Refinancing replaces the loan on a property with a new one. For investors it does three jobs: it can lower the monthly payment, move a short-term loan into long-term debt, and release equity as cash for the next purchase.
Moving from a bridge loan to long-term debt
This is the most common refinance we see. A fix and flip or bridge loan is short-term and interest-only. Once the renovation is done and the property is rented, a 30-year rental loan replaces it. The payment drops, the term extends, and you can often recover much or all of the cash you put into the project.
Taking cash out
A cash-out refinance converts equity into cash. Investors use it for the down payment on another property, for improvements, or to pay off more expensive debt. We lend up to 80% loan-to-value on a rental cash-out refinance.
| Example | Amount |
|---|---|
| Property value after renovation | $500,000 |
| New loan at 80% | $400,000 |
| Bridge loan paid off | $340,000 |
| Cash returned before closing costs | $60,000 |
The example is an illustration, not a quote.
Lowering the rate or payment
If rates have fallen since you borrowed, or you are leaving a higher-rate bridge loan, a refinance lowers the cost of holding the property and improves monthly cash flow.
Consolidating
Several rentals can be combined into one portfolio loan with a single payment. A 120% partial release lets you sell one property out of the portfolio later.
What qualifies
A rental refinance is approved on the property’s debt service coverage ratio: rent divided by the full monthly payment. A ratio of 1.0 or better is preferred. Your personal income is not part of the review. See DSCR rental loans for the details.
Things to check first
- Whether your current loan has a prepayment penalty
- That the new payment still leaves the property covering itself
- Closing costs, which in Massachusetts include your closing attorney’s fee
Send us the property and we will show you what a refinance could look like.