This is exactly how to refinance a hard money loan in 2025.
Learn the best loan options, new methods, and eligibility criteria.
Also, what to do in unexpected situations.
Let’s get started.
Best Refinancing Options for Hard Money Loans
Hard money loans offer real estate investors quick access to funds. They provide flexibility and speed, making them invaluable for acquiring properties. However, these short-term loans aren’t meant to be long-term solutions.
Conventional Mortgage Loans
A conventional mortgage offers lower interest rates but comes with strict borrower requirements. Traditional mortgages are best suited for investors with high incomes and low revolving monthly debt.
Minimum Credit Score:
Most lenders require a 680 or higher, but some lenders will accept a 620 or higher if your debt-to-income ratio has improved or your personal income is sufficient.
Maximum Loan Amount:
Rate-and-term refinance: Up to 95% LTV
Cash-out refinance: Up to 80% LTV
DTI Ratio:
Most lenders require a DTI ratio below 50%.
Seasoning Period
Traditional banks will require at least six months for cash-out refinances.
Pros:
- Lower interest rates
- Ideal for high-income earners
Cons:
- 2 years of tax returns
- 24 months of bank statements
- W-2 and paystubs required
- DTI requirement
- Strict loan qualifications
- Close in 30-60 days
Rental Property Loans
Designed for real estate investors, who need long-term financing without relying on personal income to qualify.
These loans evaluate the property’s cash flow, so there is no personal income verification.
Loan-to-Value (LTV)
Rate-and-term refinance: Up to 80% LTV
Cash out refinance: Up to 75% LTV
Minimum Credit Score
Most private money lenders require a 660 or higher, but some lenders accept 620+ if you’re an experienced investor.
Minimum Loan Amount
$100,000 or more
DSCR Ratio
Most lenders require a 1.0x to 1.2x DSCR ratio, but some will accept 0.75x with significant experience.
Seasoning Period
Seasoning periods vary based on lender, but most have two tiers. 3-6 months of monthly rent payments or 6+ months of collected rent payments. The more rent history you can provide, the lower interest rate and higher leverage you’ll get.
Pros:
- Based on current/future rental income
- Pre-approval within 24-48 hours
- Close in 21-30 days
- Typically 2 months of bank statements
- No tax returns, W-2 or paystubs
Cons:
- Slightly higher interest rates
- Slightly higher origination points
Rental Loan Terms
Flexible loan terms to refi from hard money.
| Minimum Credit Score | 680+ |
| Minimum Loan Amount | $100,000+ |
| Purchase/Refinance | Up to 80% LTV |
| Cash Out Refinance | Up to 75% LTV |
| Interest Rates | Starting at 7% |
| Minimum DSCR | 1.1 |
| Closing Time | 21-30 days |
See How Much You Qualify For
- Secure up to 80% financing
- Qualify using rental income
- Short-term rentals allowed
DSCR Loans for Short-Term Rentals
Designed to be used exclusively for short-term rentals. These loans have the same loan requirements as rental loans, but are calculated differently. Rather than using rental market rates for long-term tenants, these loans use rental income projections on airbnb and other short-term rental platforms.
Seasoned Investors
Investors with at least 12 months of short-term rental experience in the area, can qualify using up to 100% of AirDNA rental income projections.
New Investors
First-time investors with no experience can qualify using up to 75% of AirDNA rental income projections, provided they own a primary residence.
HELOC
In some cases a HELOC, or a home equity line of credit is a great way to refinance until you can find permanent financing. While this is not recommended, since interest rates can fluctuate, it is a better option than defaulting on your loan or selling the property prematurely.
HELOC Requirements
Loan requirements are similar to conventional mortgages.
Need Help Refinancing?
Residential Bridge Loan
Many times refinancing with another bridge loan is the only option for many investors. Here are some examples:
- You have not finished renovating
- Your property hasn’t sold yet
- Previous hard money loan cannot be extended anymore
- Your credit score is lower than 660
- Your hard money lender is taking advantage of you
- You can’t qualify for a long-term loan
Problem
If you’re reading this guide, there’s a chance you already know, most hard money lenders (90%) will not refinance a hard money loan from another lender. These loans are very high risk, because they signal something went wrong.
Solution
Depending on the state and complexity, Capital Ton can help you refinance a hard money loan with a bridge loan, and in some states with no credit check.
Pros:
- Opportunity to flip the property
- Opportunity to refinance later
- Opportunity to buy more time
- Close as fast as 5 days
- No personal income verification
- No tax returns, W-2 or paystubs
- Typically 2 months of bank statements
Cons:
- Higher interest rates
- Higher origination points
Eligibility Criteria for Refinancing a Hard Money Loan
Refinancing a hard money loan requires meeting certain criteria. These requirements vary based on the loan type but generally have similar property requirements.
Property Requirements
Even if you have a great credit score, your property must also qualify. An appraisal must be ordered to make sure the property is in good condition.
Rent-Ready Condition
If applying for a rental loan, the property must be rent-ready for tenants to move-in.
Move-In Condition
If applying for a FHA loan, VA loan or HELOC, a traditional bank will want the property to be in move-in ready.
Seasoning Period:
Most lenders require 3-6 months of ownership before allowing refinancing.
Minimum Loan Amount
Most private money loans will require a minimum loan amount of $100,000. This may not be the case with conventional loans from a traditional bank.
Explore Refinancing Loan Options
Secure up to 80% financing using projected rental income. Not based on tax returns or personal income.
- Up to 80% LTV
- Use future monthly rent to qualify
- No experience required
Important Steps to Refinancing Your Hard Money Loan
Step 1: Assess Your Financial Situation
Before applying for a refinance, evaluate your credit score, DTI, monthly debt history, monthly rental income history (if any), property condition, etc. If necessary, improve your credit or reduce outstanding debts before refinancing.
Analyze Your Time Frame
If you’re refinancing to a 30 year fixed-rate loan, try to improve your credit score before applying. If you’re behind on payments or your loan is close to maturity, consider a residential bridge loan.
Step 2: Determine the Best Loan Type
Choose between conventional, DSCR for long-term rental or short-term rental, HELOC or another hard money loan. This decision should be based on your financial situation, property condition, and long-term investment goals.
Step 3: Gather Documentation
Conventional lenders will request:
- 2 years of tax returns
- 24 months of bank statements
- Payroll stubs
- 2 years of W-2 or 1099
DSCR lenders will request:
- Rental income history (if any)
- Borrower track record (if any)
- 2 months of bank statements
- LLC articles of formation
- LLC operating agreement
- EIN letter
Step 4: Apply for Pre-Approval
Getting pre-approved gives you more information to work with, such as loan terms, interest rates, and loan eligibility.
Step 5: Lender Orders Appraisal
If you approve the loan terms, the lender will order an appraisal.
Step 6: Finalize the Refinancing Process
Once underwriting approves the loan, you’ll have a chance to approve final loan terms. At closing, the hard money loan will be repaid.