The Quick Read: On a DSCR cash-out refinance, standard reserves are the default, and a waiver is a narrow exception tied to the file. Standard reserves suit most borrowers who hold liquid cash. A waiver suits conservative files at modest leverage and smaller loan sizes, and it usually costs you something in cash-out size.
- Standard reserves on a cash-out commonly run about 6 months of PITIA, stepping up to about 9 months above $1,500,000.
- Waivers tend to appear on conservative files at modest leverage under $1,500,000, and they are not automatic on a cash-out.
- Cash-out proceeds are not a safe source of reserves. Treat them as lender-specific at best.
- Clearing the coverage test does not mean the property cash flows.
This article covers the reserves a lender asks you to hold on your loan. It does not cover HOA or condo association reserves.
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Key Terms Defined
DSCR is the debt service coverage ratio: the property’s monthly rent divided by its monthly obligation. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
PITIA is principal, interest, taxes, insurance, and association dues. It is the full monthly obligation on the property.
Reserves are liquid funds you still hold after closing, counted in months of PITIA.
Waived reserves means the lender sets the reserve requirement at zero for a specific file. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Seasoning is the ownership period a lender wants before it allows cash-out. Across the network that is about 6 months, measured from title recording.
Net cash-out proceeds are what is left after the old loan is paid off and closing costs come out.
The Honest Answer on Who Each Option Fits
Most investors will end up on standard reserves, and that is fine. If you hold a healthy cash cushion, the reserve requirement costs you nothing extra. It simply sits in your account. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
A waiver fits a narrower profile. Think of a borrower with a conservative file: modest leverage, a loan under $1,500,000, solid credit, and strong coverage. Reserve rules vary by lender, leverage, loan size, and transaction type, so a waiver is a feature of a particular program and file. It is not a right.
A waiver also does not mean you can skip personal qualification. Credit and liquidity still matter on DSCR files, so the “purely asset-based” idea is a misconception. Business-purpose investor loans are reviewed differently from owner-occupied mortgages.
Side-by-Side
The table below describes how these two paths typically work across the network of lenders Lendmire places files with. Every file is underwritten individually.
| Factor | Waived Reserves | Standard Reserves |
|---|---|---|
| Review basis | Rent vs. PITIA, plus credit | Rent vs. PITIA, plus credit |
| Typical fit | Conservative, modest-leverage files | Most cash-out files |
| Loan size | Typically under $1,500,000 | About 9 months above $1,500,000 |
| Reserve months | Zero if the waiver applies | Commonly about 6 months |
| Documentation | Credit, rent, property review | Adds asset statements |
| Property types | Same eligibility rules | Same eligibility rules |
| Entity vesting | Guarantor-based | Guarantor holds the funds |
| Seasoning | About 6 months for cash-out | About 6 months for cash-out |
| Trade-off | Often lower leverage, less cash out | Cash is tied up after closing |
The same property rules apply to both paths. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, with or without a waiver. If you vest the property in an LLC, that is subject to program terms, and the guarantor still carries the reserve test.
What Standard Reserves Look Like on a Cash-Out
Standard reserves are a stated number of months of PITIA on the subject property, held in liquid accounts after closing. On most cash-out files across the network, that is about 6 months. Above $1,500,000 it typically steps up to about 9 months. First-time investors on high-balance programs can see a longer requirement than experienced owners.
The lender sizes the reserve on the new payment, not the old one. A bigger cash-out loan means a bigger payment, so the reserve target grows with it. The same bigger loan also lowers your coverage ratio, because rent is divided by a larger PITIA. A cash-out refinance pays off the old mortgage with a larger new one, and the extra comes to you as cash. Every dollar of extra loan feeds both the reserve target and the coverage test.
Lenders commonly ask for recent bank statements to prove the assets. On a DSCR file, those statements prove assets and source of funds, while rent carries the ratio. Lendmire’s piece Super Jumbo DSCR vs Bank Statement Reserves on a Cash-Out Refinance goes deeper on documentation.
Not every asset counts at face value. Brokerage and retirement accounts are generally accepted but discounted, and the discount varies by lender. Your real shortfall can be larger than the headline number. Business accounts are reviewed case by case.
How a Waiver Actually Works
A waiver is a condition attached to a scenario. The cleanest cases are conservative files at modest leverage under $1,500,000. Above that size, the network typically steps up to about 9 months.
Here is the catch for a cash-out borrower. Cash-out on an investment property tops out around 75% LTV on a cash-out refinance across most of the network. A waiver tends to favor lower leverage, which means pulling less cash. Some waivers are written around rate-and-term files, where no cash comes back at closing. Do not assume a waiver carries over to a cash-out. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Sub-1.00 coverage adds another wrinkle. A 1.00 ratio is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Reserve expectations on that path can rise, so a waiver and thin coverage rarely show up together.
Here is the practical test. Ask the lender to put the reserve condition in writing, with the exact leverage and loan size it applies to. A marketed “no reserves” claim means little until the term sheet says it for your file.
Do Cash-Out Proceeds Count as Reserves?
The safe assumption is no. Some lenders allow proceeds to count under conditions, but others exclude them, and above $3,000,000 they do not satisfy reserves. Treat this as lender-specific and unreliable until you see it in writing.
