The Quick Read: A cash-out refinance replaces your current first mortgage with a larger loan and pays you the difference, and Fannie Mae allows it on a rental only if you clear its seasoning clocks, stay under a 75% loan-to-value cap on a one-unit investment property cash-out, and pass personal income and credit tests. Those rules apply only to loans sold to the agency. A DSCR cash-out runs on lender guidelines instead, and it qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
- Fannie Mae cash-out on a one-unit investment property tops out at 75% LTV per the agency’s eligibility matrix. Caps differ for other unit counts and transaction types.
- The agency checks you first: income, debt-to-income ratio, credit, and how many mortgages you carry.
- A DSCR cash-out checks the property first. Across the wholesale network Lendmire works with, cash-out on a standard rental tops out around 75% LTV.
- Agency seasoning runs on two clocks. DSCR files in the network commonly expect about 6 months.
- More cash out means a bigger loan, and a bigger loan means lower coverage.
Key Terms Defined
Cash-out refinance: A new first mortgage that pays off the old one and hands you the leftover as cash.
LTV (loan-to-value): The loan balance divided by the property’s appraised value.
Seasoning: The waiting period a lender wants before it will refinance, counted from purchase or from the date of the existing loan.
Note date: The date the borrower signed the loan, which is how the age of a mortgage is measured.
Delayed financing: An agency exception that lets a recent all-cash buyer take cash out without waiting out the full title clock.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly housing obligation.
PITIA: Principal, interest, taxes, insurance, and any association dues. It is the payment figure on the bottom half of the DSCR fraction.
Reserves: Liquid savings, usually counted in months of PITIA, that you hold after closing.
DSCR Cash-Out Calculator
Run the cash-out numbers in your market
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.
How Does Fannie Mae Treat a Cash-Out Refinance on a Rental?
Fannie Mae treats it as a person-based loan with strict timing rules. The governing text is the agency’s Selling Guide section on cash-out refinance transactions. It requires the new loan to be a first lien on the same property, or a new loan on a property with no mortgage.
The leverage cap comes from the agency’s eligibility matrix. It lists 75% LTV for a cash-out on a one-unit investment property. A limited cash-out refinance only allows incidental cash back, so it is a different product. The matrix also sets lower caps for some other combinations of unit count and transaction type, so check it for the exact property you own. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The matrix also notes that cash-outs run through the agency’s automated underwriting system need minimum reserves when the borrower’s debt-to-income ratio is above 45%.
Underwriting is where the agency track feels different. The lender reviews your income, your debts, your credit, and your total mortgage footprint. A property can have plenty of equity and still stall because the borrower’s personal file is the bottleneck. That is the reason many investors with several rentals look at DSCR investor loans. This is the only agency material you need here. The rest of this article is about how the two tracks diverge.
The Step-by-Step Mechanics
The sequence is the same on both tracks, but the tests at each step differ.
1. Define the transaction. The new loan pays off the existing first mortgage. You receive the difference after payoff, costs, and any holdbacks.
2. Check seasoning. Each program has its own clock, covered in the next section.
3. Size the loan. The maximum is the appraised value times the LTV cap. On a DSCR file, the loan is also limited by what the coverage math supports.
4. Order the appraisal. Both tracks need an appraisal. Rental files also need a rent opinion, typically a rent schedule on a one-unit property and an operating income statement on a two-to-four-unit property.
5. Underwrite. The agency tests the person. A DSCR lender tests the property.
6. Recompute coverage on the new, larger loan. Pulling cash out raises the balance, so coverage drops.
7. Close and disburse. Net cash is the new loan minus payoff, costs, and holdbacks.
Step six surprises people. The amount of cash you take and the coverage test pull against each other, so you size them together.
Which Seasoning Clock Applies?
On the agency side, two separate clocks run at once. At least one borrower must have been on title for six months before the new loan disburses. If the refinance pays off an existing first mortgage, that mortgage must also be at least 12 months old, measured from its note date to the new loan’s note date. Both tests come from the Selling Guide.
The 12-month test does not apply to second liens being paid off or to buying out a co-owner under a legal agreement. Certain transactions are ineligible outright, including loans with a temporary buydown and some properties with PACE financing.
