Case Study: The Rent Never Changed. The Refinance Came Up $22,614 Short.

By Steve Waller · September 28, 2026

The file

This is a worked example built on Houston's own August numbers, not a named borrower. An investor buys a single-family house in Houston on a hard money loan, renovates it, leases it and plans to refinance into a thirty-year DSCR loan. The plan is the ordinary one: the rental loan pays off the hard money loan and the investor walks away with nothing left in the deal.

• After-repair value: $300,000. Hard money payoff: $225,000, which is 75% of that value.
• Rent: $2,412 a month, the average Houston single-family lease in August according to HAR.
• Property taxes: $550 a month, about 2.2% of value a year.
• The refinance lender caps the loan at 75% of value and requires rent to cover the full payment (principal, interest, taxes, insurance) 1.10 times. So the payment can be no more than $2,192.73.

How the investor penciled it

At purchase, the investor took insurance off the seller's old declarations page, $1,987 a year, which is exactly the Texas average premium in 2020. He took the rate off a quote sheet a year old, 6.30%, which is where Freddie Mac's thirty-year survey sat twelve months ago.

On those two numbers the file works. After taxes and a $165.58 monthly premium, $1,477.14 is left for principal and interest, and at 6.30% that supports a $238,644 loan. The 75% cap binds first at $225,000, which retires the hard money loan to the dollar. On paper the investor leaves nothing in the deal.

What the refinance actually saw

Two lines on the underwriting sheet had moved, and neither of them was the rent.

• Insurance. The bound premium came in at $3,506 a year, the current Texas average from the Texas Department of Insurance. That is $126.58 a month more than the plan.
• Rate. Freddie Mac's survey printed 7.03% on 24 September, the first reading above seven percent since January 2025. The ten-year Treasury touched 5.18% that Thursday, its highest print since 2007, and closed Friday at 5.17%.

With the real premium, $1,350.56 is left for principal and interest. At 7.03% that supports $202,386. The hard money payoff is still $225,000. The investor brings $22,614 to the closing table on a house whose rent is exactly what he planned.

Where the $22,614 came from

Every dollar of monthly payment supports $149.85 of loan at 7.03%, against $161.56 at 6.30%. Run each line on its own:

• The rate alone takes the supported loan from $238,644 to $221,355, which already falls below the $225,000 payoff.
• The insurance alone, at 7.03%, removes another $18,969 of loan, taking it to $202,386. That is the $126.58 a month times $149.85.

The insurance line is the bigger of the two, and it was the one sitting on a document the investor could have checked before he bought.

Why the negative filings do not fix it

The Texas Department of Insurance now shows filed rate requests of negative 0.8% for August and negative 1.8% across June through August, the first negative prints in five years. They come after the average premium rose from $1,987 in 2020 to $3,506 in 2025, a 76.4% increase, with filed increases of 10.8%, 21.1% and 18.7% in 2022, 2023 and 2024.

Apply negative 1.8% to $3,506 and it is $63 a year, or $5.26 a month, which is about $790 of supportable loan. Against a $22,614 shortfall it is nothing. And a filed request is not a lower bill in anyone's escrow account. The filings say the premium has stopped climbing. They do not say it is going back.

Put another way: insurance on the average Texas policy is now 12.1% of the average Houston rent. In 2020 it was 6.9%. The rent went nowhere and five points of it moved to the carrier.

The mistake was the order, not the deal

Nothing in this file was a bad house or a bad rent. The investor ran the refinance after the hard money loan closed, on numbers nobody had checked. Run before the offer, the same arithmetic gives him three honest choices: offer about $22,600 less, plan to leave that cash in the deal, or pass. All three are fine decisions. Finding out at the refinance is not a decision at all.

Three checks belong before the purchase contract, not after the rehab:

• A bound insurance quote on the subject property. Not the seller's declarations page, not a percentage of value. At 12% of gross rent, a premium off by twenty percent moves coverage by more than two points of rent.
• Today's rate, plus a cushion. The ten-year moved 38 basis points in September alone. A takeout priced at last month's rate is already wrong.
• The coverage test run both ways. Check the loan the rent supports, not only the loan the value supports. On this file the rent was the binding limit by more than $22,000.

Run your own file first

The calculators on acp-lending.com were built for exactly this order of work. The DSCR calculator takes the rent, taxes, a real insurance figure and today's rate and returns the loan the property will actually carry. The deal calculator runs the hard money side and compares the flip exit against the rental exit on the same numbers. Put your file through both before you sign the purchase contract, not after the rehab is finished.

The full report, and every earlier one, is available on the ACP website at acp-lending.com. Investors can sign up at acp-lending.com/investor-brief to receive new reports by email.

Sources

• Texas Department of Insurance, Texas homeowners insurance market overview
• Freddie Mac Primary Mortgage Market Survey, 24 September 2026
• US Department of the Treasury, Daily Treasury Par Yield Curve Rates, September 2026
• HAR Rental Market Update, August 2026

Market data is from public sources and is provided for information only. Nothing here is an offer of credit, a rate quote, or investment advice. Financing is subject to underwriting, lender approval, appraisal or valuation, title, insurance, property eligibility and program availability.

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