The Quick Read: A contractor’s cash-out is not one fixed number. It is the smaller of two limits: the income a lender credits from your deposits after an expense factor, and the equity left under the leverage cap once the existing loan and closing costs come out. Whichever limit you hit first sets your check.
- Owner-occupied cash-out (primary residence or second home) runs up to 80% LTV with a fixed expense ratio. It drops to 75% LTV when the expense ratio is accountant-prepared. Loan size and credit move the exact cap.
- Investment-property cash-out tops out around 75% LTV on select lenders’ programs.
- Contractors usually face a heavier expense factor than office-based businesses, so a CPA letter is the main lever you control.
- Loan sizes run from roughly $125,000 to $3,500,000, and reserves commonly sit around 6 months of the housing payment. All of it is subject to lender guidelines.
- If the property is a non-owner-occupied rental, a DSCR loan may fit better than bank statements.
What “Pulls Out” Means Here
Pulling out means taking equity as cash. You refinance the home or rental for more than you owe, pay off the old loan, and keep the difference. (If you landed here after a contractor walked off your kitchen remodel, this is not that article.)
A bank statement cash-out is reviewed on documented income under the applicable program, subject to lender guidelines. The lender reads 12 months of personal or business bank statements instead of leaning on traditional personal-income documentation. That matters for contractors. Write-offs for trucks, tools, materials, and subcontractors shrink the net income on a tax return. Deposits tell a fuller story.
The loan is still fully underwritten. Deposits get screened, an expense factor gets applied, and the result gets tested against the new payment and your other debts. It is a different yardstick, not an absent one.
Key Terms Defined
Cash-out refinance: a new, larger loan that pays off your existing mortgage and hands you the difference.
LTV (loan-to-value): the new loan balance divided by the appraised value of the property.
Expense factor: the share of your business deposits the lender treats as operating costs, which are removed before income is counted.
Qualifying deposits: the deposits left after transfers, loan proceeds, refunds, and one-off items are screened out.
Seasoning: the ownership period a lender wants before it will allow cash-out on a property. Lenders set their own.
Reserves: liquid funds you keep after closing, commonly measured in months of the housing payment.
DSCR (debt service coverage ratio): monthly rent divided by the full monthly obligation on a rental. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines.
The Two Limits That Decide Your Number
Think of two doors. You can only walk through the narrower one.
The equity limit. The lender applies a leverage cap to the appraised value. The maximum new loan is that cap times the value. Subtract your payoff and closing costs, and what remains is the most cash the property can release.
The income limit. Your qualifying income has to support the new, larger payment alongside your other debts. A bigger loan means a bigger payment. A contractor with strong equity but heavily trimmed income can hit this wall first.
Low-balance borrowers usually hit the income limit last, because their payoff is small. High-balance borrowers often hit the equity limit first, because the payoff eats most of the room under the cap.
How Your Deposits Become Qualifying Income
The sequence is the same across the lenders Lendmire works with, even though the details differ by program.
1. Pick the statement type. Personal statements are generally counted at close to full eligible deposits. Business statements get an expense factor. If business receipts and expenses run through a personal account, expect the lender to treat the file as business statements.
2. Screen the deposits. Transfers between your own accounts, loan proceeds, refunds, and unexplained one-off deposits come out first.
3. Apply your ownership share. If you own 60% of the business, only that share of the income counts.
4. Apply the expense factor. The formula is eligible deposits, divided by the months reviewed, times one minus the expense factor.
5. Test the result. The lender compares the monthly qualifying income to the proposed payment and your other debts.
Here is the arithmetic with indexed numbers. This is the article’s own illustration, not a lender quote. Say your eligible deposits are 100 units. A 50% factor leaves 50 units of income. A 25% factor leaves 75 units, which is 50% more qualifying income from the same deposits. The lender sets the factor, so treat it as a variable, not a promise.
Which Deposits Count for a Contractor?