Investors often assume only the six-month title clock matters. It does not. Someone who bought six months ago with a new mortgage can still fail the 12-month note-age test.
Across the DSCR network, seasoning is simpler. About 6 months is the common expectation, and it is a lender guideline, not an agency rule. Some lenders will look at a file earlier, and some want longer. Because each lender writes its own guideline, the same property can get different answers from different lenders.
The Delayed Financing Exception
Delayed financing is the agency’s carve-out for the investor who paid cash. Under the Selling Guide, a borrower who bought in the prior six months can still take cash out if several conditions are met:
- The purchase was arm’s-length.
- The settlement statement shows no mortgage financing.
- A title search shows no liens.
- The buyer was a person, an eligible trust, or an LLC or partnership the borrower owns 100%.
It is still treated as a cash-out, so cash-out caps apply. It waives only the title-seasoning wait. The loan amount is generally limited to the documented purchase cost plus eligible costs, not the new appraised value. So a buyer who bought well below value and renovated cannot pull out the full new value this way.
A purchase funded with a short-term loan does not fit the exception, because the exception requires no financing on the original purchase. A rehab-and-refinance plan funded with short-term money usually needs a different route.
A Worked Example in Percentages
Take a rental with a first mortgage at 50% of its appraised value. Say the owner wants to refinance at the 75% cash-out ceiling that applies to standard rentals across the network. The new loan is 75% of value, so the gross cash before costs is about 25% of value. Closing costs and holdbacks come out of that. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Now watch coverage. Assume the old loan produced a DSCR of 1.50x. The new loan is half again as large, so principal and interest rise by about half. Taxes and insurance do not change. Coverage on the new loan lands around 1.1x. Those are modeled assumptions, not market data. If taxes and insurance are a larger share of the payment, the ratio falls a little less. If they are a smaller share, it falls a little more.
That file clears a 1.00 floor, but with little room. If the starting ratio had been 1.20x, the same cash-out would likely push coverage under 1.00. In that case, the options are to take less cash, or to ask whether a select lender in the network will review a coverage ratio below 1.00 with leverage and terms adjusted. Eligibility stays subject to lender guidelines, credit approval, and property review.
An illustrative investment cash-out calculator can help you test different cash-out amounts. It gives an estimate, not a quote.
Where the DSCR Track Differs
The DSCR track measures the building, not the borrower’s paycheck. Here is a side-by-side look at the two paths. The agency column reflects the agency’s published rules. The DSCR column reflects typical ranges across select lenders in Lendmire’s network.
| Factor | Agency cash-out | DSCR cash-out |
|---|---|---|
| Who is tested | Borrower income and debts | Property rent vs. PITIA |
| Max LTV, one-unit rental cash-out | 75% | Around 75% on standard rentals |
| Seasoning | 6 months title, 12-month note age | Commonly about 6 months |
| Reserves | Vary; apply in some DU cases | Commonly about 6 months PITIA |
| Vesting | Built for individual borrowers | LLC title common* |
*Subject to lender program eligibility.
Several details apply on the DSCR side. Credit expectations vary: a 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers. Loan sizes run up to $3,000,000 on standard programs. Above $2,500,000, the network generally holds to 30-year fixed structures. Reserves commonly run about 6 months of PITIA and step up to about 9 months on loans above $1,500,000. On shorter-term-stay collateral such as an Airbnb-style short-term rental, the cash-out ceiling is 70%, versus 75% for standard rentals.
Coverage of 1.00 is where many select programs start, and stronger ratios tend to open better leverage and terms. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Some property types are simply not offered. Manufactured homes, log homes, and barndominiums fall outside these programs.
For the full picture of how these loans work, see the complete DSCR loans guide.
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.
Edge Cases Where the General Rule Breaks
Entity title. The agency path is built around individual borrowers. An investor who holds a rental in an LLC often has to plan title before applying, and that can affect the seasoning clocks. The delayed financing exception for a 100%-owned LLC is the main carve-out. DSCR programs commonly allow LLC vesting, subject to program terms.
Large portfolios. An investor with many mortgages in a personal name can run into agency reserve increases and caps on financed properties. DSCR files look at each property’s own rent instead, though lenders still review the borrower’s overall profile.
Title seasoning exceptions. The Selling Guide treats certain transfers, such as inheritance or divorce awards, differently from a purchase. Read the current text before relying on that.
