The Quick Read: Costs on this refinance are charged on the entire new loan, not just the cash you pull out, so a low existing first lien still produces a full cost stack that comes out of your proceeds before any check reaches you. The bigger economic effect is usually repricing the whole balance, not the fees themselves.
- A cash-out replaces your first lien. Origination charges and title premiums follow the size of the new loan.
- Appraisal, recording, and settlement fees are roughly fixed per file, so they hurt most when proceeds are small.
- Net cash is the new loan minus the payoff, minus closing costs, minus any prepayment charge on the old loan.
- Cash-out typically tops out around 75% LTV on a standard rental, and rent coverage on the larger payment can cap the loan before equity does.
What Counts as a Closing Cost on a Cash-Out?
Closing costs on an investor cash-out are the fees to originate the new loan, verify the property, insure the title, and record the paperwork. They come out of the proceeds or get paid in cash at closing. Agent commissions never apply, because nobody is selling anything.
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.
Many investors expect costs to track only the new money. The new loan pays off the old one, so the lender prices and charges against the full new balance.
A low first lien makes this feel odd. You owe little, and you hold a lot of equity. The gross check can look large. Costs still scale with the bigger loan you are creating, not with the small balance you are retiring.
Which Costs Move With Loan Size?
Origination charges and title premiums grow as the loan grows. Appraisal, recording, and settlement fees stay about the same whether the loan is large or small. Across the network, the exact mix varies by lender, state, and loan size.
| Cost bucket | Moves with loan size? | Can it be netted from proceeds? |
|---|---|---|
| Origination and points | Yes | Yes, within the leverage cap |
| Underwriting and processing | Mostly flat | Yes |
| Appraisal | Flat | Often paid up front |
| Lender’s title policy | Yes | Yes |
| Settlement and recording | Mostly flat | Yes |
| Prepaids and escrow deposits | Varies | Yes, if escrowed |
| Old-loan prepayment charge | Tied to old balance | Deducted at payoff |
| LLC documents and title extras | Flat | Yes |
Lender fees are typically the largest piece of the stack, and title charges tend to come next. That ordering matches what the federal consumer-finance regulator reports in its closing cost request for information, though that study covers consumer mortgages broadly rather than DSCR files.
Title deserves its own note. A new lender’s policy is generally issued on the new loan. Reissue or refinance-rate discounts exist on some policies, but they depend on the insurer, the state, and the age of the earlier policy. On a rental held for many years, do not assume a discount. Ask title for both quotes.
How Underwriting Treats the Refinance, Step by Step
Underwriting on a cash-out is a sequence of subtractions. Each step can lower the number before you see a check. Here is the order most programs in the network follow.
1. Value. The lender’s own appraisal sets value. Your estimate, or the number you paid, does not size the loan.
2. Leverage cap. Value times the cap gives the equity-based maximum. On most files that cap is around 75% LTV on a standard rental.
3. Rent test. The lender checks whether rent used for lender review covers the full monthly obligation on the new, larger loan. That means principal, interest, taxes, insurance, and any HOA dues. Many select programs start at 1.00 coverage, and stronger ratios open better pricing and leverage.
4. Maximum loan. The maximum is the lesser of the equity-based loan and the loan the rent can carry.
5. Payoff. Title gets payoff letters for the first lien and any junior liens. At closing, title wires the old holder and records the release.
6. Costs. The stack in the table comes out next.
7. Net cash. What remains goes to you.
Seasoning matters before any of this starts. Cash-out typically expects about six months of ownership, measured from the recording of your title. Reserves also come into play. Around six months of PITIA is common, and loans above $1,500,000 typically step up to about nine months. Credit floors begin near 620 in parts of the network, most programs want around 660, and 700 or higher opens the strongest leverage tiers. All of this is subject to lender guidelines.
The Low-First-Lien Twist: Repricing Is the Real Cost
A cheap first lien is an asset you give up. Replacing it with a larger DSCR loan raises the cost of every dollar you owe, not only the equity you pull out. The closing costs are a one-time charge. The repricing runs for as long as you hold the new loan.
That is why the question is never only “what are the fees?” Ask what you are trading. You are swapping a small, old balance for a bigger, newly priced one. The cash you receive has to earn enough to justify that swap.
Lendmire’s piece Should a Scaling Investor Preserve a Low First Lien or Cash Out the Rental takes that decision head-on. This article stays on the cost side of the same choice.
Two more points belong here. Check the old note for a prepayment charge. A cheap first lien may carry none, but you should confirm before you plan around the payoff. And remember that clearing 1.00 coverage is not the same as positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation, so the cash you borrow should be sized with those in mind.
A Worked Example in Percentages
Percentages show the mechanics without pretending to price a real file. These inputs are modeled assumptions, not market data. Think of the appraised value as 100.
Scenario A: a low first lien.
- Existing first lien: 30% of value.
- Leverage cap: 75% of value.
- Gross release before costs: 45% of value.
- Costs: origination, title, and fixed fees all come out of that 45%.
Scenario B: a high payoff.
- Existing first lien: 70% of value.
- Leverage cap: 75% of value.
- Gross release before costs: 5% of value.
- Costs: the fixed fees alone can consume most of it, and the percentage-based fees finish the job.
Scenario C: rent binds first.
- Existing first lien: 30% of value.
- Rent can carry a loan of only about 60% of value at the program’s coverage minimum.
- Gross release before costs: 30% of value, not 45%.
