Keep the first. Add the second.
How a DSCR second mortgage works
A standalone closed-end second mortgage adds a separate loan behind an existing eligible first mortgage. The rental property must support both loan payments and the applicable property expenses.
1. Existing first lien
The desk verifies the current balance, payment, servicer and loan terms. Adjustable-rate and interest-only mortgages may need a different qualifying payment. Private financing, hard-money loans, reverse mortgages, negative amortization, balloon payments and forbearance can require a different financing review.
2. Requested second lien
The existing first mortgage, any other lien that will remain, and the new loan are compared with the property value. The available amount depends on credit, property type, existing debt and current program limits.
3. Combined DSCR
Gross rent is compared with the qualifying first-lien payment, proposed second-lien payment, property taxes, insurance, HOA and other applicable housing expenses. The second lien is never reviewed in isolation.
4. Complete property review
Time you have owned the property, recent sale listings, rental documents, property type, valuation, title, insurance, ownership structure and state requirements affect the options that can be considered.
A second mortgage is a second payment
Keeping the first mortgage does not replace its payment or remove its obligations. A new closed-end second adds its own repayment schedule and closing costs. We review the combined payments and property expenses before discussing a structure.
An example of replacing an existing second
Illustration only: a property valued at $1,000,000 has a $450,000 first mortgage and a $50,000 existing second. Current combined loan-to-value is 50%. A new $200,000 loan that pays off the existing second leaves $650,000 of mortgage debt, or 65% proposed CLTV. The amount before closing costs available after the $50,000 payoff is $150,000—not $200,000.
Start with estimates; confirm with documents
You do not need perfect numbers to request a review. Choose an estimate or “not sure” rather than guessing that a balance is zero. A specialist can reconcile the statements, rental support and proposed use of funds with you.