Refinancing

Refinancing replaces an existing loan with a new loan, usually to change the rate, the term or the balance. A DSCR refinance qualifies the new loan on the property's rent rather than the borrower's income, which lets investors move off bridge, hard money or conventional loans without new tax returns.

A rate-and-term refinance keeps the balance about the same and changes the rate or schedule. A lower rate raises the ratio right away: on the example loan, dropping from 7.5% to 7.25% lifts DSCR from about 1.20 to 1.22. A cash-out refinance takes a larger balance, which raises the payment and lowers the ratio.

Every refinance is a new underwriting. The lender orders a new appraisal, checks current rent against market rent and applies its current minimum ratio. A property that qualified easily at purchase can fall short on refinance if taxes and insurance have climbed faster than rent.

Further reading: Refinancing on Wikipedia.