Question about refinancing a HML into a traditional/DSCR loan...

[Faiz Kanash]

Hello!
Just a question to see if this is doable... Is it possible to refinance a hard money loan into a traditional/DSCR 30 year loan if I don't have that much equity in the property? Not a cash-out refinance, just a general refinance. For example, I buy a 4 unit using a hard money loan(Interest only 12 month) but only put 5% down on the property, and after finishing fixing it up I want to keep it for rental income. But, would I be able to get a traditional/DSCR loan on it if I only have 5% equity in the property, or would the lender require me to put down additional money onto the property?

Thanks!

[Robin Simon]

Quote from @Ned Carey:

Your equity at refinance has nothing to do with how much you put down at original purchase. 

Your loan to value (LTV) is how much is the new loan you are applying for vs the current value of the property. DSCR lenders typiclaly want 70-85% loan to value. The interest rate you will get will be better as you lower the loan to value.

Partially true - generally currently equity/cost basis doesn't matter for DSCR Loans after six months of seasoning since purchase, but if trying to do a refinance within the first six months, there will typically be restrictions/limits etc.

*Note - since 4/1/23 - conventional now has these severe limits on cash-out for the first 12 months