DSCR Cash-Out Refinance: How Much Can You Get?

A DSCR cash-out refinance lets you borrow against the equity in a rental property by replacing your current mortgage with a larger one. To qualify, the lender looks at whether the property’s rent can support the new monthly payment rather than relying mainly on your personal income.

That rent calculation, along with the property’s value, helps determine how large the new loan can be. The loan first pays off your current mortgage and any closing costs you roll into it. What remains is the cash you receive, which may be less than an advertised borrowing limit suggests.

How does a DSCR cash-out refinance work?

A DSCR cash-out refinance replaces your rental property’s current mortgage with a larger loan. The new loan pays off the old balance, and you receive what remains after closing costs and other amounts are due. The lender uses the property’s value to help set the loan limit and checks whether its rent can support the new monthly payment. Taking out more cash usually means a larger monthly payment, which can lower the property’s DSCR (debt service coverage ratio).

Many rental lenders calculate DSCR by dividing the property’s monthly rent by the new loan’s monthly PITIA (principal, interest, property taxes, insurance, and any HOA dues). A ratio of 1.0 means the counted rent exactly covers those costs. See our guide to a good DSCR ratio to learn what lenders may consider strong and what the number leaves out.

For example, suppose your rental is worth $400,000 and you owe $180,000 on its mortgage. If the lender approves a $300,000 new loan, $180,000 pays off the old mortgage. That leaves $120,000 in gross cash-out before closing costs and any other amounts due. The lender calculates DSCR using the payment on the full $300,000 new loan.

If you only want to change your rate, loan term, or payment structure, ask lenders about a rate-and-term refinance. This type of refinancing also replaces the existing mortgage, but it generally does not provide substantial cash back.

If you want money back at closing, ask for a cash-out refinance quote. The lender may allow a different loan amount and charge a different rate or fees than it would for a rate-and-term refinance.

How much cash can you take out?

For a DSCR cash-out refinance, the lender checks what your rental is worth and whether its rent can cover the new monthly payment. Once the loan pays off your current mortgage and refinancing costs, the amount left is your cash-out. Here’s how the property’s value, rent, and refinancing costs affect the cash you could receive.

Check the loan-to-value limit

Loan-to-value (LTV) tells you what share of the property’s value the new mortgage would cover. A 75% LTV limit means the lender may let you borrow up to 75% of the property’s appraised value. That is the total new loan, not the cash you receive after paying off your current mortgage.

To estimate the largest loan allowed by the LTV limit, multiply the property’s value by the limit:

Property value × maximum LTV = maximum new loan based on value

For a $400,000 property, a 75% limit gives you $300,000 ($400,000 × 0.75). An 80% limit gives you $320,000. You can also check a proposed loan by dividing it by the property’s value: $300,000 ÷ $400,000 = 75% LTV.

Lenders set different cash-out limits. Easy Street Capital lists up to 75% LTV for a DSCR cash-out refinance, while Griffin Funding lists up to 80% when the DSCR is at least 1.0. These are program limits, which vary by lender. The lender still has to approve the property value, rent, and rest of the loan.

See how the new payment affects DSCR

The LTV limit tells you how much the lender might allow based on the property’s value. The rent may limit the loan further. If you borrow more while the rent stays the same, the new monthly payment generally rises and the DSCR falls.

Continuing with the $400,000 rental and $180,000 mortgage payoff from the earlier example, assume the lender counts $3,000 a month in rent. Property taxes and insurance total $500 a month, there are no HOA dues, and the new loan has an illustrative 7.25% rate over 30 years. We’ll hold the rate constant to show the effect of loan size, though an actual lender may quote different rates at different LTVs.

Borrowing $20,000 more in the 80% LTV scenario raises gross cash-out by $20,000, but the higher payment lowers DSCR from 1.18 to 1.12. To reach a 1.25 DSCR with $3,000 in rent, monthly PITIA could be no more than $2,400 ($3,000 ÷ 1.25). At the example’s rate and term, that means a smaller loan and less cash out.

