The Quick Read: On most files, a purchase gets more leverage than a cash-out refinance, because you put your own cash in and the lender sizes against the lower of price or appraisal. A rate-and-term refinance sits between the two, and a cash-out sits lowest.
- Purchase loans typically land at 75%-80% LTV on an investment property, and select high-leverage programs reach 85% with roughly a 700+ score.
- Cash-out refinances on a standard rental top out around 75% LTV across most of the network, with about 6 months of seasoning commonly expected.
- Rate-and-term refinances (no cash back) can reach up to 85% LTV on the strongest files.
- Rental coverage is a second gate. The tighter of the LTV cap and the DSCR test sets your loan size.
All figures are typical ranges from select lenders in Lendmire’s wholesale network, subject to lender guidelines and not a commitment to lend.
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The honest answer is that these are two different jobs. A purchase loan is for an investor who wants maximum leverage and has the cash to put down. A refinance is for an investor who already owns the property and wants a better structure or access to equity. The cash-out version trades some leverage for liquidity. Neither is better in the abstract. The right one depends on whether you are buying, restructuring, or pulling money out.
LTV means loan-to-value, the loan balance divided by the property’s value. DSCR means debt service coverage ratio, which compares the property’s rent to its monthly obligation. This article sets both side by side so you can see where each one limits you. For the full program picture, start with Lendmire’s complete DSCR loans guide.
Side-by-Side
The table shows how a purchase, a rate-and-term refinance, and a cash-out refinance typically differ across the network. It covers investment properties only, and every cell is a typical range, not a promise.
| Factor | Purchase | Rate-and-Term Refi | Cash-Out Refi |
|---|---|---|---|
| Typical LTV ceiling | 75%-80%; 85% select | Up to 85% on strong files | Around 75% |
| Value basis | Lower of price or appraisal | Appraised value | Appraised value |
| Ownership clock | None | Often little or none | About 6 months common |
| Rent evidence | Appraisal market rent | In-place lease usual | In-place lease usual |
| Reserves | About 6 months PITIA | Can be waived if conservative | About 6 months PITIA |
| Entity vesting | Individual or LLC | Individual or LLC | Individual or LLC |
| Source of equity | Your down payment | Existing equity | Existing equity, partly returned |
PITIA is principal, interest, taxes, insurance, and any association dues. It is the monthly obligation the rent must cover. Reserves are liquid funds you hold after closing, usually counted in months of PITIA. They vary by lender, leverage, loan size, and transaction type. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, and loans above that size typically step up to about 9 months.
Many files close in an LLC, subject to lender program eligibility. Moving title between entities shortly before a refinance can disturb the ownership clock, so ask before you retitle.
Key Terms Defined
Seasoning is the waiting period a lender wants between buying a property and refinancing against its new value. Rate-and-term refinance replaces the existing loan without giving you meaningful cash back. Cash-out refinance replaces the loan with a larger one and pays you the difference. Value basis is the number the lender applies the LTV percentage to. Coverage is shorthand for the DSCR figure, monthly rent divided by PITIA.
Which Value Counts?
On a purchase, the lender applies the LTV percentage to the lower of the contract price or the appraised value. If you overpay, the lender does not lend on the overpayment. If the appraisal comes in under the price, your down payment rises to fill the gap.
On a refinance, the lender uses the appraised value. Your own estimate of what the property is worth does not enter the math. An investor who rehabbed a property and expects a high after-repair value still has to get an appraiser to agree. Some programs also size to documented cost, price plus verified rehab spending, while the seasoning window is still open. After the window closes, appraised value generally takes over. That is why timing can change the check size on a value-add deal.
The appraisal also sets market rent. DSCR does not skip the appraisal, it skips personal income documentation. Appraisers commonly use the Single-Family Comparable Rent Schedule (Form 1007) and the Small Residential Income Property Appraisal Report (Form 1025) as report formats. Form 1007 is the format for one-unit properties and Form 1025 for 2-4 units. They are report formats that DSCR lenders reuse, not DSCR program rules.
Why the Ceilings Differ
Lenders treat each transaction as a different level of risk. A purchase has a built-in equity cushion because you wrote a check. The property was also just priced by an arm’s-length sale.
A cash-out refinance does the opposite. It removes equity you already had, so the lender holds less cushion against a price drop. That is the reason cash-out ceilings sit below purchase ceilings across most of the network.
A rate-and-term refinance does not pull equity out. It keeps the balance close to what you owed, so the risk looks closer to a purchase. That is why its ceiling can sit higher than a cash-out, and why a payoff-only refinance can work where a cash-out cannot.
Business-purpose investor loans like these are designed for non-owner-occupied investment properties. They are reviewed differently from a standard owner-occupied mortgage.
When Purchase LTV Is the Better Fit
Purchase leverage fits you if you want the most property for the least cash and have the funds to close. The typical range is 75%-80% LTV, which means 20%-25% down. Select high-leverage programs reach 85% LTV with about 15% down, and those usually want a score around 700 or higher.
A purchase also carries no ownership clock. You can buy a property this month and the loan is sized against the price. That matters if you are moving on a good deal and do not want to wait for a seasoning window.
Your down payment must come from your own funds. Most programs will not accept a second lien at closing to fund it. Plan on the down payment plus reserves coming out of your own accounts.
Rent evidence is also simpler on a purchase. There is often no tenant or a lease being transferred, so the appraisal’s market rent does most of the work.
