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Key Takeaways:
1. Ziffy Mortgage’s DSCR loan refinancing allows investors to qualify using a property’s rental income instead of personal income or tax returns.
2. Your refinancing goals, like lowering payments, shortening loan terms, or accessing equity, determine the best DSCR refinance strategy.
3. The LTV (Loan-to-Value) ratio and DSCR (Debt Service Coverage Ratio) play a key role in securing favorable refinance terms and interest rates.
Table of Contents
Refinancing an investment property can be a powerful wealth-building strategy, but for today’s investor, the traditional loan process is often a bottleneck. That’s why DSCR (Debt Service Coverage Ratio) loans have become the go-to financing method for portfolio growth.
At Ziffy Mortgage, we’ve designed our DSCR loan program to simplify this process, allowing you to qualify based solely on your property’s rental income rather than your personal income and tax returns.
This guide provides a step-by-step framework to understand the DSCR refinancing process for your rental property. We’ll show you how Ziffy’s platform streamlines each stage, helping you make a data-driven decision to optimize your loan terms and scale your portfolio.
Step 1: Define Your Financial Goal
Before you start looking for a new loan, you need a clear “why.” Refinancing isn’t a one-size-fits-all solution; your goal will determine the right type of DSCR refinance for you.
Common Refinance Goals for Investors:
Lowering Your Interest Rate and Monthly Payment: This is the most common reason to refinance. If current interest rates are significantly lower than your existing rate, a Ziffy Mortgage DSCR loan can reduce your monthly expenses, boosting your cash flow and increasing your return on investment (ROI).
Cash-Out Refinance to Fund Your Next Deal: A cash-out refinance allows you to tap into your built-in home equity. With a Ziffy Mortgage DSCR loan, you can get a new, larger loan and receive the difference in cash, which you can then use as a down payment for another investment property, for major renovations, or to pay off high-interest debt.
Changing Your Loan Term: You might want to switch from a 30-year to a 15-year DSCR loan to pay off the property faster and save on total interest. Conversely, extending your loan term can lower your monthly payments, freeing up cash for other investments.
Actionable Guidance: Use Ziffy's financial analysis tools to model different scenarios. Input your current loan details and a hypothetical new DSCR loan with a lower interest rate or different term. See how each option affects your projected monthly cash flow and total interest paid over time.
Step 2: Prepare Your Financial Profile (The DSCR Way)
This is where a DSCR loan differs most from a traditional refinance. At Ziffy, we focus on the property’s rental income, not your personal income. This means you can bypass the personal tax returns, W-2s, and complex Debt-to-Income (DTI) calculations required by conventional loans.
Key Requirements for a Ziffy Mortgage DSCR Loan:
Credit Score: Your personal credit score is still an important indicator of your overall financial responsibility. At Ziffy, we require a minimum score of 620, but a score of 720 or higher will give you the best rates and terms.
Property’s Rental Income: This is the most critical factor. The DSCR is calculated by dividing the property’s gross rental income by its monthly mortgage payment (Principal, Interest, Taxes, Insurance, and Association fees). At Ziffy, we require a DSCR of 1 or higher for the most favorable terms.
Note: We also offer DSCR loans on properties with DSCR ratio between 0 – 1. These are know as No-Ratio DSCR Loans. However, please note that this option would require a higher down payment.
Cash Reserves: We still require proof of liquid cash reserves, typically enough to cover two months of mortgage payments on all of your financed properties. This assures us that you can handle potential vacancies.
Property Type: Ziffy’s DSCR loans are ideal for a range of investment properties, including single-family homes, 2 – 4 unit multi-family properties, and even short-term rentals.
Actionable Guidance: Before you apply, use Ziffy's DSCR calculator to see if your property's current rental income meets our requirements. Our platform provides a real-time DSCR calculation, allowing you to quickly determine your eligibility.
Step 3: Determine Your Property’s Value and Equity
Your property’s equity is the difference between its current market value and your outstanding mortgage balance. Refinancing requires a certain amount of equity to be successful, and DSCR loans often have stricter requirements.
Loan-to-Value (LTV) Ratio: This ratio is the new loan amount divided by the property’s appraised value. At Ziffy, we maintain a conservative LTV requirement, often capping it at 80% for a rate-and-term refinance and as low as 75% for a cash-out refinance. This means you’ll need at least 20% to 25% equity in the property.
