The Quick Read: Usually you need to leave 15% to 25% of the property’s appraised value untouched after the new loan is sized, and the exact share depends on the type of refinance. Cash-out refinances demand the most remaining equity. Rent coverage, credit and reserves can limit the loan before equity does.
- On a cash-out refinance of a standard rental, most programs in Lendmire’s wholesale network top out around 75% loan-to-value (LTV), the loan as a share of appraised value. That leaves about 25% equity in the property.
- On a rate-and-term refinance of an investment property, select high-leverage programs reach up to 85% LTV. Strong credit is typically needed, and many files land lower.
- Short-term rental collateral is held lower: around 70% on a refinance and 70% on a cash-out.
- Equity is only the first test. The rent also has to cover the new payment, and the file has to pass credit, reserve and property checks.
The Short Answer: Equity Left Behind, Not Equity You Hold
Lenders do not ask how much equity you have today. They ask how much will remain after the new loan funds. The remaining equity equals 100% minus the maximum LTV for your transaction.
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 15, 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 15, 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.
So a 75% cap means 25% of the value stays in the property. A 100%-paid-off rental has 100% equity, but a cash-out loan still stops at the cap. The rest stays locked in the building.
This is why “I have plenty of equity” and “I can pull plenty of cash” are two different claims. Gross equity is the ceiling you could theoretically reach. Withdrawable cash is what remains after the cap, your payoff, closing costs and any holdbacks.
Equity requirements for DSCR refinances are lender policy, not a single national rule. A DSCR loan is a loan that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. These loans are not agency products, so each lender or investor sets its own caps. One fact makes this practical. Across a wholesale network of DSCR lenders, the caps cluster tightly, but they are not identical.
How Do You Calculate Your Own Number?
Run four steps. They take ten minutes and tell you whether a refinance is even worth pursuing.
1. Estimate the value. Use recent sales of similar rentals nearby, then treat the number as a range. The appraiser, not you, sets the final figure.
2. Add up every lien. Count the first mortgage, any second mortgage, and any private or hard-money loan secured by the property.
3. Multiply value by the cap. For a cash-out on a standard rental, use 75%. For a rate-and-term refinance, use the ceiling that fits your credit and leverage tier.
4. Subtract. Take the maximum loan, then subtract your payoff, closing costs and any holdbacks. What is left is your possible cash-out. If it is negative, you need more value, less debt or a different structure.
Picture a rental you expect to appraise at 100 units of value, with debt equal to 60% of that value. A 75% cash-out cap gives you a 15-point gap before costs. Closing costs come out of that gap, so your cash is smaller than 15% of value. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Now stress it. Suppose the appraisal lands 10% lower, at 90 units. Your 60-unit payoff is now about 67% of value. The 75% cap on 90 units is 67.5 units, so the room shrinks from 15 points of the original value to about 7.5. A modest appraisal miss can cut the cash roughly in half.
Next, take a payoff-only case. Debt sits at 80% of value, and you want a lower payment or a new term with no cash back. That is a rate-and-term refinance. It can work at a higher cap than a cash-out, but only on programs that reach that leverage and only with credit to match.
Key Terms Defined
Equity: the property’s appraised value minus everything owed against it.
Combined LTV: all loans on the property added together and divided by its value. As the CFPB’s guide to using home equity explains, lenders typically require you to keep a cushion of equity, so combined LTV and remaining equity are two sides of the same number.
Rate-and-term refinance: a new loan that pays off the old one and closing costs, with no cash to you.
Cash-out refinance: a new, larger loan that pays off the old one and sends you the difference. Corporate Finance Institute describes it as a way to convert equity into cash.
Seasoning: the waiting period between buying a property and refinancing it, counted from the deed recording.
PITIA: principal, interest, taxes, insurance and any association dues, which together make up the full monthly payment.
DSCR (debt service coverage ratio): monthly rent divided by PITIA. A result of 1.00 means rent equals the payment.
Equity Requirements by Transaction Type
The table shows typical ceilings across most programs in the network. Select lenders can sit above or below them, and every file is reviewed individually.
| Transaction | Typical max LTV | Equity left in property |
|---|---|---|
| Investment purchase | 75%–80% | 20%–25% |
| High-leverage purchase (select, 700+) | Up to 85% | About 15% |
| Rate-and-term refinance (select ceiling) | Up to 85% | About 15% |
| Cash-out, standard rental | About 75% | About 25% |
| Short-term rental refinance | Around 70% | About 30% |
| Short-term rental cash-out | 70% | 30% |
Why does a cash-out sit lower? Cash leaving the deal raises the lender’s risk, so the lender wants a thicker cushion. A rate-and-term loan returns nothing to you, so it can be sized closer to your existing balance.
Market surveys report that about 25% equity is a typical requirement for a cash-out on an investment property, according to Credit Karma. That matches what the network shows for a standard rental, where 75% LTV on a cash-out leaves about 25% equity. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
One contrast helps if you are comparing paths. Conventional loans follow published eligibility matrices, such as the Fannie Mae eligibility matrix, which vary by occupancy and unit count. DSCR loans are lender-specific, non-agency products, so each lender sets its own caps. Do not assume a conventional cap applies to a DSCR file, or the reverse.
For a deeper look at the cash-out side, see Lendmire’s piece Tapping Investment Property Equity With A Cash Out Refinance.
Does Seasoning Change the Number?
Yes. Seasoning decides which value the lender uses, and that can change your equity more than any cap.
Early in ownership, many lenders size the loan off the lower of the appraised value or your cost basis. Cost basis means purchase price plus documented improvements. After the seasoning period, they size off the appraisal. For cash-out refinances, about 6 months is the common expectation across the network.
