- Your new loan is the lowest of four numbers: the LTV cap on the appraisal, your credit tier's cap, a cost-basis cap if you're early, and the loan the rent can carry.
- Most outside DSCR lenders want 90 days of ownership. Until then, Roc Capital and Civic hold the loan to 80% of what you've spent.
- Cash-out refinances top out near 75% of value at most lenders. Rate-and-term reaches 80% at several, but it only pays off what you owe plus costs.
- The hard money payoff is more than the principal. Accrued interest, deferred fees and any exit point all come out of your proceeds.
- Conventional cash-out rules want six months of ownership and won't retire a first mortgage younger than 12 months, which shuts out most rehab exits.
- In the duplex example, a $267,000 loan returns $16,113 and leaves $17,421 in the deal. At a $330,000 appraisal, a cash-out would need $3,387 from you at closing.
The refinance is a new loan, underwritten from zero
To refinance after rehab is to replace a short-term, interest-only rehab or hard money loan with a 30-year rental loan, most often a DSCR loan. The new lender doesn't inherit anything the rehab lender decided. It orders its own appraisal, pulls your credit, counts the rent its own way and applies its own seasoning rule. Published DSCR closing times run about two to five weeks: Defy quotes 14 to 21 days, Easy Street 30 and Griffin an average of 34.
You'll pick one of two refinance types. A cash-out refinance borrows more than the payoff and closing costs and hands you the rest; Easy Street treats anything over $2,000 to you as cash-out. A rate-and-term refinance just pays off the existing loan and the costs. Lenders give the two different leverage caps, which is why the choice matters most when the appraisal disappoints.
The deal: a side-by-side duplex coming off hard money
You bought a 1950s side-by-side duplex for $186,000 with a hard money loan: 90% of the price ($167,400) plus 100% of a $71,000 rehab budget, or $238,400, at 10.25% interest-only with 1.5 points. Two kitchens, a roof, a furnace and new floors took nine weeks. One side leased at $1,350 a month while the work wrapped up, and the other signed at the same rent a week before the appraisal.
| Input | Amount |
|---|---|
| Purchase price | $186,000 |
| Rehab spent | $71,000 |
| Total cost basis | $257,000 |
| Hard money balance | $238,400 |
| Appraised value after the work | $356,000 |
| Rent, two units at $1,350 | $2,700 a month |
| Taxes and insurance | $350 + $150 = $500 a month |
| Refinance | 30-year fixed at 7.375% |
Scroll sideways for the other columns →
Limit 1: the appraisal times the LTV cap
Every rental lender caps the loan at a percentage of appraised value, its LTV. On a cash-out, the October 2026 published caps run 70% to 80%, and most sit at 75%: Lima One, LendingOne, Easy Street, Roc and Civic all publish 75%, while Griffin and Defy go to 80%. Rate-and-term caps run 75% to 80%, with LendingOne, Easy Street, Roc, Civic and Defy at 80%.
On the duplex, $356,000 at 75% is a $267,000 cash-out loan. At 80%, a rate-and-term loan could go to $284,800, but it can only be as large as the payoff plus costs.
What the appraiser is pricing
The rehab lender's ARV was a forecast. The refinance appraisal is a measurement of a finished property against recent sales of similar ones. On a rental the appraiser also gives an opinion of market rent, and the DSCR lender uses that opinion when it's lower than your leases. Staying in-house removes one variable: Lima One lets you use the appraisal from your fix-and-flip loan to set the after-repair value on its DSCR exit loan.
You can't pick the appraiser, but you can leave a packet that makes the work easy to see:
- The scope of work with each line's cost, and paid invoices to match.
- Final lien waivers, permits and inspection sign-offs.
- Before-and-after photos of every room you touched.
- Signed leases for each unit.
- Three to five recent sales you think are comparable, with a line on why each one fits.
Limit 2: the tier your credit score lands in
Leverage steps down with your score. RCN Capital's cash-out cap drops from 75% to 70% to 60% as the credit tier falls, and on purchases it publishes 80% at 700 and above but 65% at 660 to 679. DSCR minimum scores run 620 to 680, with most lenders at 640 to 660.
