1st Advantage MortgageHome / Cash-out refinance
Programs
DSCR cash-out refinance
Turn a rental's equity into capital, qualified on its rent.
A DSCR cash-out refinance lets you borrow against a rental's equity, qualified on its rent rather than your income. Maximum leverage is lower than on a purchase, commonly 65% to 75% and up to 80% where lender guidelines allow it, and depending on the lender, programs allow a refinance soon after an all-cash purchase.
Common uses
- Down payment on the next rental
- Renovations that raise the rent
- Paying off a short-term loan used to buy and fix the property
- Consolidating several loans into one
- Building reserves for a growing portfolio
The shape of the rules
| Question | Typical answer |
|---|---|
| How much can I borrow? | Commonly 65% to 75% of value, up to 80% where lender guidelines allow it, with some caps on cash in hand |
| Is there a seasoning period? | It varies. Depending on the lender, programs want months of ownership, and some allow a quick refinance after a cash purchase |
| Can proceeds count as reserves? | Where lender guidelines allow it, yes |
| Does the ratio still apply? | Yes, rent versus the new, larger payment |
| Can the property be vacant? | Depending on the lender, programs allow it with a lower maximum loan-to-value |
Delayed financing in one paragraph
If you bought a rental with cash, depending on the lender, programs let you refinance soon afterward and pull most of your purchase money back, treating the refinance with its own rules for documenting how the cash was sourced. It is a useful way to recycle capital, but the details differ a lot by lender.
Watch the cost
Cash-out generally prices higher than a purchase or a rate-and-term refinance, and the larger loan raises the payment and lowers the ratio. Run the new loan through the calculator before you decide.
Frequently asked questions
Can I take cash out of a property I own?
Yes, where lender guidelines allow it. Maximum leverage is lower than on a purchase, commonly 65% to 75% and up to 80% where lender guidelines allow it. Seasoning rules differ, and depending on the lender, programs permit a refinance shortly after an all-cash purchase. See cash-out refinance.
How many months of reserves will a lender ask for?
Reserves are the liquid funds still in your accounts after closing, measured in months of PITIA. The range runs from none where lender guidelines allow it to about six months, and goes higher for first-time investors, foreign nationals, large loans and low ratios. Where lender guidelines allow it, cash-out proceeds can count toward the requirement.
Is a loan possible when rent is less than the payment?
Where lender guidelines allow it, yes. Ratios down to about 0.75 are approved, and a few no-ratio loans ignore the test altogether, usually with lower leverage, stronger credit or more reserves. You can also change the inputs by adding cash, trimming the insurance cost or choosing an interest-only payment.