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DSCR vs Hard Money Loan
Two very different products for two different stages of an investor’s deal. Hard money buys speed and rehab capital; DSCR holds the stabilized rental for the long haul.
The short answer
Choose DSCR if
- The property is stabilized, rent-ready, and cash-flowing
- You're refinancing out of hard money after the rehab is complete (BRRRR refi)
- You want a 30-year fixed rate locked in for long-term hold
- You need to pull cash out for the next acquisition
- You want to vest in an LLC and scale without DTI caps
- You can wait 15-21 days for the right rate and term
Choose Hard Money if
- You're buying a distressed property that won't pass a standard appraisal
- You need rehab capital bundled into the loan
- Your closing window is 7-10 days and a traditional lender can't move that fast
- You're flipping — sale will pay off the loan in 6-12 months
- You're in the purchase + rehab phase of a BRRRR strategy
- The deal needs leverage against ARV rather than current value
Side-by-side: DSCR vs Hard Money Loan
| Feature | DSCR Loan | Hard Money Loan |
|---|---|---|
| Loan purpose | Long-term hold of a stabilized rental | Short-term purchase, rehab, or bridge |
| Term length | 15-, 30-, or 40-year fixed (or 5/6, 7/6, 10/6 ARM) | 6-18 months typical |
| Rate (typical, 2026) | Investor-grade fixed rate (low-to-mid 7s) | 8-14%+ interest-only |
| Points / origination | Standard mortgage origination (typically 1-2 pts) | 2-5 points up front |
| Maximum LTV / leverage | Up to 80% of appraised value | 65-75% of ARV (After Repair Value) |
| Rehab funding | Not included — property must be rent-ready | Bundled — rehab draws funded against scope |
| Income documentation | None — property's rental income qualifies | Light credit check; primarily asset-based |
| Minimum credit score | 640 | 600-680 typical (varies by lender) |
| Closing timeline | 15-21 days | 3-10 days |
| Prepayment penalty | Standard PPP (often 5/4/3/2/1 or step-down) | Usually none — designed for fast exit |
| Exit strategy | Hold and cash flow indefinitely | Sell, or refinance into DSCR / conventional |
FAQ
Yes — this is the classic BRRRR refinance. Once the property is rehabbed, leased, and stabilized, a DSCR loan pays off the hard money lender at the new (post-rehab) appraised value. You replace 12-14% interest-only with a 30-year fixed and pull cash out if the new appraisal supports it.
By a wide margin on rate, yes. DSCR rates run several percentage points below hard money, and DSCR amortizes over 15-40 years instead of charging interest-only. Hard money's value isn't in the rate — it's in speed and rehab funding that DSCR can't provide.
TQL closes DSCR purchases in 15-21 days when title, appraisal, and insurance line up. If the seller demands a 7-day close on a distressed asset, hard money is the only realistic option for the initial purchase. Refinance into DSCR after closing.
Different stages, different tools. Hard money buys + rehabs distressed inventory at speed. DSCR holds the stabilized rental long-term at investor-grade rates. Mature portfolios use hard money for acquisitions, DSCR for the permanent take-out — and rinse and repeat.
TQL specializes in permanent investor financing — DSCR, bank statement, P&L, and asset utilization mortgages. We're the take-out lender on the back end of a flip or BRRRR project, not the rehab-phase lender. If you need rehab funding, we'll refer you to a hard money partner and refinance you out when the project stabilizes.