Refinancing a Rental With a DSCR Loan: Your Options

Yes. DSCR loans are used to refinance rentals as often as to buy them. You can change your rate or term, pull out equity, or move a finished rehab off short-term financing and onto a long-term loan. In each case the lender qualifies the loan mainly on the property's rent compared with its payment.

Option 1: rate-and-term

You replace your current loan without taking extra cash, beyond small amounts allowed to cover costs. Investors do this to:

• Swap an adjustable or balloon loan for a long-term fixed one
• Change the loan term or payment structure
• Move a property from personal financing into an LLC
• Lower the rate, when market rates allow it

The new payment still has to meet the lender's debt service coverage ratio (DSCR) minimum. On RSC Private Lending's DSCR Rental program, that minimum is 0.75x, and a rate-and-term refinance goes up to 80% loan-to-value (LTV).

Option 2: cash-out

You borrow more than you owe and keep the difference. Cash-out loans typically come with a lower maximum LTV and may require a period of ownership first. On RSC's DSCR Rental program, a cash-out refinance goes up to 75% LTV. For a deeper look, see our article on DSCR cash-out refinances.

Option 3: graduate from a rehab or bridge loan

This is the classic move for investors who buy, renovate and rent. Once the property is finished and rented, or rent-ready, a DSCR loan can pay off the short-term loan and replace it with long-term financing.

To make it work, the property usually needs to be in rentable condition, appraise high enough to fit the LTV limit, and produce rent that covers the new payment at the required ratio.

Example (illustrative only): An investor bought a house for $160,000 and spent $50,000 on a rehab with a short-term loan of $185,000. The finished home appraises at $280,000 and rents for $2,300. A DSCR loan large enough to pay off the $185,000 balance, with a monthly payment around $1,800 including taxes and insurance, would produce a DSCR of about 1.28x. The investor moves from a short-term loan to long-term debt and keeps the property.

Option 4: delayed financing

If you bought a rental with cash, some lenders let you refinance soon after closing to recover part of that cash, typically based on your documented purchase cost. Rules vary widely from lender to lender.

What you will need

DSCR refinances generally skip tax returns and pay stubs. Expect to provide:

• Current leases, or a market rent estimate from the appraisal
• Proof of insurance and property tax amounts
• A payoff letter from your current lender
• Entity documents if you hold title in an LLC or other entity
• Bank statements for reserves

What this means for you

Know your goal first: better terms, cash out, or a clean exit from short-term debt. Then run the new payment against your rent. If the ratio works, a DSCR refinance can be a straightforward next step.

Thinking about refinancing a rental? Send RSC Private Lending your scenario for a term sheet in 24 hours. All loans are business-purpose and subject to underwriting.