Contractor accounts are messy. Money comes in as draws, goes out to subs and suppliers, and sometimes circles back as refunds. Underwriters sort it as follows.
| Deposit type | Usual treatment | What helps |
|---|---|---|
| Customer payments | Counted | Invoices, contracts |
| Progress draws | Counted | Draw schedules |
| Subcontractor pass-throughs | Heavier factor or trimmed | CPA expense letter |
| Supplier refunds and credits | Usually excluded | Matching purchase records |
| Transfers between accounts | Excluded | Clear account labels |
| Cash jobs deposited later | Often questioned | Invoices, job records |
| Loan proceeds, owner injections | Excluded | Source documents |
| Platform payouts | Counted if consistent | Platform statements |
Deposits should look like your trade. A lender expects the pattern to match the business, so a run of round, unexplained deposits invites questions. Mixed or commingled accounts are a common cause of file problems. Some underwriters apply the harsher treatment or ask for clean statements.
The Cash-Out Formula, Step by Step
1. Multiply the appraised value by the leverage cap. That is the maximum new loan.
2. Subtract the payoff of your existing mortgage.
3. Subtract closing costs, prepaids, and any reserve requirement you must fund.
4. Compare the result to what your income can support. The smaller number wins. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The cap depends on occupancy. Across the network, owner-occupied cash-out (primary residence or second home) runs up to 80% LTV with a fixed expense ratio, or 75% LTV with an accountant-prepared ratio, by loan size and credit. Investment-property cash-out tops out around 75% LTV. The 90% figure you may see for primary-residence purchase or rate-and-term loans does not apply to cash-out. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Here are three contrasting profiles, expressed as shares of appraised value. Closing costs come off afterward.
| Profile | Payoff | Cap | Room before costs |
|---|---|---|---|
| Owner-occupied, low balance | 40% of value | 80% LTV | 40% of value |
| Owner-occupied, high balance | 72% of value | 80% LTV | 8% of value |
| Rental, mid balance | 60% of value | 75% LTV | 15% of value |
The second borrower may have a great income file and still walk away with little. Equity, not income, is the binding limit there. Closing costs can shrink an 8% cushion to almost nothing. Borrowers in that spot often look at larger-loan structures, and Lendmire’s piece How to Guard Cash-Out Proceeds on a Super Jumbo Bank Statement Refi covers that end of the market.
Why the Number Comes In Lower Than Expected
When a contractor’s quote lands below the hope, the cause is usually one of these.
- The expense factor is heavier than assumed. Materials, subs, and payroll push lenders toward a higher factor. Lendmire does not tell borrowers a contractor-specific percentage, because lenders set it and it varies.
- Pass-through money inflated the deposits. Customer funds that flow straight to subs and suppliers can be trimmed or hit with a higher factor.
- Ownership share is partial. Only your share of the business income counts.
- The payoff is large. The equity limit binds before income ever matters.
- The appraisal came in light. Every point of value changes the cap.
- Reserves took a bite. Funds set aside to meet reserve requirements are not cash in your pocket.
- Statements were commingled. Mixed accounts can push the file into worse treatment.
An accountant-prepared expense ratio can move the outcome. On owner-occupied cash-out, the program difference is built in: the accountant-prepared route typically comes with a lower leverage ceiling in exchange for a documented ratio, while the fixed-ratio route may allow somewhat higher leverage. Which is better depends on how your actual expenses compare to the fixed ratio. A CPA can tell you before you apply. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
How Much Should You Pull?
The maximum is rarely the smartest number. Every extra point of cash-out raises the loan balance, so it raises the payment and trims your equity cushion. Contractors have lumpy months, and a payment sized to the best quarter can pinch in the slowest.
A useful test is the use of funds. Cash that pays off higher-cost business debt, funds equipment that earns revenue, or finances a renovation that may support a higher appraised value, depending on comps and underwriter review, has a plan behind it. Cash that covers a cash-flow gap is a warning sign. Keep the reserve requirement in mind as well: roughly 6 months of the housing payment is common, and that money should not be your working capital. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Rental or Residence? Occupancy Picks the Rulebook
This is where many contractors take the wrong turn. Occupancy decides the loan type.
