking. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Here is how the provider types differ by what they typically offer.
| Provider type | Typical fit | Main catch |
|---|---|---|
| Broker with wholesale network | Files needing a program match | Lender still approves the loan |
| Single direct lender | Files that fit its one program | Fewer program options |
| Large retail lender | Conventional-style borrowers | Often needs an individual borrower |
| Hard money to hard money | Short-term bridge fallback | Resets the maturity clock |
Programs change, and every file is underwritten individually.
How Underwriting Treats the Takeout, Step by Step
The mechanics run in a fixed order. Each step can limit the next.
1. Classify the refinance. If the new loan only pays off the hard money note and costs, it is payoff-only. Any cash back makes it cash-out. This single fork decides seasoning, leverage, and reserves.
2. Check the seasoning clock. On most programs in the network, the clock runs from the recorded deed, not from the day the hard money lender funded. The hard money maturity date ignores the seasoning date entirely. Inside the window, cash-out is typically sized on cost basis plus documented improvements. Past the window, it is sized on appraised value. About 6 months is the common expectation across the network, though it varies by program.
3. Order the appraisal. The appraisal does two jobs. It sets value, which drives LTV, and it sets market rent, which drives coverage. One-unit properties use the Form 1007 rent schedule. Two-to-four-unit properties use Form 1025. The rent used for lender review is often the lower of the lease rent and the appraiser’s market rent. Short-term rentals work differently, because nightly-rate properties lean on platform booking data instead.
4. Run coverage on the new loan. A larger cash-out loan lowers coverage, because the monthly obligation rises while rent stays flat. Many select programs in the network start at 1.00 coverage, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. A property can have the equity for cash-out and still lack the rent.
5. Clear reserves and credit. Reserves vary by lender, leverage, loan size, and transaction type. About 6 months of PITIA is common, and loans above $1,500,000 typically step up to about 9 months. Credit floors start near 620 in parts of the network. Most programs want around 660, and 700 or higher unlocks the strongest leverage tiers.
6. Close and pay off. The title company pays the hard money lender directly from loan proceeds, and you never handle the payoff money. Order a current payoff statement, because it includes per diem interest and any exit fees. Confirm the lender’s lien-release requirements before closing.
What Does a Cash-Out Takeout Look Like in Numbers?
Run the numbers in percentages of appraised value. This is a modeled illustration, not a market fact.
Say the new appraisal supports 100 units of value. On a standard rental, a DSCR cash-out refinance tops out around 75% LTV across most of the network. That leaves some room in value before closing costs, per diem interest, and exit fees come out. On a short-term-rental property, the cash-out ceiling is lower, so the room is smaller. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Now say the hard money loan was sized aggressively and the payoff sits near 72% of value. At 75% on a standard rental, almost nothing is left to return. A payoff-only refinance may be the only fit, and it still solves the deadline.
Then check coverage. The larger the new loan, the thinner the coverage. If rent covers the new obligation at roughly 1.2x, the file has room. If coverage lands near 1.00, cash-out may need to shrink. Clearing 1.00 is also not the same as positive cash flow. DSCR compares rent to PITIA only, so repairs, vacancy, management, utilities, and capex sit outside the calculation.
A larger down payment or smaller loan lowers the monthly obligation and can lift coverage. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Where the General Rule Breaks
These edge cases are the ones that change the plan.
The loan is young and the balloon arrives before seasoning is met. You have two paths. You can request an extension from the hard money lender, or you can do a payoff-only DSCR refinance now and a cash-out later. The extension costs fees. The two-step path costs a second set of closing costs. Model the carry cost of waiting, because the payoff keeps growing while you wait. If the hard money term is shorter than the seasoning window, you are exposed to a maturity that arrives before a cash-out refinance is available. A payoff-only refinance does not depend on that seasoning window, so it stays open as the fallback when the timing is tight.
Hard money already sits near the cash-out cap. If the hard money loan was sized near 75% of after-repair value, there is no cash left under a 75% cap on a standard rental. Only a no-cash-out refinance fits, and that type of refinance can be done from the start of ownership.
Delayed financing does not rescue a hard money purchase. Agency guides describe a delayed financing exception for cash buyers, and it is a contrast point here, not a DSCR rule. The Fannie Mae Selling Guide requires an arm’s-length original purchase and a settlement statement showing no mortgage financing was used. A hard money purchase carries a lien, so it fails that test. DSCR programs set seasoning by their own contract terms, not by any federal rule, and some have their own version of delayed financing for true cash buyers. These generally return cost basis, not post-rehab value.
