Rate-and-term refinance out of a hard money loan
How do I refinance out of a hard money loan into a long-term rental loan?
A rate-and-term refinance out of hard money has one job — retire the existing balance in full with no cash left over — and that only works cleanly when the appraised value and the new lender’s maximum LTV together reach far enough to cover what is owed.
- DSCR rental loan A rate-and-term refinance replaces the hard money balance with a long-term amortizing loan and takes no cash out, which needs leverage close to the top of what a lender publishes to fully retire the prior balance.
- A cash-out refinance sized for extra proceeds The goal here is retiring the hard money balance in full, not extracting additional cash — sizing the request as a cash-out when the math only supports payoff invites a declined or re-traded loan.
Lenders in the directory
Who publishes criteria this deal clears
Matched across all 37 lenders in the directory on published maximum LTV. This list is computed from stored criteria, not curated — it changes when a lender’s published figures change.
Writes the product, has not published the threshold
These 8 carry a relevant product but have not published the figure this scenario depends on, or carry no verification date. We will not claim they qualify and we will not claim they do not — ask them directly.
Why this needs more leverage than a typical purchase
Unlike a purchase, where the down payment is simply whatever the borrower brings, a rate-and-term refinance out of hard money is constrained on the other side: the new loan has to be large enough to pay off the existing balance, plus any accrued interest or exit fees, with nothing left to negotiate. This page filters to lenders publishing a maximum LTV at or above 80%, which is closer to the top of what this directory’s rental lenders publish, because a lower ceiling can leave a gap between what the new loan covers and what the hard money loan actually costs to retire.
The appraisal at refinance time is the real variable
The hard money loan was almost certainly sized against the purchase price or the projected after-repair value at origination. The refinance appraisal reflects the property’s actual current condition and market value — if the rehab did not add as much value as projected, or the market moved against the borrower, the appraisal can come in below what is needed to fully retire the balance even with maximum leverage. See appraisal came in low for what happens next if that occurs.
Timing against the hard money loan’s maturity
A rate-and-term refinance done proactively, before the hard money loan’s term is close to expiring, has more room to shop rates and terms than one done under deadline pressure — the maturing-balloon version of this scenario, covered separately, carries a different urgency and a different set of trade-offs.
What to have ready
- Current payoff statement from the hard money lender
- Recent appraisal or comparable sales supporting current value
- Documentation of any rehab completed, if the property was purchased for renovation
Questions
Why does this scenario need higher leverage than a purchase?
What if the refinance appraisal comes in below what I owe?
Is this different from refinancing a maturing balloon?
Terms used on this page
- Hard Money Loan — A hard money loan is short-term real estate financing secured by the property and underwritten mainly on its value, typically from a private lender rather than a bank.
- After Repair Value (ARV) — After repair value is the estimated market value of a property once planned renovations are finished. It is the basis for most fix-and-flip and BRRRR lending decisions.
- Debt Service Coverage Ratio (DSCR) — DSCR is a property’s gross monthly rent divided by its total monthly mortgage payment. A DSCR of 1.00 means the rent exactly covers the payment; 1.25 means rent exceeds the payment by 25%.