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If you’ve built up equity in your rental properties, a cash-out refinance could be your best tool for unlocking that capital and reinvesting it into new deals. But traditional lenders often create hurdles—especially if your personal income doesn’t neatly fit their documentation requirements.
Enter the DSCR loan: a flexible financing option that uses your property’s rental income—not your W-2s or tax returns—to qualify you. It’s ideal for real estate investors looking to quickly and efficiently tap into rental property equity.
In this guide, we’ll show you how to use a DSCR cash-out refinance and what you need to qualify in 2025.
🧠 What Is a DSCR Loan Cash-Out Refinance?
A Debt Service Coverage Ratio (DSCR) cash-out refinance allows rental property owners to replace their existing mortgage with a larger one—and pocket the difference—based solely on the property’s cash flow.
Instead of evaluating your personal debt-to-income (DTI) ratio, lenders approve your new loan by ensuring the rental income can cover the new mortgage payment.
👉 Learn more about DSCR Loans and why they’re popular among property investors.
✅ How Does a DSCR Cash-Out Refinance Work?
Here’s the basic process:
- Determine Property Value: Get an appraisal to find current market value.
- Calculate Max Loan Amount: Lenders typically allow up to 70–75% LTV (Loan-to-Value) for cash-outs.
- Ensure Rental Income Covers New Loan: Your property’s Debt Service Coverage Ratio (DSCR) must meet lender guidelines (typically 1.0–1.25).
- Receive Cash Proceeds: After paying off your old mortgage, the leftover cash is yours to invest.
🔗 Related: Use our Loan Comparison Calculator to estimate new loan terms.
📋 DSCR Cash-Out Loan Requirements
While programs vary slightly, here are the standard requirements:
| Requirement | Typical Guidelines |
|---|---|
| Minimum DSCR | 1.0–1.25 (higher for larger loans) |
| Maximum LTV (Cash-Out) | 70–75% |
| Credit Score | 660+ (some lenders go as low as 620) |
| Seasoning Period | 6–12 months ownership (varies by lender) |
| Reserves | 6–12 months PITIA recommended |
| Eligible Properties | 1–4 units, condos, townhomes, STRs |
| Ownership Type | LLC or personal (LLC often preferred) |
💵 How Much Can You Cash Out with a DSCR Loan?
Example Scenario:
- Appraised Property Value: $400,000
- Max LTV for Cash-Out: 70%
- Maximum Loan Amount: $280,000
- Existing Mortgage Balance: $200,000
- Available Cash-Out Proceeds: $80,000 (before fees)
You can use the $80,000 to:
- Purchase additional rental properties
- Fund renovations for higher rents
- Pay off high-interest business debt
- Build liquidity for future deals
👉 Thinking about a rental property BRRR strategy? Learn how DSCR loans power BRRR investing.
🔥 Why Use a DSCR Loan for Cash-Out Instead of a Traditional Loan?
Faster Approval: No tax return audits or lengthy income verifications.
Flexible Qualifying: Rental income is the main factor, not your personal debt.
Investor-Friendly Terms: LLCs and portfolios allowed; no property limits.
Speed to Close: Some DSCR refinances close in 21–30 days.
Traditional loans often:
- Limit cash-out to 70%–75% LTV but with stricter income requirements
- Require full personal underwriting, slowing you down
- Impose limits if you already have multiple financed properties
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
🛠️ Tips to Maximize Your DSCR Cash-Out Refinance
- Improve Your DSCR: Pay down small debts (e.g., HOA arrears) that affect PITIA.
- Consider Interest-Only Options: Many DSCR lenders offer 5–10 years interest-only to boost DSCR.
- Bundle Multiple Properties: Some lenders allow blanket refinances across multiple rentals.
- Shop Lenders: Different DSCR lenders have different LTV limits and rate premiums.
- Pre-Fund Escrow Reserves: Strengthens your application and eases approval.
📈 Is Now a Good Time to Refinance?
Despite higher interest rates compared to a few years ago, cash-out refinancing can still make sense if:
- Property values have risen substantially.
- You’re locked into a short-term loan (e.g., a hard money bridge loan).
- You need liquidity to expand your real estate portfolio.
With rental demand strong in many markets and DSCR loans offering flexible underwriting, 2025 remains an attractive window for strategic refinancing moves.
🔗 Curious how much your rental property is worth? Use our Affordability Calculator to estimate your borrowing power.
🧾 FAQs About DSCR Cash-Out Refinancing
How long do I need to own the property before doing a DSCR cash-out?
Most lenders require 6–12 months seasoning before allowing a cash-out refinance.
Can I cash out with a DSCR loan if my DSCR is below 1.0?
Some lenders allow sub-1.0 DSCR loans but may require more reserves, lower LTV, or charge higher rates.
Can I refinance into a DSCR loan from a hard money loan?
Yes! Many real estate investors use DSCR cash-out refinances to pay off expensive bridge loans and lock in long-term rental financing.
📣 Final Thoughts
If you want to unlock your rental property’s trapped equity without the red tape of traditional loans, a DSCR cash-out refinance could be your best move. Whether you’re looking to scale your portfolio, fund renovations, or simply increase your liquidity, DSCR loans offer unmatched flexibility for today’s real estate investor.
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
