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Case Study, Part Two: What the Market Would Have to Do to Close a $22,614 Refinance Gap

By Steve Waller · September 29, 2026

Case Study, Part Two: What the Market Would Have to Do to Close a $22,614 Refinance Gap

The Houston rental that came up $22,614 short at refinance only closes on its own if insurance falls 52%, below its 2020 level, or the thirty-year falls about a point to 6.01%, or rent rises $166 a month. A 10% premium cut and a quarter-point rate drop together still leave it $12,920 short. Waiting on the outlook costs carry every month it takes.

Where the file stands

Yesterday's case study left a Houston rental with a problem that had nothing to do with the house. After-repair value $300,000, hard money payoff $225,000, rent $2,412 a month, taxes $550 a month. The refinance lender requires rent to cover the full payment 1.10 times. With insurance bound at the current Texas average of $3,506 a year and the thirty-year at 7.03%, the rent supports a loan of $202,386. The investor is $22,614 short of paying off the hard money loan.

The tempting response is to wait. Texas insurance filings just turned negative, reinsurance is getting cheaper, and the Legislature convenes in January. So this follow-up asks one question: what would each of those have to do to close the gap on its own?

What the insurance line would have to do

To carry a $225,000 loan at 7.03%, principal and interest has to be $1,501.47 a month. Take that and the taxes out of the $2,192.73 the rent allows, and $141.26 a month is left for insurance. That is $1,695 a year, a 52% cut from $3,506 and below the 2020 statewide average of $1,987.

The negative filings do not come close. The Texas Department of Insurance shows filed requests of negative 1.8% across June through August. On this policy that is $63 a year, or about $788 of loan. Suppose next year's reinsurance savings reach the policy in full as a 10% premium cut. Aon expects property savings of around 10% at the January renewals, and 86% of insurers in Moody's buyer survey expect prices to fall again. That cut is $351 a year and $4,378 of loan, about a fifth of the gap.

What the rate would have to do

Hold insurance at $3,506 and ask what rate lets the rent carry $225,000. The answer is 6.01%, about a full point below Freddie Mac's 7.03%.

A full point would be a big move. The Fed raised to 3.75% to 4.00% on 16 September, and its median projection adds another increase this year. The ten-year closed Friday at 5.17%.

Both lines at once

Put the two most plausible pieces of relief together: a 10% premium cut and a quarter-point rate drop. The rent then supports $212,080, and the investor is still $12,920 short. Even with the market going his way, he brings cash.

What the rent would have to do

At today's insurance and today's rate, the file needs rent of $2,578, which is $166 a month more, or 6.9%. HAR's August average Houston single-family lease was $2,412, against $2,414 a year earlier.

What waiting costs

Hard money is priced to be short. At a 12% coupon, used here only for illustration, carrying a $225,000 balance costs $2,250 a month in interest. Six months of waiting is $13,500, more than half the gap, spent to find out whether the market will close it. That is before extension fees or a maturity date.

The outlook, applied to this file

What the investor can actually do now

The lesson is the same one, one step earlier

Every figure in this post existed before the purchase contract was signed. Run first, the answer is simple: offer about $22,600 less, or plan to leave that cash in. Run after the rehab, every option is worse, and the hard money interest keeps running while he decides.

The calculators on acp-lending.com are built for that order of work. The DSCR calculator takes rent, taxes, a real insurance quote 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 the file through both before the offer goes in.

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

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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