On the duplex, a 70% cap is $249,200. That's $1,687 short of the $250,887 needed to pay off the hard money and close, so you'd bring cash instead of getting it. Check the refinance lender's tier for your score before you close the rehab loan. A score that clears the hard money lender's 600 to 660 minimum may not clear the refinance.
Limit 3: the seasoning clock and your cost basis
Seasoning is how long you've owned the property, and it decides whether the lender uses the new appraisal or what you spent. Which rule applies depends on where you refinance:
- Same lender as the rehab loan: Lima One waives seasoning when you move its fix-and-flip loan into its rental loan and takes up to 50% off the origination fee. LendingOne's fix-to-rent loan typically converts at up to 75% of ARV with 0.5% off the rate, and charges an extra point at payoff if you take the refinance elsewhere.
- Outside DSCR lender, past 90 days: 90 days or three months is the usual wait at Kiavi, LendingOne, Lima One, Roc and Civic before they lend on appraised value.
- Outside lender, under three months: Roc Capital and Civic lend no more than 80% of your total cost basis: the price you paid plus documented rehab.
- Non-QM lenders: Griffin and Defy advertise options with no seasoning. Ask how they value a property you bought weeks ago.
- Conventional (Fannie Mae): a borrower on title for six months, and the first mortgage you're retiring has to be 12 months old or more, counted between the two note dates.
The duplex finished in nine weeks. Go to Roc or Civic at day 75 and the cap is 80% of $257,000, or $205,600: $45,287 short of the payoff and costs. Waiting until after day 90 costs about $2,700 a month, made up of $2,036 of interest on the fully drawn $238,400 plus $685 of taxes, vacant-property insurance and utilities. Three extra weeks costs about $2,000; refinancing early would have meant finding $45,287. Wait.
Limit 4: the loan the rent can carry
A DSCR lender divides qualifying rent by the full payment: principal, interest, taxes, insurance and any HOA dues (PITIA). Published minimums: 1.05 at Roc and Civic; 1.00 at Lima One and RCN; 0.80 at Kiavi; 0.75 at LendingOne and Defy; no minimum at Easy Street. Qualifying rent is whichever is smaller, the lease or the appraiser's market rent. Kiavi lets the lease count up to 110% of market rent, and Roc and Civic underwrite an empty unit at 90% of its market rent.
Turn that around and the rent sets a maximum loan:
At 7.375% over 30 years, each dollar borrowed costs $0.0069068 a month. With both sides leased at a 1.05 minimum, the duplex supports $2,700 ÷ 1.05 = $2,571 of PITIA. Take out $500 of taxes and insurance and $2,071 is left for principal and interest, which carries a $299,900 loan. With one side vacant it qualifies on $1,350 + $1,215 = $2,565 of rent and supports $281,300. Both are above $267,000, so the LTV cap binds, not the rent. On the $267,000 loan the payment is $1,844 of P&I, PITIA is $2,344, and the DSCR is 1.15 leased or 1.09 with one side empty.
Rent binds where values run high against rents. If this duplex leased at $1,150 a side, a 1.05 minimum would hold the loan to about $244,800, below both the LTV cap and the payoff. At these taxes, insurance and rate, it takes $2,461 of rent to carry the full $267,000 at 1.05.
All four limits on one page
| Limit | Rule used | Duplex result |
|---|---|---|
| LTV cap, cash-out | 75% of $356,000 | $267,000 |
| Credit tier, lower score | 70% of $356,000 | $249,200 |
| Cost basis, owned under 3 months | 80% of $257,000 | $205,600 |
| Rent, both units leased | $2,700 at a 1.05 minimum | $299,900 |
| Rent, one unit vacant | $2,565 at a 1.05 minimum | $281,300 |
| Past 90 days at the top credit tier | Lowest that applies | $267,000 |
Scroll sideways for the other columns →
From payoff statement to cash in hand
Ask the hard money lender for a payoff statement dated for your refinance closing. It's rarely just the principal. Expect interest accrued since the last payment, any fees you deferred (Lima One lets borrowers defer origination fees to the exit), any exit point for refinancing elsewhere, and release and recording charges. This example assumes the rehab lender charges a 1-point exit fee like LendingOne's, and that the refinance closes 12 days after the last interest payment.
