The Quick Read: The conventional cash-out ratio on a rental is a loan-to-value cap set below what a primary residence gets. Fortune reports Fannie Mae’s investment caps at 75% for a single-unit property and 70% for 2–4 units. The ratio is a ceiling, not an entitlement, because income, debt, reserves and property count can bind first.
- Loan-to-value (LTV) is the new loan divided by the appraised value.
- The cap is lower on rentals than on a primary residence.
- Unit count matters: 2–4 unit properties get a tighter cap than 1-unit properties.
- Cash to you equals the new loan minus payoff and costs.
- DSCR cash-out through select lenders in Lendmire’s network tops out around 75% LTV on standard rentals. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Most investors searching this phrase want one number. The number is real, but it hides several moving parts. This explainer walks through what the ratio means, how underwriting uses it, where it breaks, and what to do when it leaves you short.
DSCR Cash-Out Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 8, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 8, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Which “Ratio” Are You Asking About?
“Cash-out ratio” gets used loosely. Four different things hide behind it.
- LTV: the new first mortgage divided by appraised value. This is the one the cap applies to.
- CLTV: combined LTV, which adds any second liens to the first mortgage.
- DTI: debt-to-income, your monthly debts against your personal income. It is a separate test.
- Equity extracted: the share of value that actually reaches you after payoff and costs.
This article is about the first one. The cap on LTV decides the largest loan the property can carry. Everything else decides whether you get there.
What Does “Conventional” Mean Here?
Fannie Mae and Freddie Mac are the two agencies that set the rules most banks use for standard mortgages. Rental properties fall under the stricter side of those rules.
That is the only agency contrast this article draws. DSCR loans run on a different basis entirely, and a later section compares the two.
How Much Can You Borrow on a Rental?
The cap depends on occupancy and unit count. Fortune’s investment cash-out refinance explainer reports 75% for a single-unit investment property and 70% for 2–4 units, both lower than primary-residence caps. A Fannie Mae eligibility matrix excerpt lists 80% for a 1-unit primary-residence cash-out and 75% for 2–4 units.
| Property | Cash-out LTV cap | Equity that must remain |
|---|---|---|
| 1-unit primary residence | 80% | 20% |
| 2–4 unit primary residence | 75% | 25% |
| 1-unit investment property | 75% | 25% |
| 2–4 unit investment property | 70% | 30% |
A common mistake is applying the 80% figure to a rental. That number belongs to an owner-occupied home. Rentals sit lower, and a duplex through fourplex sits lower still.
The cap also applies to the whole new loan, not just the cash you take. If you owe a lot already, little room is left.
How Underwriting Turns the Ratio Into Cash
Cash to you is the ceiling loan minus payoff and costs. Underwriting follows a set order.
1. Value. An appraiser sets the value. On a 1-unit rental where rent helps you qualify, the Fannie Mae Selling Guide’s appraisal forms section calls for a Form 1007 rent schedule. A 1007 is a short report estimating market rent. Small 2–4 unit properties use Form 1025, an income-focused appraisal form.
2. Ceiling. Multiply value by the cap. A 1-unit rental at the 75% cap can carry a new loan up to three-quarters of appraised value.
3. Subtract. Take off the existing mortgage payoff, any liens, and closing costs. What remains is your cash.
4. Check the loan’s age. The Selling Guide’s cash-out section says a cash-out refinance can pay off the existing first mortgage only if it is at least 12 months old.
5. Qualify you personally. Conventional underwriting reviews your income, DTI, credit and reserves. Reserves are cash left over after closing. The guide also lets you roll closing costs and points into the loan, and use the equity for any purpose.
Picture a rental appraised at a round $400,000 with the 75% cap. The ceiling loan is three-quarters of value. If your payoff and costs eat most of that, little cash reaches you. The calculator on this page can turn percentages into dollars for your own numbers, as an illustrative estimate only.
Why the Ratio Isn’t the Whole Test
The cap is the outer wall, and other tests often hit first. Conventional underwriting qualifies you, not the building.
- Personal income and DTI. The loan must fit your debts against your income. Rental income generally counts only partially toward that test.
- Reserves. Conventional files want cash set aside, and the requirement can grow as your portfolio grows.
- Property count. Conventional limits how many financed properties you can carry. Market guideline summaries put the limit at 10 on investment transactions, so large portfolios hit a wall.
- Title. Conventional generally wants an individual on title, not an LLC.
- Lender overlays. An individual bank or credit union can be stricter than the agencies. A smaller bank may cap you at a few loans no matter what the agency allows.
This is why a strong appraisal does not guarantee a big check. High value helps one test. It does not touch the rest.
Seasoning and the Delayed Financing Exception
How you bought decides how soon you can cash out. Seasoning is the waiting period between buying a property and refinancing it. Conventional treats a refinance of a recent purchase as a cash-out.
One exception exists. Under the earlier Selling Guide version on cash-out refinances, delayed financing lets a cash buyer refinance within a six-month window. The purchase must be arm’s-length, and the new loan is capped near your documented investment plus costs.
| How you bought | What happens |
|---|---|
| Cash purchase | Delayed financing may apply, loan capped near cost |
| Financed purchase | Regular seasoning clock applies |
| Hard money plus rehab (BRRRR) | Not eligible for delayed financing |
BRRRR means buy, rehab, rent, refinance, repeat. It trips people up here. Your purchase was financed, so delayed financing does not apply. Refinance early and the appraiser may not credit your rehab work in the way you hoped, so timing changes how much value you recycle.