Limited versus full cash-out. These are not interchangeable. A limited cash-out has no 12-month note-age test but allows only incidental cash back, so it cannot fund the next down payment.
Short-term rentals. STR collateral carries lower leverage. Cash-out tops out at 70% on STR collateral, and lenders typically want a score near 640 or higher and about 12 months of hosting history. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
Passing coverage is not cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses all sit outside the ratio. A property can clear 1.00 and still lose money in a bad month. Lendmire’s own take on this appears in its piece Should a DSCR Investor Take the Maximum Cash-Out Refinance on a Rental?. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Agency or DSCR: Which Fits Your File?
Choose by what the bottleneck is.
The agency path may fit if your income is strong, your debts are modest, you own few financed properties, and the property is in your own name. You give up flexibility, but you accept a process built around your personal file.
The DSCR path may fit if your traditional personal-income documentation understates your real cash position, you own many rentals, you hold title in an LLC, or your debt-to-income ratio is the problem. It is reviewed on the property, so a strong rental can carry a file when the borrower profile is complicated.
Here is a rough decision list:
- Short on seasoning? Check the two agency clocks first. If you miss either, the DSCR network’s shorter expectation may help.
- Too much cash out? Coverage drops as the loan grows. Test the ratio before you commit to a cash-out amount.
- Planning a rehab and refinance? Match the plan to the clocks. Agency rules punish a refinance that comes too soon after a financed purchase.
- Strong equity but weak personal file? Equity alone does not satisfy either track. Strong files clear both tests: enough equity and enough rental coverage.
A larger down payment on a purchase can lift coverage by shrinking the payment. It never erases leverage caps, credit floors, reserve rules, or property eligibility.
For a closer look at the agency path alone, Lendmire’s Fannie Mae cash out refinance investment property goes into more detail.
What Does It Cost to Take the Cash?
Expect costs on both tracks, and count them before you set a cash-out target. Closing costs, appraisal fees, and holdbacks reduce your net cash. Agency pricing adds adjustments for investment property and for higher leverage, and DSCR pricing varies by lender, leverage, and coverage. Compare full terms across options rather than judging by one number.
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.
Frequently Asked Questions
Does Fannie Mae allow a cash-out refinance on an investment property?
Yes, with limits. The agency’s matrix sets 75% LTV for a cash-out on a one-unit investment property, and other unit counts and transaction types carry their own caps. You must also clear the seasoning rules and a personal income and credit review. Programs and guidelines change, so check the current matrix. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
How long do I have to own a rental before a Fannie Mae cash-out?
Six months on title, plus the existing first mortgage must be at least 12 months old if you are paying it off. The delayed financing exception can waive the title wait for a qualifying all-cash buyer. DSCR files in the network commonly expect about 6 months of seasoning.
Do Fannie Mae rules apply to a DSCR cash-out?
No. Agency rules apply only to loans sold to the agency. A DSCR cash-out follows each lender’s guidelines, which test the property’s rent against its payment. Across the network, cash-out tops out around 75% LTV on a standard rental and 70% on short-term rental collateral. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Can I use the cash from a cash-out refinance as reserves?
Often not. Many lenders do not count the proceeds of the very loan you are closing toward your required reserves. Across the network, reserves commonly run about 6 months of PITIA, and about 9 months on loans above $1,500,000. Confirm with the specific lender.
Does passing the 1.00 coverage test mean my rental cash flows?
No. The ratio compares rent to PITIA only. Vacancy, repairs, management, utilities, and capital expenses sit outside it, so a property can clear 1.00 and still run short in a hard month.
Next Step
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. As a mortgage broker, Lendmire arranges financing through select lenders in its wholesale network, covering 41 markets including Washington, D.C. Call 828-256-2183 to talk through your file. Loan eligibility is subject to lender guidelines and is not a commitment to lend.
Agency rules sit on one side of the table and rental coverage sits on the other, and the investor who knows which test is the bottleneck usually picks the right loan on the first try.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide, Cash-Out Refinance Transactions
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Fannie Mae Guidelines Cash Out Investment Property · Fannie Mae Cash Out Investment Property LTV · What Is The Maximum LTV For A Conventional Cash Out Refinance?
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.