The refinance; Hard Money vs Mortgage Lender
New to Real Estate · Louisville, KY · Member since 2024 · 9 posts · 11 votes
The refinance; Hard Money vs Mortgage Lender
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AJ ExnerPro Member
Lender · Springfield, MO · Member since 2023 · 651 posts · 314 votesI agree with @Divin Kanyama and would even add that the HML might have some other benefits to sticking with them on the refinance that they wouldn't normally have (so asking specifically on that compared to going through their "normal" DSCR route).
Specifically, I have found that they might have lower seasoning requirements, so if they helped you renovate the property and physically saw the upgrades and changes you've made through the draw process that they would be more "lenient" on what they would require if the appraisal comes in higher. Plus, if it comes down to it, they are more familiar with you as a borrower and could close more effectively because they have your information on file (LLC documents, etc.)
To play devil's advocate though, I have found that the programs that do one thing well (HMLs or DSCR) will often struggle to do the other as well. My best guess is that to Underwrite a HML is a lot different than Underwriting a DSCR loan and that the overlap is a little too much for any lender to handle. The things that a good DSCR lender looks for is going to seriously slow down a good HML underwrite and potentially bog a deal down to much.
Side by side is definitely good, but the word that Divin used (certainty) is what I call 'close-ability', which is hard to see on the front end but your time is definitely worth it. Hopefully you can catch a good program with good terms and get what you need out of it.
Good luck!
10 Replies
- 1wDivin KanyamaBusiness MemberAccountant · Seattle, WA · Member since 2025 · 149 posts · 39 votes
@Allen Montgomery , I’d get a term sheet from both and compare the full deal—not just go with the lender I already know. The hard-money lender may be easier and faster because they already know the property and the rehab. The mortgage lender, though, may offer better long-term pricing.
The main things I’d compare are the rate, points and fees, cash-out amount, seasoning rules, appraisal, reserve requirements, prepayment penalty, and closing timeline. I’d also make sure the new loan fully pays off the hard-money balance and closing costs, then calculate how much cash I’m actually getting back.
For me, the best choice is the lender offering the best overall combination of cost, certainty, and speed—not just the lowest advertised rate. If the hard-money lender is competitive and can close quickly, I may stay with them. If the mortgage lender offers meaningfully better long-term terms and I have enough time, I’d likely switch. Either way, I’d start early and keep a backup option so I’m not forced into an expensive extension.
- 1wAJ ExnerPro MemberLender · Springfield, MO · Member since 2023 · 651 posts · 314 votes
I agree with @Divin Kanyama and would even add that the HML might have some other benefits to sticking with them on the refinance that they wouldn't normally have (so asking specifically on that compared to going through their "normal" DSCR route).
Specifically, I have found that they might have lower seasoning requirements, so if they helped you renovate the property and physically saw the upgrades and changes you've made through the draw process that they would be more "lenient" on what they would require if the appraisal comes in higher. Plus, if it comes down to it, they are more familiar with you as a borrower and could close more effectively because they have your information on file (LLC documents, etc.)
To play devil's advocate though, I have found that the programs that do one thing well (HMLs or DSCR) will often struggle to do the other as well. My best guess is that to Underwrite a HML is a lot different than Underwriting a DSCR loan and that the overlap is a little too much for any lender to handle. The things that a good DSCR lender looks for is going to seriously slow down a good HML underwrite and potentially bog a deal down to much.
Side by side is definitely good, but the word that Divin used (certainty) is what I call 'close-ability', which is hard to see on the front end but your time is definitely worth it. Hopefully you can catch a good program with good terms and get what you need out of it.
Good luck!
- 1wAlex BekezaBusiness MemberLender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
@Allen Montgomery There are some groups that offer killer pricing on the HML side and average or worse on the DSCR side and vice versa. I wouldn't stay with the HML just because he already has your LLC docs, SOW, etc on hand. I'd shop a couple lenders to make sure you're getting the best terms. Perhaps even send the quotes to the HML and see if they'd like to match or beat. I heard a great quote from a lender conference once time. The speaker said "Be faithful to your spouse but have two lenders".
Investor Property Loan5306 Reviews - Investor · Austin, TX · Member since 2014 · 142 posts · 84 votes1w
I wouldn't make the decision based on whether they call themselves a hard-money lender or mortgage lender. For the refinance, you're comparing two DSCR loans.