A lender may accept a ratio below 1.25, while another may require it for the terms you want. It may also use a current lease, an appraiser’s market-rent estimate, or other approved evidence instead of your projected rent. Ask for a quote using the loan amount and rent figure the lender would actually use. You can run an initial estimate with our DSCR calculator.

Subtract the mortgage payoff and closing costs

The new loan amount is not the cash you take home. First, it pays off your existing mortgage. Closing costs and any penalty for paying off the old loan early reduce what remains.

Using the $300,000 new loan from the example above, the calculation might look like this:

Both 3% amounts are illustrative, not standard charges. Your old loan may have no prepayment penalty, and the actual payoff may include interest owed through the payoff date. Taxes, insurance, escrow items, and other closing charges can also change the final amount.

Ask for an itemized estimate before planning how to use the cash. Our DSCR loan closing costs guide explains which charges to check.

How soon after buying can you cash out?

If you recently bought or renovated a rental, you may want to use a DSCR cash-out refinance to recover some of the money you put into it. How soon you can refinance depends on the lender’s seasoning rule, which is the length of time you must own the property before you can cash out.

Some programs let you refinance soon after purchase but limit the property value they use to calculate your loan. Others have no ownership waiting period. Either way, an early refinance may give you less cash than you expect, even if the property has appraised for more than you paid.

Suppose you bought a rental for $300,000, spent $40,000 on documented renovations, and it now appraises for $400,000. If a program uses the lower of the appraised value and your documented purchase and renovation costs for an early refinance, it would calculate the loan limit using $340,000:

Using the $340,000 cost instead of the $400,000 appraisal makes the maximum loan $45,000 smaller. That does not necessarily mean waiting will give you another $45,000 in cash. The rent must still support the larger loan payment, and you must meet the lender’s other requirements.

Ask lenders how soon you can refinance, whether your documented renovations count toward cost, which value the lender would use, and whether it has a separate limit on the loan amount for recent purchases. Our lender question checklist can help you compare the answers from various lenders you’re considering.

What do lenders look at besides the ratio?

Your rental might have enough equity for a larger loan, and its rent might cover the new payment. That still does not guarantee you can take out the full amount. When reviewing a DSCR cash-out refinance, the lender may also look at:

• Your credit and cash reserves: These can affect the available LTV, rate, and approval.
• The property's condition and rental use: A vacant rental, a short-term rental, or a recently renovated property may need different evidence or qualify under a different program.
• Proof of rent: Have the current lease and rent history ready if you have them. The lender may also require an appraisal with a market-rent estimate.
• Your current loan and ownership records: Get a recent mortgage statement, request a payoff figure, and gather renovation receipts if you bought or improved the property recently. If an LLC owns it, ask what entity and guarantee documents are required. See our guide to DSCR loans for LLCs.

A DSCR cash-out refinance usually does not require tax returns or pay stubs to prove your personal income. The lender will still check your credit and ask for records showing the property’s rent and value, your current mortgage payoff, and any savings you need to qualify.

When does taking cash out make sense?

A DSCR cash-out refinance may make sense if you need funds to improve your rental or buy another property, and the rental can support the larger mortgage. The cash comes from borrowing more against the property, so you will have a higher loan balance and less equity. Before deciding, check:

1. What the rental will earn after refinancing. Subtract the new monthly payment, including taxes and insurance, from the rent. Then allow for vacancies, maintenance, management, and larger repairs. In our 75% LTV example, $453 a month remains after the loan payment, before any of those other costs.
2. What it will cost to get the cash. Look at the new rate and payment, lender fees, closing costs, any penalty for paying off your current loan, and any penalty for paying off the new one early. Our DSCR loan rates guide explains what can affect your quote.
3. Whether you need to replace your current mortgage. If it has a favorable rate, a home equity loan or line of credit might let you keep it. Compare the payments and fees for both loans together with the proposed cash-out refinance. Our DSCR home equity guide covers those options.

You do not have to borrow the maximum amount the lender allows. Ask for a quote based on how much cash you need so you can see whether the new payment works for the property.