Common reasons to refinance
Investors refinance on a rate-term basis to move from a short-term bridge or renovation loan into long-term financing, to exit a loan with an expensive structure, to switch between interest-only and amortizing payments, or to take advantage of a better market for investor loans.
- Replacing a bridge or rehab loan after the property is stabilized and rented
- Removing a balloon or adjustable feature
- Changing the prepayment structure going forward
- Lowering the monthly payment to improve cash flow and DSCR
How it is priced
Rate-term refinances are generally priced closer to purchases than cash-out loans are, because equity is staying in the property. Your loan-to-value is calculated against the new appraisal, so appreciation or improvements since you bought can move you into a better LTV tier on their own.
Watch your current prepayment penalty
If your existing DSCR loan has a prepayment penalty still in effect, refinancing triggers it. Part of our analysis is calculating that cost and comparing it with the savings from the new loan, so you can see the break-even point clearly. Sometimes the right answer is to wait.
What to gather
Have your current mortgage statement, the lease or leases, proof of insurance, a recent property tax bill and statements showing reserves. Entity documents are needed if the property is held in an LLC.
Factors that weigh most on this loan
| Factor | Why it matters here |
|---|---|
| Loan-to-value | Measured on today’s appraised value. |
| Prepayment penalty | Both your current one and the new one matter. |
| Interest-only | Switching payment type changes DSCR and price. |
| Rate lock | Lock timing matters when you are refinancing to improve pricing. |
Common questions
Can I take any cash out on a rate-term refinance?
Generally only a small amount, typically to cover closing costs, is allowed before a loan is treated as cash-out. Each wholesale lender defines this limit, and we will confirm it for your scenario.
Does a rate-term refinance need a new appraisal?
In most cases yes. The new appraisal sets your loan-to-value and, on DSCR loans, often supplies the market rent figure used in the ratio.