Spent proceeds also cannot do double duty. If your plan is to pull cash out to fund the next down payment, that cash is gone once you wire it. The reserves on the new loan have to come from somewhere else. Lendmire’s article Rental HELOC vs Cash-Out Refinance for an Investor’s Down Payment covers the recycling math.
When Waived Reserves Is the Better Fit
A waiver earns its place in a few situations:
- You are cash-light but equity-rich. Your liquid cash is thin, but the property carries strong equity and clean coverage. A waiver removes the reserve test as the obstacle.
- The loan is modest. Files under $1,500,000 are where waivers appear most often.
- You will accept less cash out. If a lower-leverage cash-out still covers your goal, trading some proceeds for zero reserve months can leave you with more spendable cash.
- You want the cash working elsewhere. Reserves are money you cannot spend. A waiver frees it for repairs, the next acquisition, or a cushion you control.
Picture an investor with a duplex, solid credit, and coverage comfortably above 1.00. She wants moderate cash-out on a loan well under $1,500,000. A waiver on that file means she keeps her savings liquid instead of parked behind the loan. Whether it applies to her cash-out depends on the program and the leverage.
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.
When Standard Reserves Is the Better Fit
Standard reserves usually win when any of these is true:
- You already hold the cash. If six months of PITIA sits in checking or savings anyway, the requirement costs you nothing.
- You want maximum leverage. Standard reserves pair with the full cash-out ceiling: 75% LTV on a cash-out refinance of a standard rental. Short-term-rental collateral caps at 70% on a cash-out, and expects a 640+ score and about 12 months of hosting history.
- The loan is large. Above $1,500,000 you are in the roughly 9-month tier regardless, so the waiver question is moot.
- Your coverage is thin. Lenders protect themselves with liquidity when the ratio is tight. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Run the numbers on a $1,500,000-plus property at 75% LTV with coverage near 1.05. You would be looking at about 9 months of reserves on a payment that has just grown. That is a lot of cash to keep parked, so plan the liquidity before you plan the cash-out. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Remember what the ratio measures. Clearing 1.00 is not positive cash flow, because repairs, vacancy, management, utilities, and capex sit outside the calculation. Reserves are also not the same as an operating cushion. Hold some of both.
A Quick Note on Agency Rules
Agency loans use a different framework. Conventional lenders follow the Fannie Mae eligibility matrix, which sets its own reserve rules for investment properties. DSCR loans do not follow it. Because DSCR loans are business-purpose credit, they fall outside the consumer rules in Regulation Z, which is why their reserve rules come from each program’s own guidelines.
How to Choose
Work through this in order:
1. Count your liquid assets, discounting retirement and brokerage accounts. 2. Check the loan size against the $1,500,000 line. 3. Decide how much cash out you actually need, and how much leverage that implies. 4. Ask whether a waiver exists for that leverage and transaction type. 5. Confirm in writing what the reserve condition is, and what it requires.
If a waiver requires a smaller cash-out than you need, compare the spendable result both ways. The answer is often closer than you expect.
Common Mistakes
- Counting the same dollars twice. Proceeds that fund a down payment cannot also satisfy reserves.
- Assuming a waiver is automatic. It depends on scenario, leverage, and loan size.
- Sizing reserves on the old payment. The new, larger loan sets the number.
- Counting retirement funds in full. They are discounted.
- Treating coverage above 1.00 as profit. It only means rent covers PITIA.
Frequently Asked Questions
Can reserves be waived entirely on a DSCR cash-out refinance?
Sometimes, but not as a general rule. Waivers tend to appear on conservative files at modest leverage under $1,500,000. Many cash-out files carry about 6 months. Ask for the condition in writing before you plan around it.
How many months of reserves does a DSCR cash-out usually need?
Commonly about 6 months of PITIA, stepping up to about 9 months above $1,500,000. Reserves vary by lender, leverage, loan size, and transaction type, so treat these as typical ranges from select wholesale-network guidelines.
Do cash-out proceeds count toward reserves?
Assume they do not. Some lenders allow it under conditions, others exclude it, and above $3,000,000 it does not satisfy reserves. If your plan depends on it, get that confirmed first.
Does a larger down payment or more equity remove the reserve requirement?
No. More equity can lower the payment and lift your coverage ratio, but it does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files have enough equity and enough rental coverage. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Do retirement and brokerage accounts count as reserves?
Generally yes, at a discount that varies by lender. Plan around a reduced value, not the statement balance. Business accounts are reviewed case by case, and the guarantor holds the funds.
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 broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. For the full picture, read the complete DSCR loans guide. Program terms are subject to lender guidelines and this is not a commitment to lend.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 41 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
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References
1. Corporate Finance Institute: Cash Out Refinance
2. Fannie Mae: Eligibility Matrix (document 20786)
3. CFPB: Regulation Z, Section 1026.3 Exempt Transactions
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: How a Portfolio Cash-Out Refinance Funds the Next Package · How to Run a Cash-Out Refinance Across a Whole Rental Portfolio · How Pooled Equity Spreads Across LLC Rentals in a 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.