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DSCR loans for Hilton Head vacation rentals and South Carolina rental property
Long-term financing approved on what the property earns. Villas, condos and houses, rented by the week or by the year, with no tax returns or employment check.
DSCR loan terms
| To buy | up to 85% LTV |
| Cash-out refinance | up to 80% LTV |
| Credit scores from | 600 |
| Fixed terms | 5 to 30 years |
| Prepayment choices | 3-year, 5-year or none |
| Typical closing | about 30 days |
At a 600 score the limit is 70% loan-to-value. Stronger credit qualifies for up to 85% on a purchase.
DSCR in plain terms
DSCR is short for debt service coverage ratio. It answers one question: does the rent pay the mortgage? If it does, the loan can be approved without looking at your personal income.
DSCR = monthly rent ÷ monthly payment. The payment counts principal, interest, property taxes, insurance and any owners’ association dues.
| Rent | Payment | DSCR | Reading |
|---|---|---|---|
| $5,200 | $4,000 | 1.30 | Income is 30% above the payment |
| $3,500 | $3,500 | 1.00 | Income equals the payment |
| $3,150 | $3,500 | 0.90 | Income is short; expect less leverage or a higher rate |
We prefer a ratio of 1.0 or higher. A strong borrower can qualify under 1.0 with lower leverage, and there is a no-DSCR option up to 75% loan-to-value at a higher rate.
Vacation rental loans
On Hilton Head most rental income is short-term. We underwrite those properties on projected short-term income, not on what the unit would bring on an annual lease, and that usually supports a larger loan.
- Income is taken from 12 months of rental history, or from AirDNA projections counted at about 70 to 80%.
- The property must be a permitted short-term rental with no zoning restriction against it.
- Villas, condos and condotels qualify. Non-warrantable condos and condotels are financed at slightly lower leverage.
The Town of Hilton Head Island requires a short-term rental permit, and many owners’ associations set their own rental rules. Charleston and Savannah restrict short-term rentals far more tightly. Confirm what is allowed at a specific address before you buy.
What makes the payment higher in South Carolina
- Property tax. South Carolina assesses investment and second homes at 6% of value, against 4% for an owner’s primary residence, so the tax bill on a rental is noticeably higher than a neighbor’s.
- Flood and wind insurance. Coastal properties often need separate flood and wind coverage. Both sit inside the payment and lower the ratio.
- Association and regime fees. Villa regime fees can be substantial. They count too.
Get real quotes for all three before you make an offer. They decide whether a deal clears 1.0.
Loan options
- Fixed terms from 5 to 30 years. The 10/1 interest-only and the 30-year fully amortized loan are chosen most often.
- Qualifying on the interest-only payment is available.
- A 3-year or 5-year prepayment penalty. The 5-year option usually prices about 0.25 to 0.5% lower. No penalty is available at a higher rate.
- One property or a whole portfolio.
Refinancing after a renovation
If you renovate a property and decide to keep it, a DSCR loan replaces the short-term fix and flip loan with long-term debt. A cash-out refinance at up to 80% loan-to-value can hand back much of the cash you put in.
Documents we ask for
- Loan application
- Signed purchase contract, or your original settlement statement for a refinance
- The lease for a long-term rental, or an income statement for a short-term rental
- Two months of bank statements
- Insurance and closing attorney contacts, and someone to let the appraiser in
- For an LLC: articles of organization, EIN letter and operating agreement
The full list is in our hard money loan document checklist.
DSCR loans: common questions
We prefer 1.0 or higher, which means the rent covers the full payment. Strong borrowers can qualify below 1.0 with lower leverage, and a no-DSCR program is available up to 75% loan-to-value at a higher rate.
Yes. Short-term rentals are qualified on 12 months of rental history or on AirDNA projections counted at about 70 to 80%. The property must be a permitted short-term rental.
Yes. We finance villas, warrantable and non-warrantable condos, and condotels. Non-warrantable condos and condotels are financed at slightly lower leverage.
The minimum is 600, at up to 70% loan-to-value. Higher scores qualify for up to 85% of the purchase price.
No. A DSCR loan is approved on the property’s rental income. There is no employment, tax return or debt-to-income review.
No. These are business-purpose loans and are not reported on your personal credit like a conventional mortgage. There is no cap on how many properties we will finance for you.
Buying or refinancing a rental?
Send the address, the price and what you plan to do with it. We will reply with the leverage and pricing that fit your deal.