Refinance rates have dipped to 6.18 percent. On the surface, it looks like relief—a break from the 7.5 percent nightmare of early 2024. But here’s what the headlines won’t tell you: That “cheaper” rate just became a trap. Because while rates fell, lenders changed the entire game.
The old rule was simple. Refinance to 80 Loan-to-Value. Maximize leverage. Get the equity out. That playbook built fortunes in 2023. Today, it will destroy your portfolio.
In this episode of the 5-Minute PRIME Podcast, host Martin Maxwell pulls back the curtain on the lending standards shift that quietly reshaped the refinance market in late 2025. This isn’t theory—it’s the difference between accessing your trapped equity and staying stuck. It’s the difference between scaling your portfolio and watching opportunities slip away.
Tune in to learn:
- The Rate Environment Reality: Why 6.18 percent feels cheap but costs you $240,000 extra over 30 years—and why the Fannie Mae forecast might be wrong.
- The LTV Ceiling That Changed: How lenders went from 80 percent to 65-75 percent LTV overnight, and why the Federal Reserve’s lending survey proves standards have tightened dramatically.
- The DSCR Trap: The single calculation that determines if you can actually refinance. Most investors don’t know this number. You will.
- The Strategic Reposition: How professionals use the new lending rules to move equity from lazy assets into growth assets—while keeping both deals.
- The April 15 Advantage: Why refinancing before the tax deadline positions you to lock rates at maximum strength, with documented proof of income that lenders actually want to see.
Are you sitting on $100,000 in equity that you can’t access? Is your portfolio hitting the new LTV ceiling? This episode will tell you exactly why—and what to do about it.
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Show Notes: Refi Playbook
Key Takeaways
- The 80% LTV Rule is Dead: Lenders have shifted standards. While 80% Loan-to-Value was the previous gold standard, current market conditions have pushed the “Safety LTV” to 65–70% to account for higher rates and tighter equity requirements.
- The DSCR Gatekeeper: Debt Service Coverage Ratio (DSCR) is now the primary hurdle. Lenders generally require a minimum of 1.25. At current rates (6.18%–6.35%), many properties that were leveraged at 80% LTV will fail this test and become cash-flow negative.
- The Fed vs. Treasury Yields: Don’t assume Fed rate cuts automatically lower mortgage rates. 30-year mortgages are tied to 10-year Treasury yields, which can actually rise on inflation concerns even when the Fed cuts short-term rates.
- Identifying “Lazy Equity”: Investors should focus on Return on Equity (ROE). If a property has high equity but low cash flow (e.g., 2% ROE), that equity is “lazy” and should be repositioned into higher-growth assets.
- The April 15 Strategy: Timing is critical. By April, investors have filed their 2025 tax returns, providing the two years of documented income lenders require. Aim to lock rates in March or April when documentation is strongest and lender capacity is highest.
Action Step:
- Pull your portfolio and calculate LTV for each property.
- Calculate DSCR: (Gross Rent × 12 − Expenses) ÷ Annual Debt Payment. Confirm ≥1.25.
- Calculate ROE: Annual Cash Flow ÷ Equity. Ensure equity is working efficiently.
- Contact a lender before April 15 to confirm real LTV, DSCR, and closing costs. Only refinance if DSCR ≥1.25, break-even <36 months, and capital is deployed strategically.
Mentioned in This Episode
Episodes to Revisit:
- Episode 112: Deploying Capital into 2026 Markets
- Data Sources: Freddie Mac, Fannie Mae, Mortgage Bankers Association, ABO Capital lending standards
- Key Terms: LTV (Loan-to-Value), DSCR (Debt Service Coverage Ratio), ROE (Return on Equity)
- Timing Tip: April 15 is the optimal month for refinancing with complete documentation
Challenge for Today:
- Pull your portfolio and calculate the LTV for each property using current market value versus loan balance.
- Compute the DSCR for each property: divide your annual net operating income (gross rent × 12 − expenses) by your annual debt service. Confirm it is 1.25 or higher to qualify for refinancing.
- Calculate ROE: divide annual cash flow by equity to see if your capital is generating sufficient return; aim for 5% or higher to ensure your equity is working efficiently.
- Identify properties where current LTV and DSCR allow refinancing and mark those that are constrained by today’s 65–70% LTV limits.
- For properties with trapped equity, plan a strategic redeployment of capital into higher-yield assets, targeting markets or units with projected 6%+ cash-on-cash returns.