An owner-occupied home is a consumer mortgage, so consumer disclosure rules such as TRID apply and your income gets underwritten. A cash-out on a rental you do not live in is generally treated as business-purpose, and it sits outside that consumer framework. Federal rules deem credit to acquire, improve, or maintain non-owner-occupied rental property a business purpose, and they carve out an occupancy test: if the owner expects to occupy the property for more than 14 days in the coming year, that special treatment does not apply. A law-firm explainer on business-purpose loans draws the same line, noting that consumer-law protections attach to loans to individuals for consumer purposes, such as a cash-out on a rental used to pay personal taxes. Because the purpose matters, a lender may look at what the cash is for, not just the collateral.
The practical takeaway is simple. Do not assume a rental makes a loan business-purpose if you will stay there, and do not use rental cash-out for personal expenses without a lender confirming how it will be classified. Mislabeling a consumer loan as business-purpose carries real risk for the lender and the borrower.
When DSCR Fits Better Than Bank Statements
If your weak link is personal income, a DSCR cash-out on a non-owner-occupied rental sidesteps it. The lender tests rent against the full payment instead of testing your deposits. Every dollar of cash-out raises the payment, so rent can cap your proceeds before equity does.
If the property’s rent is weak but your deposits are strong, bank statements may carry more of the file. For a contractor with several rentals, the investor-side options live in Lendmire’s complete DSCR loans guide.
| Path | Best when | Tested on | Typical cash-out cap |
|---|---|---|---|
| Bank statement, owner-occupied | You live there, income is strong | Your deposits | Up to 80% LTV |
| Bank statement, investment | Rent is thin, deposits are strong | Your deposits | Around 75% LTV |
| DSCR cash-out | Rental, strong rent, thin personal income | Rent versus payment | Varies by lender |
| Second lien | Existing first loan has value to keep | Varies | Varies by lender |
Sub-1.00 coverage programs exist through select lenders in the network, but LTV and terms adjust. Exact eligibility depends on credit, reserves, and property review.
Timing, Second Homes, and Paperwork
Most cash-out programs want a period of ownership before they allow cash-out. The length is lender-defined, so ask before you plan around a date. Second homes follow the owner-occupied cash-out ceiling, and Lendmire’s piece How Much Cash-Out a Second-Home Bank Statement Loan Allows goes deeper.
Gather these before you apply:
- 12 months of personal or business bank statements.
- Proof of how long you have been in business and how much of it you own.
- A CPA or tax-preparer letter on expenses, if you have one.
- A payoff statement for your current mortgage.
- Homeowner’s insurance and property information.
- Documentation for large or unusual deposits.
Frequently Asked Questions
Can a contractor take cash out of a house with bank statements instead of traditional personal-income documentation?
Yes, subject to lender guidelines. The loan is reviewed on documented income under the applicable program, and you need enough equity under the leverage cap. Owner-occupied cash-out runs up to 80% LTV. Occupancy and the loan’s purpose decide which loan type applies.
What is the maximum LTV on a bank statement cash-out?
On owner-occupied cash-out, up to 80% LTV with a fixed expense ratio, or 75% LTV with an accountant-prepared ratio, by loan size and credit. The 90% figure applies to primary-residence purchase and rate-and-term loans, not cash-out. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Can I choose my own expense factor?
No. The lender sets it based on the type of business. You can influence it with documentation, such as a CPA or tax-preparer letter showing your actual expenses. That letter is the main lever a contractor has.
Does a bank statement loan mean no income verification?
No. The file is fully underwritten. Deposits are screened, the expense factor is applied, and the income is tested against the payment and your other debts.
Is a DSCR cash-out better for a rental I own?
Often, yes. If the property is a non-owner-occupied rental, DSCR tests rent against the payment instead of your deposits. It may fit better when personal income is the weak link, subject to lender guidelines.
Next Step
If you are self-employed and want to see how the numbers work, Lendmire can help you compare bank statement loan options based on your deposits, the property, credit profile, leverage, and your goals.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.
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References
1. CFPB – Regulation Z § 1026.3, exemptions and business-purpose credit
2. Doss Law – Business Purpose Exemption Simplified
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Tap Equity Without Losing Your Low First-Mortgage on Bank Statements · How to Pull Business Capital From Home Equity on Bank Statements · How a Contractor Pulls Equity From a High-Equity Home on Bank Statements
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.