Put the written terms side by side and compare rate, points, total closing costs, valuation method, seasoning, cash-out limits, reserves, prepayment penalty, and most importantly the likelihood of actually closing on time.
I’d also ask whether the quoted terms are already approved for your specific property and borrower profile or are still just preliminary. A slightly cheaper loan is not cheaper if the terms change late and you end up paying an extension on the hard-money loan.
For a BRRRR exit, I would prioritize certainty first, total long-term cost second, and familiarity with the existing lender third.
- Lender · NJ · Member since 2025 · 50 posts · 23 votes6d
I think it really comes down to the terms and what the investor is trying to accomplish. If both lenders can offer the same DSCR cashout, I'd compare the rate, fees, prepayment penalty, and how long they plan to hold the property.
- 5dGregory AcsPro MemberLender · MD · Member since 2025 · 133 posts · 52 votes
There isn't one right answer. I'd compare both lenders based on the full picture, not just the interest rate. Things like closing costs, prepayment penalties, appraisal requirements, reserve requirements, turnaround time, and how they handle cash-out refinances can have just as much impact as the rate itself.
I'd also ask each lender to provide a complete loan estimate so you can compare the actual cost of the refinance side by side. Sometimes the lender you used for the hard money loan offers a smoother transition, but it's still worth shopping around to make sure you're getting the best overall terms. If you'd like to compare DSCR refinance options or walk through the numbers before making a decision, I'd be happy to help.
- 5dKyle HendricksPro MemberLender · Member since 2021 · 170 posts · 74 votes
Depends on term, speed, etc. A lot of the time the regular lender will have better options but always worth comparing.
- 4dRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Utilizing the same lender to do HML and the DSCR Refinance has some benefit but it also is a bit overrated if you have the time and inclination to shop - a lot of times you can probably get better terms somewhere else because the original lender likely feels they have you more "captive" already but theres no reason you can't get better terms elsewhere
Harpoon Capital512 Reviews - 4dAiden AvtgisBusiness MemberReal Estate Agent · Cleveland, OH · Member since 2024 · 27 posts · 14 votes
Ultimately, I think it comes down to the terms and what makes the most sense for the deal and your long-term strategy. Loyalty can be important and valuable, especially if you’re building a relationship with a hard money lender who can help you with future deals. That loyalty doesn’t help you much good if the refinance terms don’t allow the property to cash flow.
At the same time, if sticking with the same HML provides long-term benefits, better flexibility, easier access to capital, or a stronger relationship that outweighs a little less cash flow, then that may be the better route.
I'd compare both options based on the interest rate, fees, loan amount, DSCR requirements, prepayment penalties, and how the deal performs after refinancing.
- 19hChristian TurnerPro MemberLender · Coral Gables, FL · Member since 2026 · 20 posts · 5 votes
Broker here, so I'll give you the part of this that the term-sheet comparison above (which is correct) doesn't cover: what is structurally different about the two, because it explains why the numbers come out the way they do.
Most hard money lenders that 'do DSCR' are not holding those loans. They originate the 30-year DSCR on a correspondent line and sell it to the same handful of institutional buyers that everyone else sells to. So their DSCR pricing is that buyer's pricing plus their margin, and their guidelines are that buyer's guidelines. What you are really getting from the hard money lender is convenience and a warm file: they already have your rehab budget, draws and photos, which makes documenting the after-repair value easy, and they know the property, so they will sometimes let you skip a second appraisal or use a desk review. That is worth something, especially on speed.
The mortgage lender, if they are a direct lender, has one DSCR product with one set of overlays. If they are a broker, they have twenty. The reason that matters on a BRRRR specifically: the three things that decide how much cash you actually pull out (seasoning to appraised value, how rehab gets documented, and the prepayment penalty structure) vary more across DSCR investors than the rate does. A 5-year step-down prepay versus a 3-year versus none is a bigger dollar swing over the life of the loan than an eighth of a point, and it is where hard money lenders' DSCR products tend to be least flexible, because their buyers want the prepay.
The practical way to decide: get both term sheets on the same day with the same loan amount, and compare cash-out after payoff and costs, the prepay, and the days to close. If the hard money lender is within a quarter point and can close in two weeks with no new appraisal, take the certainty. If they are wider than that or their prepay is longer, the warm file is not worth it.
And the reason not to ask only the two lenders you already know: the DSCR market has gotten very competitive in the past year, and the spread between the best and worst quote on the same file is usually much wider than new investors expect.
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