Here is the catch for rehab investors. If you bought low and renovated, the appraisal may show a large gain, but a cost-basis cap can leave that gain unreachable until seasoning passes. Waiting can move the loan from a cost basis to an appraisal basis, and that is sometimes the whole difference between a thin refinance and a useful one.
Experience from the broker’s desk: files built on a purchase-plus-rehab strategy tend to run into the seasoning clock rather than the LTV cap. The investor has the equity on paper, but the lender is still looking at the paper trail from the purchase. Collecting settlement statements and rehab receipts before applying saves a lot of back-and-forth.
Rent Coverage Can Cap the Loan Before Equity Does
You can have enough equity and still not get the loan you want. The reason is the rent test.
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. The lender divides monthly rent by PITIA. A bigger loan means a bigger payment and a lower ratio.
Programs differ on the floor. A coverage ratio of 1.00 is where many select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted, so if your ratio is thin, ask which path fits.
Clearing 1.00 does not mean the property produces positive cash flow. DSCR counts rent against PITIA only. Repairs, vacancy, management, utilities and capital expenses sit outside the calculation, so budget for them separately.
Other gates sit alongside equity:
- Credit: a 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers.
- Reserves: commonly about 6 months of PITIA, although 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. Larger loans typically step up to about 9 months.
- Loan size: up to $3,000,000 on standard programs (smaller balances available through select lenders), with the network generally holding to 30-year fixed structures above $2,500,000.
- Property type: manufactured homes, log homes and barndominiums are not offered through these programs, no matter how much equity they carry.
- Short-term rentals: expect a 640+ credit 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.
Strong equity can improve a file, but it does not erase a credit floor, a reserve rule or a thin coverage ratio. The strongest files clear both tests: enough equity and enough rent. Lendmire’s piece Investment Property Cash-Out Refinance for Landlords Sizing Equity Limits covers how those two limits interact on larger draws.
What If You Don’t Have Enough Equity?
You have five realistic options. Which fits depends on the gap.
1. Wait out seasoning. If a cost-basis cap is the problem, time may fix it without any new money.
2. Pay down principal. A lump-sum paydown lowers the balance relative to value and also improves the coverage ratio.
3. Switch to rate-and-term. If you need a better structure but not the cash, the higher ceiling may fit.
4. Take less cash. Sizing the loan below the cap preserves coverage and can improve the terms.
5. Add documented value. Improvements may support a higher appraised value, depending on comps and underwriter review. Keep receipts.
Honestly, option four is the one investors skip. Pulling every available dollar is rarely the strongest play when the extra cash drops your coverage ratio into thin territory.
Special Situations Worth Knowing
Paying off hard money or a bridge loan. If the new loan only retires the old one and covers costs, it usually counts as rate-and-term. If cash comes back to you, it becomes a cash-out. The classification changes the cap, so confirm it before you run the numbers.
Vesting in an LLC. The LLC is typically the borrower, with an individual signing a personal guarantee, subject to lender program eligibility. Entity documents add to the file, so gather them early.
Multiple liens. A second mortgage counts toward combined LTV. Add every lien to your payoff before you compare against the cap.
Cash buyers. Some lenders offer delayed financing for properties bought with cash, which can relax the waiting period. It does not waive the coverage, credit or reserve tests.
Documents. Plan on a payoff letter, a lease or rent schedule, proof of insurance, entity documents if applicable, proof of reserves, a business-purpose statement for cash-out, and settlement statements or rehab receipts if cost basis applies.
Is the Refinance Worth Doing at All?
A refinance has to pay for itself. Compare the closing costs against what you gain, whether that is cash for the next purchase, a better structure or a different term.
Cash-out proceeds are debt, not income, but 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.
The sharper question is what the cash does after it leaves. If it only plugs a hole in a weak property, a larger loan makes the hole deeper.
Frequently Asked Questions
Do I need more equity for a cash-out than for a rate-and-term refinance?
Yes, in most programs. A standard-rental cash-out tops out around 75% LTV, which leaves about 25% equity. A rate-and-term refinance on an investment property can reach higher leverage on select programs, up to 85%, typically with strong credit. Both are subject to lender guidelines and individual underwriting.
Does the equity requirement change for short-term rentals?
Yes. Short-term rental collateral is held lower, around 70% LTV on a refinance and 70% on a cash-out. That means roughly 30% equity stays in the property. Lenders also typically want about 12 months of hosting history and a 640+ credit score.
Can I refinance right after buying a property?
Sometimes, but the value basis may be your cost rather than the appraisal. For cash-outs, about 6 months of seasoning is the common expectation. Before that point, the lender may size the loan off the lower of appraised value or cost basis.
If I have lots of equity, will I qualify?
Not automatically. Rent coverage, credit, reserves and property type all matter. A large cash-out raises the payment and lowers the DSCR, so rent can cap the loan before equity does. Programs below 1.00 coverage are available through select lenders in the network, with leverage and terms adjusted.
How much cash can I actually take out?
Multiply appraised value by the maximum LTV, then subtract your payoff, closing costs and any holdbacks. The result is your possible cash-out, and it is usually far smaller than your gross equity. Lendmire’s illustrative calculator can help you test scenarios, though any estimate is a starting point rather than a quote.
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. Lendmire is a mortgage broker that arranges DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Programs change, every file is underwritten individually, and nothing here is a commitment to lend. For the full picture on how these loans work, read the complete DSCR loans guide.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
1. CFPB: Using Home Equity Guide
2. Corporate Finance Institute
3. Credit Karma: Cash-Out Refinance on an Investment Property
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Refinance a 2-4 Unit Multifamily Property With a DSCR Loan · Can You Get a DSCR Loan on a 2-4 Unit Multifamily Property? · How Much Cash Can You Pull Out of an Investment Property With a Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.