| Line | Amount |
|---|---|
| New DSCR loan, 75% of $356,000 | $267,000 |
| Hard money principal | −$238,400 |
| Exit point, 1% of $238,400 | −$2,384 |
| Accrued interest, 12 days at 10.25% | −$803 |
| Refinance closing costs: two-unit appraisal, title, lender fees | −$6,900 |
| Escrow deposit for taxes and insurance | −$2,400 |
| Cash to you | $16,113 |
Scroll sideways for the other columns →
Against that, here's what went in. The down payment was $18,600 and the points $3,576. Purchase closing costs were $3,800. Three months of interest came to $5,503: $4,290 on the purchase portion and $1,213 on rehab draws as they went out. Taxes, insurance and utilities added $2,055. Total cash in is $33,534, so $17,421 stays in a duplex with $89,000 of equity, the gap between the $356,000 value and the $267,000 loan.
When the appraisal comes in short
Say the duplex appraises at $330,000 instead of $356,000. A 75% cash-out is $247,500, which is $3,387 short of the $250,887 needed for the payoff, the costs and the escrow deposit. You have four moves:
- Switch to rate-and-term. Where the cap is 80%, a $250,887 loan is 76.0% of $330,000 and fits. You take nothing home, but you're off 10.25% interest. The payment is $1,733 of P&I and the DSCR is 1.21.
- Ask for a reconsideration of value with closer sales the appraiser didn't use.
- Bring the $3,387. If the rehab loan is close to maturity, a small check can cost less than an extension.
- Wait and re-appraise, at about $2,700 a month on hard money, only if the value is likely to move.
Work out your break-even values before the appraiser visits. On this deal a 75% cash-out pays everything off at a value of $334,500 or higher; at 80%, a rate-and-term loan still works down to $313,600. Below that, you're bringing cash either way.
Bought with cash? Delayed financing gets the money back
If you paid cash at auction or off-market, there's no rehab loan to retire. You want your cash back. Kiavi advertises restoring your cash position within 6 months of purchase on investment property, and Angel Oak lists delayed financing next to purchase and refinance on its investor cash-flow program. Ask each lender how it treats the rehab money you spent.
Fannie Mae's version for conventional loans (Selling Guide B2-1.3-03, dated December 10, 2025) has firm limits. The purchase must be arm's-length and within six months of the new loan. The settlement statement must show no mortgage financing, title must be free of liens, and you have to document where the money came from. The ceiling on the new loan is your documented initial investment in the purchase, plus financed closing costs, prepaid fees and points on the new loan, still within the cash-out LTV limits.
Rehab spending isn't in Fannie's formula. Had the duplex been a $186,000 cash purchase, the conventional route would return roughly the price plus the new loan's costs, against $267,000 from a DSCR lender lending on value after 90 days.
The refinance checklist, in the order it happens
- Before you close the rehab loan, get the refinance lender's terms: the LTV cap at your score, the seasoning rule, the DSCR minimum and the prepayment options.
- Read the rehab loan's exit terms: maturity date, extension fees, deferred origination and any exit point for refinancing elsewhere.
- Lease every unit before the appraisal so qualifying rent is the lease, not 90% of market rent.
- Order the payoff statement dated for the refinance closing, and check every fee on it.
- Pick cash-out or rate-and-term after the appraisal, using your break-even values.
- Choose the prepayment schedule. Many DSCR loans default to a five-year declining penalty; shorter schedules, a flat 5% or no penalty at all are available for a higher rate.
Still planning? The BRRRR method step by step walks one deal from offer to refinance, and cash-out refinance covers a rental you already own.
Rehab and DSCR loans are business-purpose credit for rentals and resale property only; no one in your household can live in the home. If you'll occupy it, you need a residential mortgage. Ask a CPA how cash-out money and any eventual sale will be taxed.