The delayed-financing exception also caps you at cost. It will not hand you the rehab-driven value.
What Does Cash-Out Do to Pricing and Cash Flow?
Conventional cash-out carries loan-level price adjustments, which are fees added based on LTV and credit score. The Selling Guide ties them to both. Investment cash-outs also carry a pricing premium over owner-occupied loans. We quote no numbers here, since these adjustments vary by loan.
A bigger loan means a bigger payment. Pulling cash out can erase the rental’s margin. Run your return on the pulled equity against the added carrying cost and transaction costs before committing. New debt also uses up DTI room, which can block your next conventional purchase.
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.
When Conventional Stops Fitting
Conventional ties you to your personal profile, and that is where larger investors run out of room. A growing portfolio, an LLC title, or thin personal income can each stall a file even with plenty of equity.
DSCR financing is a different path. DSCR stands for debt service coverage ratio, which compares a property’s rent to its full monthly payment: principal, interest, taxes, insurance and any association dues. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
Across Lendmire’s wholesale network, the typical shape looks like this:
- Cash-out LTV: tops out around 75% on standard rentals. Short-term-rental collateral caps at 70% on cash-out.
- Seasoning: about 6 months of ownership is the common expectation.
- Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- Credit: a 620 floor exists in parts of the network. Most programs want around 660, and 700 or higher unlocks the strongest tiers.
- Reserves: commonly around 6 months of PITIA, stepping up to about 9 months above $1,500,000. PITIA is principal, interest, taxes, insurance and association dues.
- Loan size: up to $3,000,000 on standard programs, with smaller balances routed through select lenders.
- Ineligible property types: manufactured homes, log homes and barndominiums are not offered.
Those figures are typical ranges from select lenders, not promises, and every file is underwritten individually. Equity available depends on rent used for lender review, PITIA, reserves and the 75% ceiling.
One caution on reading the number. Clearing 1.00 coverage is not the same as positive cash flow. Repairs, vacancy, management, utilities and capital costs all sit outside the calculation.
The strongest files clear both tests: enough equity and enough rental coverage. Lendmire’s complete DSCR loans guide covers the full qualification picture. For the conventional-side mechanics, Lendmire’s piece How Many Investment Homes Can You Refinance In Conventional Loan With Cash Out goes deeper on portfolio limits.
If the Ratio Leaves Too Little Cash
You have options when the math comes up short.
- Wait. Appreciation or rent growth can lift value and widen the ceiling.
- Pay down. A lower existing balance leaves more room under the cap.
- Check the structure. A second lien counts toward combined LTV, so it can eat headroom.
- Switch loan type. A DSCR cash-out may fit when property count or title is the real constraint.
- Weigh the cost. If cash raises payment and costs more than the equity earns, skipping the refinance is a valid answer.
Key Terms Defined
- LTV (loan-to-value): the loan amount divided by the property’s appraised value.
- CLTV (combined LTV): all loans against the property, first and second liens together, divided by value.
- DTI (debt-to-income): your monthly debt payments compared with your monthly income.
- Seasoning: the waiting period between buying a property and refinancing it.
- Reserves: cash or liquid assets you hold after closing, often counted in months of payments.
- Delayed financing: an exception letting a cash buyer refinance soon after purchase, with the loan capped near cost.
Frequently Asked Questions
What is the maximum conventional cash-out LTV on a rental?
Fortune reports Fannie Mae caps of 75% for a single-unit investment property and 70% for 2–4 units. Primary residences get higher caps. Individual lenders can set lower limits than the agencies.
Does the ratio apply to the whole loan or just the cash I take out?
It applies to the whole new loan. Your payoff balance counts first, then closing costs come off, and the remainder is your cash. A rental with a high existing balance may leave little room under the cap.
Can I refinance right after buying a rental?
It depends on how you paid. A cash buyer may use delayed financing, with the loan capped near documented cost. A financed purchase follows the regular seasoning clock, and a refinance of a loan under 12 months old generally cannot be cash-out on the conventional path.
Do short-term rentals change the conventional ratio?
The agency’s appraiser guidance says the Selling Guide is silent on whether short-term rental income counts. Where a lender does count it, a Form 1007 is still required, and that form is built around monthly rent. For DSCR short-term-rental collateral, cash-out tops out at 70%, with about 12 months of hosting history expected.
Why do larger investors move away from conventional?
Personal DTI, financed-property limits and individual title are the usual reasons. Property-based DSCR programs review the rent against the payment instead, subject to lender guidelines. If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fortune — investment cash-out refinance
2. Fannie Mae eligibility matrix excerpt
3. Fannie Mae Selling Guide’s appraisal forms section
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a BRRRR Investor Refinance a DSCR Loan After Bridge Exit? · How to Cash Out on the Full Value After a DSCR Exit From Hard Money · How Much Equity and Reserves a Rental HELOC Lender Expects
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.