How long is a payoff letter valid?

Typically ten to fifteen business days, though it varies by lender — always confirm the stated expiry before relying on the figure.

What happens if my DSCR closing slips past the payoff letter's expiry?

The closing agent requests an updated payoff figure reflecting additional per-diem interest; it is a delay and a cost, not a default, provided the hard-money note itself has not matured.

Can I negotiate the extension fee with my hard-money lender?

Sometimes, particularly with a track record and a documented refinance already in process, but terms vary entirely by lender and are not standardised.

Does the DSCR lender coordinate directly with the hard-money lender?

The closing or title agent typically handles payoff coordination and disbursement; the DSCR lender's role is sizing and funding the new loan.

Should I start the DSCR refinance before the rehab is fully complete?

The DSCR loan cannot close until the property is rent-ready or leased, but the application, appraisal scheduling and document collection can often start as the rehab nears completion.

LESSON 4 OF 65 MIN READ

Refinancing out of hard money: payoff letters, per-diem interest and timing

Refinancing out of hard money means paying off a short-term bridge note with a permanent DSCR loan before the bridge's maturity date or its costlier extension terms take effect. The mechanics turn on the payoff letter — a document with a limited valid-through window that states the balance plus per-diem interest accruing until the funds are received — and the discipline is timing the DSCR closing early enough that a delay does not force a costly extension. Because hard-money rates commonly run into the low-to-mid teens with points on top, every week of delay is expensive, which makes the refinance timeline itself part of the deal's economics.

THE NUMBERS

Minimum DSCR	0.75 (0.75–0.99 prices at +62.5 bps, 70% LTV cap)
Maximum LTV	80% purchase or rate-and-term · 75% cash-out
FICO floor	660 (below that the desk does not lend)
Loan size	$100K – $3M single · $10M portfolio
Reserves	6 months PITIA · 12 months on a portfolio
Prepay options	5-4-3-2-1 par · 3-2-1 +25 bps · 1-yr +50 bps · none +87.5 bps
Typical days to close	21–30 days from a signed term sheet
Rate sheet	Silt Rate Desk — Market Composite Sept 2026 · effective 2026-09-01

ILLUSTRATIVE — published program floors, not a quote or a commitment to lend. Subject to underwriting, appraisal and final credit approval.

What is a payoff letter, and why does it expire?

A payoff letter states the exact amount required to satisfy the note as of a stated date, plus a per-diem figure that accrues for each additional day funds are not received, and it is typically valid for a narrow window — often ten to fifteen business days. It expires because interest keeps accruing on the original loan every day it remains outstanding; the letter is a snapshot, not a fixed number. Ordering a fresh payoff letter close to the anticipated DSCR closing date, rather than early in the process, avoids a stale figure that under-funds the payoff at the table.

How does per-diem interest actually work at closing?

Per-diem interest is the daily cost of the hard-money loan remaining outstanding, calculated on the balance at the note's contract rate, and it is added to the stated payoff balance for every day between the letter's stated date and the day the payoff is actually funded and received by the lender. If a closing slips by a week past the letter's date, the title company or closing agent needs the updated figure — the original letter's total will be short, and settlement will not fund correctly on the wrong number. Building a few days of buffer into the requested payoff figure is standard practice to absorb small timing shifts.

What are extension fees, and when do they get triggered?

Most bridge and hard-money notes carry a fixed maturity term, often six to eighteen months, and if the DSCR refinance is not closed by that date the borrower must either default or pay an extension fee — commonly a percentage point or more of the loan balance — for an additional block of time. Extension terms and fee levels vary by lender and are set in the original hard-money note, not by Silt or any DSCR lender, so reading that note's extension clause before it is needed is the only way to know the real cost of running late.

How far ahead should the DSCR refinance application start?

Given typical timelines of 21 to 30 days from a signed term sheet to closing, and the reality that appraisals and title work can run long, starting the DSCR application 45 to 60 days before the hard-money note's maturity date gives enough runway to absorb a slow appraisal or a title curative item without touching the extension window. Waiting until 30 days out to start is workable only if the file is clean and nothing about the property or entity is unusual — otherwise it is a bet against the calendar.

Does seasoning affect a hard-money-to-DSCR refinance?

Yes, the same seasoning rules apply as any other refinance: under six months on title, the DSCR loan is generally sized against documented cost basis rather than the post-rehab appraised value, and that basis calculation depends on the purchase price plus receipted improvement costs. Because many hard-money-funded projects are BRRRR rehabs closing well before the six-month mark, the basis-versus-appraisal distinction often determines exactly how much of the hard-money balance the DSCR proceeds will actually cover.

What happens if the DSCR proceeds do not fully cover the payoff?

If the DSCR loan sizes below the hard-money payoff — because of seasoning, a conservative appraisal, or a thin DSCR — the borrower must bring the shortfall to closing in cash, or negotiate a partial extension with the hard-money lender while the file is strengthened. Running a sizing estimate on the DSCR refinance before the hard-money note approaches maturity, rather than discovering the gap at the closing table, is the only reliable way to plan for a shortfall.

Timing a hard-money payoff

Hard-money loan balance	$210,000
Hard-money rate	11.5%
Per-diem interest on the balance	≈ $67 / day
Note maturity date	8 months from origination
DSCR application started	55 days before maturity
DSCR closing	26 days after application
Payoff letter ordered	5 business days before DSCR closing
Result	Payoff funded 9 days before maturity, no extension fee incurred

Illustrative figures. Per-diem rates, extension terms and fees are set by the hard-money note and vary by lender — check the original loan documents.

WHAT WE NEED FROM YOU

Hard-money note and extension terms. Confirms maturity date, per-diem calculation and extension cost if needed.
Current payoff letter. Ordered close to the anticipated DSCR closing date, not weeks in advance.
Improvement schedule with invoices. If the property was rehabbed, this supports cost-basis sizing if under six months seasoned.
Signed lease or rent evidence. Required to run the DSCR calculation on the takeout loan.
Entity documents. The DSCR refinance closes in the same entity that holds the property, or as otherwise structured.

FREQUENT QUESTIONS

How long is a payoff letter valid?: Typically ten to fifteen business days, though it varies by lender — always confirm the stated expiry before relying on the figure.
What happens if my DSCR closing slips past the payoff letter's expiry?: The closing agent requests an updated payoff figure reflecting additional per-diem interest; it is a delay and a cost, not a default, provided the hard-money note itself has not matured.
Can I negotiate the extension fee with my hard-money lender?: Sometimes, particularly with a track record and a documented refinance already in process, but terms vary entirely by lender and are not standardised.
Does the DSCR lender coordinate directly with the hard-money lender?: The closing or title agent typically handles payoff coordination and disbursement; the DSCR lender's role is sizing and funding the new loan.
Should I start the DSCR refinance before the rehab is fully complete?: The DSCR loan cannot close until the property is rent-ready or leased, but the application, appraisal scheduling and document collection can often start as the rehab nears completion.

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