Scenario C surprises people. A low first lien usually means a lot of equity. But coverage is tested on the new, larger payment. A property with modest rent against its value can hit the rent limit well before the equity limit. A lower-cost loan structure with lower leverage may still clear it, but proceeds shrink.
If rent coverage lands below 1.00, a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. It is a different path from the 1.00 programs, not the same program with a lower floor.
Roll the Costs In or Pay Cash?
You can usually net costs out of proceeds or bring cash to the table. The tradeoff is easy to see.
| Approach | Effect on your check | Effect on the loan |
|---|---|---|
| Net costs from proceeds | Smaller check | New loan stays at the cap |
| Pay costs in cash | Full gross check | Same loan, no change to coverage |
| Lower the loan to improve coverage | Smaller check | Better coverage, lower leverage |
Because the cap applies to the new loan, you cannot borrow past it to cover fees. Netting costs just shrinks the check. If the file is tight on coverage, a smaller loan can also lift the ratio. That is a real lever when rent is the limiting factor.
A larger down payment or smaller loan never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Where the General Rule Breaks
The rule that costs follow the whole new loan holds almost everywhere. These cases bend it or change the picture.
Payoff-plus-costs only. If the new loan covers just the payoff and the costs, it is generally treated as a rate-and-term refinance. Cash back at closing puts the file on the cash-out line. That line is drawn by lender policy.
Paid-off property. A rental with no mortgage is still a cash-out refinance when you pull cash. The cash-out cap applies.
Short-term rentals. Cash-out on short-term-rental collateral is held to 70% LTV, versus around 75% on a standard long-term rental. Expect a 640 or higher score 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. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
A second lien instead. Leaving the first loan in place changes the cost picture. You reprice only the new money. But rent must cover both payments, and combined leverage is tested. Lendmire’s article Should a Low-First-Lien Investor Cash Out or Open a Rental HELOC covers that comparison. Investment-property HELOC lines cap at $500,000 total.
LLC title. Entity-titled rentals can add documents and title steps, subject to lender program eligibility. Budget for that as a flat extra.
Local variation. Title rates, recording fees, and transfer taxes differ by jurisdiction, so a cost estimate from one area does not transfer to another.
Ineligible property. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, so no cost analysis applies.
Do Consumer Mortgage Disclosures Apply?
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. Federal rules exempt credit extended primarily for a business or commercial purpose from the consumer lending disclosure regime. The settlement-procedures rule carries a matching business-purpose exemption.
The practical result: do not expect the standard Loan Estimate and Closing Disclosure format or its fee-tolerance caps. Ask for an itemized cost sheet in writing and compare it line by line. The exemption turns on the purpose of the loan, not just on the property being an investment, as this compliance analysis explains. Clear documentation of how proceeds will be used helps the file.
Is It Worth It? A Practical Decision Frame
Cash-out works best when the cash earns more than the all-in cost of getting it. Three questions settle most files.
How long will you hold? Spread the one-time costs over your hold period. A short hold punishes a heavy fee stack. Also check any prepayment window on the new loan, since an early sale or second refinance resets the math.
What does the cash do? Cash that funds a down payment on another rental can earn a return. Cash that sits idle only costs you. Closing costs also lower your cash-on-cash return, so run the numbers after costs, not before.
Is the check big enough? In Scenario B above, fixed fees consume most of the proceeds. When the net check is thin, skip the refinance, wait for more equity, or look at a second lien instead.
To decide whether a refinance makes sense, get the appraisal-based leverage cap, the rent-based loan limit, and the itemized costs side by side. Compare the lesser of the two loan limits against the check you actually need.
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.
Key Terms Defined
Cash-out refinance: A new loan that pays off the old one and returns the leftover as cash.
Seasoning: The ownership time a lender wants before it will allow a cash-out, typically about six months on these files.
PITIA: Principal, interest, taxes, insurance, and any association dues, the full monthly obligation rent is measured against.
DSCR: The ratio of rent used for lender review to PITIA, used to test whether the property carries its own payment.
Prepayment charge: A fee some loans carry if you pay them off early, which reduces your net cash.
Frequently Asked Questions
Do I pay closing costs only on the cash I take out?
No. The new loan replaces the old one, so origination charges and title premiums follow the full new balance. Fixed fees like appraisal and recording stay about the same either way. Only the net check shrinks as costs rise.
Does a low first lien guarantee a large check?
No. Equity sets one limit, and rent coverage on the larger new payment sets another. Whichever is lower controls the loan. Costs and any old-loan prepayment charge then come out of the gross release.
Can I fold closing costs into the new loan?
Yes, in most structures, but the leverage cap still applies. Costs netted from proceeds reduce your check rather than raising the loan. If you want the full gross check, bring cash to closing instead.
How is a payoff-only refinance different from a cash-out?
A refinance that covers only the payoff and the costs is generally treated as a rate-and-term file. Once any cash comes back to you, it moves to the cash-out line, with its lower leverage cap and seasoning expectation. Lender policy draws that line.
Does an LLC change the costs?
It can add documents and title steps, which are mostly flat fees. Whether an entity can borrow depends on lender program eligibility. Raise it early so the cost sheet reflects it.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker that arranges DSCR investor financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Programs change, and every file is underwritten individually by the lender. Nothing here is a commitment to lend. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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. The complete DSCR loans guide covers the full program picture.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
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References
1. CFPB closing cost request for information
3. 12 CFR 1024.5, Cornell Legal Information Institute
4. Regulation Z and Investment Properties, Compliance Alliance
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: Cash Out Refinance Investment Property Laws · Should I Pay Off My HELOC or Invest? · Cash Out Refinance Balloon LLC Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.