The tradeoff is cash. High leverage means a thinner margin if rents soften. Picture a buyer at 80% LTV on a duplex whose rent clears the coverage test with little room. That buyer has less cushion than one at 75% on the same property. A larger down payment lowers the monthly obligation and can lift the DSCR. It does not erase credit floors, reserve rules, or property eligibility. A purchase is the right tool when you have the cash and the property supports the coverage. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
When Refinance LTV Is the Better Fit
A refinance fits you if you already own the property and the goal is to restructure, swap loan terms, or pull out equity. The two versions behave differently, so decide which one you actually need.
Rate-and-term works when you want to replace a loan without taking cash. Examples include paying off short-term bridge debt, changing structures, or moving to a longer term. The ceiling can reach 85% LTV on the strongest files, though many land lower. Seasoning is often light, and reserves can be waived on conservative files at modest leverage under $1,500,000. If you do not need cash, this is usually the cleaner path.
Cash-out works when you want liquidity from equity you have built. On a standard investment rental, the ceiling is around 75% LTV across most of the network. Plan on about 6 months of seasoning as the common expectation. Proceeds may or may not count toward reserves, since programs differ. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Rent evidence tightens on a refinance. Expect an in-place lease and often proof that rent is being received. Tenants who are missing a signed lease or deposit records are a common reason a refinance stalls.
Watch the cash-back line. A small amount of cash back can push a loan from rate-and-term into cash-out. The cutoff is set by each program, so ask before you assume.
For a closer look at buying and then refinancing, see Lendmire’s piece Buy Rental Property And Refinance.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
The Two Gates
LTV is only one limit on how much you can borrow. Coverage is the other. The strongest files clear both tests: enough equity and enough rental coverage.
Here is a modeled example, not a market figure. Say a rental clears about 1.25x on a purchase at 75% LTV. Now refinance it with cash out. A larger balance means a larger PITIA, and the same rent now covers less of it. That same property might sit near 1.05x after the cash-out. The LTV cap allowed the bigger loan, but the coverage ratio is what tightens. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Whichever gate is tighter controls the loan size. In high-cost areas where rent is thin relative to value, coverage often binds before the LTV cap does. In low-cost areas where rents are strong, the LTV cap tends to bind first.
Coverage of 1.00 is where select programs start, and stronger ratios open better terms and leverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Credit works the same way. A 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers.
One warning on the word “coverage.” Clearing 1.00 does not mean positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. Business Insider reported on investors who leaned on future rent growth and loose standards and got hurt, and its framing supports stress-testing with conservative assumptions. A refinance makes this sharper, because the new, larger payment is what the rent must cover.
Where the General Rule Bends
- Short-term rentals: Purchase leverage tops out at 75% LTV, refinance sits around 70%, and a 70% cash-out ceiling applies to short-term-rental collateral while standard long-term rentals reach around 75%. Expect a score of 640 or higher and about 12 months of hosting history. Coverage floors are 1.00 on purchases and refinances. 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.
- Property type and size: Condos, 2-4 unit buildings, and larger balances often step leverage down, and cash-out typically steps down faster than purchase.
- Loan size: Standard programs run up to $3,000,000, with smaller balances routed through select lenders in the network. Above $2,500,000 the network generally holds to 30-year fixed structures.
- Term structure: The 30-year fixed is the spine. Extended terms and interest-only periods are available through select lenders, and ARM structures exist for investors who want them.
- Ineligible properties: Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in these programs.
Agency rules sometimes get confused with DSCR rules. A conventional agency program requires at least one borrower to have been on title for six months before a cash-out, with narrow exceptions. DSCR seasoning is lender policy, not law, and it varies by program.
The Verdict
Choose purchase leverage when you are buying, have the cash, and the rent clears the coverage test with room to spare. It offers the highest leverage and no ownership clock. Choose a rate-and-term refinance when you want a better structure or to pay off short-term debt without taking cash. Choose cash-out when you need the liquidity and accept a lower ceiling and a seasoning clock.
If you are unsure, run both gates before you commit. Check how much the lender will lend against the value, then check what that loan does to your coverage ratio. The answer is whichever number is smaller. If an appraisal lands low on a refinance, Lendmire’s piece Appraisal Came In Low on a Rental Property Refinance: Rate-and-Term vs Cash-Out at the Lower Value covers the options.
Tax treatment varies; consult a qualified professional before relying on any deduction.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a mortgage broker arranging DSCR financing through select lenders across 41 markets including Washington, D.C., can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals.
Frequently Asked Questions
Is refinance LTV lower than purchase LTV?
Usually only for cash-out. A cash-out refinance on a standard investment property tops out around 75% LTV, while a purchase typically runs 75%-80%. A rate-and-term refinance can reach up to 85% on strong files, so it is not always lower. Each program sets its own matrix.
Does a rate-and-term refinance get the same LTV as a purchase?
It can come close. Because no equity comes out, the risk looks similar to a purchase. The strongest files can reach 85%, but many land lower depending on credit, coverage, property type, and loan size.
What value does the lender use on a refinance?
Appraised value. Your own after-repair estimate does not set the loan. Some programs size to documented cost while the seasoning window is open, then move to appraised value afterward.
Does seasoning apply to a purchase?
No. A purchase has no ownership clock because the loan is sized against price or appraisal at closing. Seasoning matters on a refinance, and about 6 months is the common expectation for cash-out.
Is a high LTV always available if I have the down payment?
No. Credit, reserves, property type, and coverage all limit leverage. A larger down payment can lift DSCR, but it does not remove LTV caps or credit floors. Programs change and every file is underwritten individually.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling & Servicing Guide Forms
2. Business Insider via Yahoo Finance
3. 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: Can a Seller Gift Equity on a DSCR Purchase? · How a Short-Term Rental Loan Works on a 2-4 Unit Property · Second-Home Mortgage vs DSCR Loan on a Short-Term Rental
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.