Actionable Guidance: The fastest way to get an estimate of your home's value is by using Ziffy's AI-powered property analysis. It can provide a quick data-driven valuation to help you understand your current equity position.
Step 4: Get Your Quote and Compare
While other lenders can offer DSCR loans, they often present a complex, slow, and opaque process. Ziffy is different. As a direct lender, we provide a streamlined, transparent experience designed specifically for the modern real estate investor.
Why Ziffy Mortgage?
Unlike platforms that connect you to a network of lenders, we are the direct lender. This means we control the entire process from start to finish, offering a level of speed and transparency that other options can’t match.
Direct Access to DSCR Loan Rates: We provide instant, real-time DSCR mortgage rate quotes. This eliminates the uncertainty of waiting for a broker to shop your loan.
Transparent Comparison Tools: Our platform allows you to run refinance scenarios and compare our offer against your existing loan. You can input the interest rate, loan term, and closing costs to instantly calculate your potential monthly savings and breakeven point.
Seamless Process: Because we are the lender, there is no back-and-forth between a broker and an underwriter. Your documents and communication are centralized on Ziffy’s platform, accelerating the underwriting and closing process.
Actionable Guidance: Start by getting a rate quote directly from us on Ziffy.ai. Then, use our refinance calculator to see how our offer stacks up against your current loan and to model the potential savings. Our goal is to empower you with the data you need to select the most profitable option.
Step 5: Gather and Submit Your Paperwork
Refinancing with a Ziffy Mortgage DSCR loan requires a fraction of the documents needed for a traditional mortgage. You’ll need to focus on providing proof of the property’s financial performance.
Required Documents for a Ziffy Mortgage DSCR Loan:
Personal Financials: Your driver’s license, a clear credit report, and bank statements showing cash reserves.
Property Financials: The property’s lease agreement(s), property insurance declarations page, and an operating agreement if the property is held in an LLC.
Appraisal and Rent Survey: Ziffy will order an appraisal and a rent survey to independently verify the property’s market value and estimated rental income.
Actionable Guidance: Organize all your property-related documents in a single digital folder. This proactive step prevents delays and frustration during the underwriting process.
Step 6: The Underwriting and Appraisal Process
After submitting your application, your file moves to underwriting. Our underwriters review all your documents and, most importantly, the property’s financial data to ensure the loan meets our criteria. During this phase, we will order a formal appraisal and a rent survey to determine the property’s current value and market rent.
Actionable Guidance: Communicate clearly and quickly with your Ziffy loan officer. Be prepared to provide additional documentation or clarification if requested. If the rent survey comes in lower than expected, you may have to negotiate a smaller loan amount or bring more cash to the closing.
Step 7: Close on the New Loan
Closing is the final step where you sign all the legal documents for the new Ziffy Mortgage DSCR mortgage. A few days before closing, you’ll receive a Closing Disclosure that details the final loan terms, fees, and costs. Review this document carefully to ensure it matches the offer you accepted.
Actionable Guidance: Take your time to read every document at the closing table. Don't be afraid to ask questions about anything you don't understand. Once the documents are signed and the loan is funded, your old mortgage is officially paid off, and the new one takes effect. You have successfully refinanced your investment property using a Ziffy Mortgage DSCR loan.
Conclusion
Refinancing an investment property is a powerful tool for growth, and the Ziffy Mortgage DSCR loan is the most efficient way for a modern investor to do it. It allows you to optimize your portfolio’s performance without the traditional headaches of DTI and tax returns.
By defining your goals, preparing your property’s financials, and using Ziffy’s data-driven tools, you can navigate the process with confidence and turn your property’s built-up equity into your next investment.
FAQs
How much does it cost to refinance with a DSCR loan?
Refinancing costs typically range from 2% to 5% of your new loan amount. These fees cover appraisal, title insurance, and other administrative costs.
Can I refinance a property that isn’t cash-flowing?
With a standard DSCR loan, the property must be able to cover its mortgage payment (a DSCR of 1.0 or higher). However, Ziffy offers a “no-ratio” DSCR loan that may allow you to refinance a property that doesn’t meet the standard DSCR threshold but shows strong income potential.
What is a “cash-out refinance” vs. a HELOC?
A cash-out refinance is a new first mortgage that replaces your old loan and gives you a lump sum of cash. A Home Equity Line of Credit (HELOC) is a second mortgage that functions like a credit card, allowing you to borrow against your home’s equity as needed. For funding a new property, a cash-out refinance is often preferred because it provides a single, large amount of capital.
