Lender guide
How to Refinance a Hard Money Loan into a DSCR Loan
A hard money loan is built to be refinanced out of. Here is the exit playbook: how to move from an expensive short-term loan into a permanent DSCR loan before the balloon hits.
A hard money loan is expensive on purpose and short by design. The plan was always to refinance out of it once the property is fixed and rented. That exit is the most important moment in a BRRRR deal, and the most common place it goes wrong. We are not a lender; some links here may be affiliate links, see our disclosure.
The exit, step by step
The permanent loan is almost always a DSCR loan, underwritten on the stabilized rent. The sequence is straightforward once the rehab is done: the property is rented and producing income, the DSCR lender appraises it at the new value, and the new loan, sized at up to about 75 percent of that value, pays off the hard money balance and ideally returns your capital. The whole engine turns on the new appraised value supporting a loan large enough to clear the hard money payoff.
The seasoning trap
The detail that catches investors is seasoning, the time a lender requires you to own the property before it will lend against the new value rather than what you paid. Six months is common, twelve is not rare. If your hard money loan matures at month twelve and your DSCR lender wants twelve months of seasoning, you can be caught paying double-digit interest with no exit available. The fix is entirely in your control: confirm the DSCR lender's seasoning rule before you take the hard money loan, and size the hard money term to outlast it with margin.
The timeline that works
Start the refinance well before the balloon. An efficient DSCR lender closes in roughly two to three weeks once the property is rented and the appraisal is ordered, but lining up the lease, the appraisal, and the payoff takes lead time. Begin the refinance at least 60 to 90 days before the hard money loan is due. Confirm your capital comes back on the BRRRR calculator before you commit to the deal at all.
Lenders that close the exit fast
Some lenders do both the hard money and the DSCR refinance, which makes the handoff cleaner and the timeline more predictable. Look for a permanent lender with a short, stated closing window and a clear seasoning policy.
Compare lenders for the refinance. Starting points to research, not endorsements. Confirm terms on each lender website. Some links may be affiliate links; see our disclosure.
More: how to choose a BRRRR lender and how to choose a hard money lender.