Two numbers set your cash-out: the appraised value and the rent. The lower of the two limits wins, so it pays to run both before you apply.
In short: On a DSCR cash-out refinance, the new loan can go up to 75% of the appraised value. Your cash is that loan amount minus your current payoff and closing costs. The rent then has to cover the new, larger payment at the program's minimum DSCR, which is 1.0x on standard programs. If the rent cannot support a loan at 75%, the rent sets your limit instead of the value.
Start with the appraisal, not your own estimate or an online value. Multiply it by 75%. That is the largest loan most DSCR cash-out programs will make, and it is lower than the up to 80% allowed on a purchase.
From that number, subtract what you owe today and your closing costs. What is left is the cash you receive at closing. If the property is free and clear, nothing comes off for a payoff, which is why paid-off rentals produce the largest checks.
A DSCR loan qualifies on the property's rent, not your income. The ratio is monthly rent divided by the full monthly payment: principal, interest, taxes, insurance and any HOA dues.
Cash-out always raises the payment, so it always lowers the ratio. A rental that sits at 1.40x on its old loan can drop near 1.0x after a large cash-out. The ratio after closing is the one that counts, and it must still clear the program minimum.
This example is illustrative and not a quote. A rental appraises at $500,000 with a $210,000 balance. Taxes and insurance run $550 a month. We use a sample rate of 7.0% on a 30-year fixed loan and sample closing costs of $10,000.
At 75% the loan is $375,000. Principal and interest is about $2,495, so the full payment is about $3,045. With rent of $3,400, the DSCR is about 1.12x, which clears 1.0x. Value sets the limit, and net cash is $155,000.
Now drop the rent to $2,900. At $375,000 the DSCR would be about 0.95x, below the standard minimum. To reach 1.0x, the payment can be no more than $2,900, which leaves $2,350 for principal and interest. That supports a loan of about $353,200, or roughly 70.6% of value. Rent sets the limit, and gross cash falls to about $143,200 before closing costs.
| Item | Rent $3,400 | Rent $2,900 |
|---|---|---|
| Appraised value | $500,000 | $500,000 |
| Loan amount | $375,000 (75%) | About $353,200 (70.6%) |
| Full monthly payment | About $3,045 | About $2,900 |
| DSCR after cash-out | About 1.12x | 1.00x |
| Payoff of current loan | $210,000 | $210,000 |
| Gross cash out | $165,000 | About $143,200 |
The two limits above are the big ones. A few smaller items can trim the final check, and it helps to know them early.
If the ratio is what holds you back, there are a few options. Some programs accept a DSCR below 1.0x, usually with lower leverage or different pricing. See our page on sub-1.0 DSCR loans. No-ratio programs set the ratio aside entirely, again usually at lower leverage.
You can also raise the ratio from the rent side. A new lease at market rent, a documented rent increase, or an appraiser's market rent estimate that is higher than the current lease can all help, depending on how the program counts rent. Shopping insurance can lower the payment side.
Not always. A cash-out near 1.0x leaves little room for vacancy or repairs. Some investors take less than the maximum so the rental keeps a cushion, then use the remaining equity later.
A simple test is to ask what the property nets each month after the new payment and a reserve for repairs. If that number is close to zero, a smaller cash-out may serve the portfolio better.
Send the financing team the address, an estimated value, your current payoff, the lease or market rent, and the annual tax and insurance bills. We review your scenario and come back with 2–3 options that show the loan amount, the ratio and the estimated cash out.
Up to 75% of appraised value on our DSCR cash-out programs, compared with up to 80% on a purchase. Credit, property type and the DSCR can lower that on some programs.
The new one. Underwriting divides the rent by the full payment on the new, larger loan, including taxes, insurance and any HOA dues.
Some programs allow a ratio below 1.0x, and no-ratio programs skip the ratio test. Both usually come with lower leverage. Otherwise, the loan is sized down until the ratio reaches the minimum.
Potentially up to 75% of the appraised value, minus closing costs, since there is no payoff. The rent still has to support the new payment.
Loan proceeds are generally not treated as income, but tax treatment depends on your situation. Ask your tax advisor before you plan around it.
These are business-purpose loans, so the funds go to business uses: a down payment on the next rental, rehab, reserves, or paying off other debt on investment property.
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