The appraisal comes in low, or market rent comes in short. Lower value cuts the loan amount. Lower rent cuts coverage. Signed leases in place before the appraisal give the appraiser real rent evidence. Keep a backup plan, such as a cash paydown or a bridge extension, in case value lands under your number. An appraisal reconsideration request with recent comps and documented improvements is a normal step.
Entity and property type. LLC ownership is generally supported on DSCR loans, subject to lender program eligibility. A conventional-style takeout often needs an individual borrower instead. Some property types are not offered at all in the network, including manufactured homes, log homes, and barndominiums.
The note has already matured. Run the extension request and the new application in parallel, and tell the DSCR lender up front. Do not let the application wait on the outcome of the extension.
Which Exit Fits Your Situation?
| Situation | Likely path | First move |
|---|---|---|
| Seasoned title, equity above the cap | DSCR cash-out refinance | Order the appraisal |
| Young title, balloon close | Extension or payoff-only | Price the extension fee |
| Payoff near the leverage ceiling | Payoff-only DSCR refinance | Confirm the payoff statement |
| Thin rent coverage | Smaller loan or paydown | Gather signed leases |
| Not stabilized yet | Hard money to hard money, up to 65% of value, varies by lender, property, and experience | Compare terms and fees |
The hard money refinance fallback in the last row varies by lender, property, and experience. It resets the maturity clock without fixing the underlying exit.
Mistakes That Derail the Exit
Starting late is a common mistake. Begin the process well before maturity, because the appraisal, title work, and payoff statement each take their own time.
Assuming the lease rent counts is another. The underwriter may use the lower of the lease and the appraiser’s market rent.
Treating seasoning as a law is a third. It is lender policy, so ask for the written seasoning language and whether cash-out is sized on cost basis or appraised value.
Skipping the payoff statement is a fourth. Exit fees and per diem interest reduce your cash back.
Forgetting reserves is a fifth. Reserve documentation, such as bank or brokerage statements, needs to be ready when the file goes in.
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path through its wholesale network of DSCR lenders across 41 markets, including Washington, D.C.
How to Vet a Provider
Ask any provider these questions in writing:
- Does the program offer cash-out, and what is the leverage cap on my property type?
- How is seasoning defined, and does it run from the deed?
- Inside the window, is the loan sized on cost basis or appraised value?
- What reserves are required at my loan size?
- Which appraisal forms and rent figures does the lender use?
- Is my entity structure accepted, and what credit tier applies?
A broker can put these questions to several wholesale lenders at once. Programs from different lenders differ most on seasoning and reserves, which is why comparing them side by side matters.
Frequently Asked Questions
Can I pull cash out when I exit a hard money loan?
Yes, if the new loan sizes above the payoff and costs. Across most of the network, DSCR cash-out tops out around 75% LTV on standard rentals, with about 6 months of seasoning as the common expectation. Programs vary, so confirm the exact terms for your property. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Does seasoning run from the hard money funding date?
On most DSCR programs it runs from the recorded deed. The hard money maturity date does not shorten or extend it. Ask the lender how it defines the clock, since lender policy sets it.
What if my balloon is due before the seasoning window ends?
You can extend the hard money note or do a payoff-only DSCR refinance and cash out later. The first costs extension fees. The second costs a second closing. Compare both against the cost of waiting.
Why does the new appraisal matter so much?
It sets value for LTV and market rent for coverage. A low value shrinks the loan, and a low rent shrinks coverage. Signed leases in place before the appraisal help support the rent figure.
Does a larger down payment fix a thin file?
It lowers the monthly obligation and can lift coverage. It does not remove leverage caps, credit floors, reserve rules, or property eligibility. The file still has to clear both the equity test and the rent test.
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. Reach the team at 828-256-2183. Qualification is subject to lender guidelines, and nothing here is a commitment to lend.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. Motley Fool: Balloon Payment
2. Fannie Mae Selling Guide, B2-1.3-03 Cash-Out Refinance Transactions
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 Much a Cash-Out Refinance Lends on a St. Charles MO Rental · How Much a Rental Cash-Out Refinance Releases After Payment Math · How Much a DSCR Cash-Out Pays Off on a Hard Money Rehab
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.