Refinancing Out of a Hard Money Loan in CT: Flip to Hold

You bought the house to flip it. The rehab is done, the numbers on the sale are thinner than you planned, and the rent it could pull looks better every week. You do not have to sell. You can refinance out of the hard money loan into a long-term rental loan and keep the property. Investors call it going from flip to hold, and in Connecticut it is one of the most common moves we finance.

Why investors switch from flip to hold

• The sale math got tight. Between both attorney closings, transfer taxes, commissions, and carrying costs, a flip that looked like a clean profit can shrink fast. Holding skips the selling costs entirely.
• The rent is strong. A freshly renovated unit in a solid Connecticut town often rents quickly and at the top of the market.
• You want equity working, not taxed. A sale turns your work into one check and a tax bill. A refinance lets you pull cash out and keep the asset.

How the refinance works

A hard money or fix and flip loan is short-term money: interest-only, 6 to 18 months, priced for speed. The exit is either a sale or a refinance. In a flip to hold, the exit is a DSCR loan, which qualifies on the property's rent instead of your personal tax returns.

1. Finish the rehab. The appraiser needs to see a completed, rentable property.
2. Get a tenant in place. A signed lease supports the rent the DSCR loan qualifies on.
3. Order the appraisal at the after-repair value. The refinance is based on what the property is worth now, not what you paid.
4. Close the DSCR loan and pay off the hard money. Any cash left over after the payoff and closing costs comes back to you.

AFC has no seasoning requirement on this refinance. Once the rehab is finished and the unit is leased, the DSCR loan can close on the after-repair appraised value. Many lenders make you hold title for six or twelve months first, which means six or twelve more months of hard money interest.

A worked example (illustrative numbers)

Say you buy a Connecticut two-family for $250,000 and put $60,000 into the rehab. After the work, it appraises at $400,000.

• The flip loan: 80% of the purchase ($200,000) plus 100% of the rehab ($60,000) is $260,000, which lands right at the 65% of after-repair value cap ($260,000). You bring the other $50,000 of the purchase plus points and closing costs.
• The refinance: a DSCR cash-out refinance at up to 75% of the $400,000 value is up to $300,000. That pays off the $260,000 hard money loan and returns up to about $40,000 before closing costs.
• The result: most of your down payment comes back, and you own a renovated rental financed on a long-term loan.

Your numbers will differ. AFC's DSCR loans go down to a 0.75 ratio, which means the rent needs to cover at least 75% of the new monthly payment (principal, interest, taxes, insurance, and any HOA dues). The appraisal sets the ceiling on the loan amount.

Plan the exit before you buy

The investors who do this well line up both loans at the start. Before you close on the purchase, know three things: what the property should rent for, what it should appraise for after the work, and how that rent compares to a long-term payment. With a DSCR minimum of 0.75, it needs to cover at least 75% of it. If the answers work, you have two exits instead of one. That is the same logic behind the BRRRR method in Connecticut, just decided halfway through the deal instead of on day one.

Because AFC makes both loans, the fix and flip loan and the DSCR loan, one team underwrites the whole plan. For the full range of rental financing, see our investment property loans, or read how private and hard money loans work with us.

Flip to hold questions

Can I refinance a hard money loan before the term ends?

Yes. Our fix and flip loans are interest-only with 6 to 18 month terms, and the refinance simply pays the loan off. Ask about prepayment terms on your specific loan before you close.

Do I need a tenant before I refinance into a DSCR loan?

Yes. The DSCR loan qualifies on the property's rent, so a signed lease is what makes the refinance work.

What credit score do I need?

Our fix and flip loans start at 620. DSCR loans start at 660, with 20 to 25% down on a purchase and cash-out up to 70 to 75% of the value on a refinance.

How fast can the hard money side fund?

As soon as 7 business days after approval. Plan the refinance on the rehab timeline, not the funding timeline.

Want to run your deal both ways? Call or text our team at (203) 452-9899.

Related reading

• Fix and flip financing in CT: ARV, draws, and points
• What is a DSCR loan? A Connecticut investor guide
• Buy and hold real estate strategy: how it builds wealth

Written by Gaetano Ciambriello, CEO of AFC Mortgage Group (NMLS #1783508). AFC Mortgage Group, LLC | NMLS #2801 | Equal Housing Lender. Rates and terms are illustrative, not a commitment to lend. Fix and flip loans: rates 10 to 12%, 2 points. All loans are subject to credit approval and program guidelines.