The Quick Read: A DSCR cash-out replaces your first mortgage and records a new first lien for the whole balance, while a second lien leaves the first alone and records one junior lien for only the new money, so recording cost follows your state’s tax base, not the product name.
- Cash-out on an investment property tops out around 75% LTV across most of the wholesale network, with about 6 months of ownership expected, measured from title recording.
- A second lien taxes only the new money in states that tax the recorded debt. In states with flat fees only, the gap is small.
- A second lien adds a future recording event: a subordination agreement if the first is ever refinanced.
- Ask the title agent for a recording estimate under both structures before choosing. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Here is the honest answer on who each option fits. A DSCR cash-out suits the investor whose existing first lien has no particular value, who wants a larger draw, or who wants one loan and one payment. A second lien suits the investor who holds a first lien worth keeping and needs a modest draw. Recording cost can tip a close call. It rarely decides a clear one. In many states the difference is a few hundred dollars. In a few, it is real money.
DSCR Cash-Out Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
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As of Oct 29, 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.
This piece covers government recording charges. It does not cover pricing, and the calculator on this site is the place for illustrative payment math.
Side-by-Side
This table shows how the two structures differ on file mechanics. The cash-out column reflects the wholesale network’s programs. The second-lien column reflects published industry norms, which vary by lender and program.
| Factor | DSCR Cash-Out | Second Lien (industry norms) |
|---|---|---|
| Existing first lien | Paid off and released | Stays in place |
| What gets recorded | New first lien, full balance | One junior lien, new money |
| Review basis | Rent vs PITIA on the new loan | Rent vs combined payments |
| Documentation | Lease, appraisal, entity papers | Same, plus first-lien documents |
| Entity vesting | Common, per program terms | Varies by lender and program |
| Reserves | Commonly around 6 months PITIA | Set by the individual lender |
| Leverage | Around 75% LTV on cash-out | Combined LTV set by lender |
| Future refinance | Clean slate on liens | Subordination needed first |
What Makes Up the Recording Bill
Recording cost has three parts: flat county fees, any state tax on the recorded debt, and title charges. Only the middle one scales with loan size, and it is the one that separates these two structures.
The CFPB’s commentary on the loan cost disclosure rule draws the line well. It treats recording fees as government charges to record and index the loan and title documents, and says they are not based on the loan amount. It treats transfer taxes as state and local charges that are based on the loan amount or sale price. Same logic applies in practice. The county filing fee is roughly the same for a refinance or a second. Loan-amount taxes are where the two diverge.
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. Consumer disclosure forms such as the Loan Estimate and Closing Disclosure do not apply to them. The itemized costs come from the lender’s and title company’s settlement statement instead. Ask for it early.
Title is the other line. A lender’s title policy is usually required on any new recorded lien. A cash-out records a new first lien and typically needs a full lender’s policy. A second lien usually needs coverage sized to the second. Whether a title underwriter will accept a date-down or endorsement instead of a new policy varies by company and state, so ask the title agent early rather than assuming.
Whole Balance vs New Money
In a state that taxes recorded debt, a cash-out taxes the entire new first lien. A second lien taxes only the new junior amount. That is the structural gap, and everything else is state-specific.
Florida shows the pattern. Per Starfield & Smith’s practitioner summary, documentary stamp tax runs $0.35 per $100 and the nonrecurring intangible tax is 2 mills, or $0.002 per dollar financed. Both are percentage-based. A cash-out refinance sets a large taxable base. A second sets a smaller one. Whether Florida taxes the existing balance again on a refinance depends on the facts of the transaction. Have the title agent confirm it. Do not assume.
New York adds a wrinkle. The New York State Tax Department’s notice for Otsego County shows how county taxes stack: basic plus special additional tax at $0.75 per $100 secured, with a county tax of $0.25 per $100 added for a combined $1.00 per $100. New York also has a tool that narrows the gap between the two structures. Per attorney commentary on the Consolidation, Extension and Modification Agreement, an existing recorded mortgage can be assigned and consolidated instead of satisfied, so tax can fall mainly on the added debt. The catch: it carries attorney and lender work, the old lender has to cooperate, and whether a given DSCR lender will do one is a lender-by-lender question.
Other states, including Georgia, Tennessee, Minnesota, Maryland, and Virginia, have mortgage, intangible, or recordation taxes of their own. The principle is the same: some states tax the recorded loan amount, and the base differs by structure. Rates and caps are not covered here. Ask the title agent.
Some edge cases cut against the simple story. Some states cap the tax or tax a maximum-lien amount stated in the instrument. A credit-line-style junior lien may be taxed on its limit, not its drawn balance. Confirm locally.
Think it through for a moment. The cost question and the keep-the-first question are linked. Keep a good first lien and add a small second, and only the new money is taxed. Replace the first with a large cash-out, and the whole balance is taxed again, except where a tool like New York’s consolidation applies. But the first lien’s own value matters more than the recording line. Recording is one slice of the total.
When DSCR Cash-Out Is the Better Fit
Cash-out is the better fit when the existing first lien is not worth protecting, when the draw is large, or when only a refinance is available for the property or the vesting. Recording cost goes up with the balance, but it buys a clean lien stack.
Here is the program side, from what the wholesale network sees day to day:
- Leverage. Cash-out on a standard rental tops out around 75% LTV. Short-term-rental collateral generally runs lower.
- Seasoning. About 6 months of ownership is the common expectation, documented by the recording on the title.
- Coverage. 1.00 is where select programs start. Stronger ratios open better pricing and leverage. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted.
- Credit. A 620 floor exists in parts of the network. Most programs want around 660. A score of 700 or above unlocks the strongest leverage tiers.
- Reserves. Commonly around 6 months of PITIA, and about 9 months on loans above $1,500,000.
- Loan size. Up to $3,000,000 on standard programs. Smaller balances route through select lenders in the network.
Entity vesting is routine here. Loans to LLC-titled borrowers are common, subject to lender program eligibility. The file needs the operating agreement, a certificate of good standing, and a signing resolution. On a cash-out, those documents sit at the center of the recording package, because the new first lien is signed by the entity.
Property type is a screen, not an afterthought. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, so no recording math changes that.
The simplest case for cash-out is also the most common one: one loan, one payment, one lien holder, no subordination to worry about later. The draw is larger because the whole 75% LTV ceiling is in play, not just what sits above the existing balance. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
When a Second Lien Is the Better Fit
A second lien is the better fit when the first lien is worth keeping and the draw is modest. Recording tax falls only on the new money, and the existing first lien stays as it is. That is the whole case. It is a good one when it applies.
Three conditions have to line up:
1. The first lien’s documents have to allow it. Some first-lien notes and security instruments limit or prohibit additional liens. If the first is itself a DSCR or non-QM loan, someone has to read the subordinate-financing language before anything else happens. This is a document-review item, and it decides whether the structure even exists.
2. A second-lien lender has to be available. The investor second-lien lane is thinner than the refinance lane across the non-QM market and is program-dependent. Combined leverage, minimum loan size, and coverage tests are set by the individual lender. Treat any single figure you see online as a market claim, not a rule. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
3. The combined payments have to clear. Coverage on a second is tested against both payments together. A property that clears 1.00 on the first alone can fall short once the second is stacked on. That is the classic pass-before, fail-after file.
Then there is the cost that hides in the future. If you ever refinance the first, the second must be paid off or subordinated. Per HousingWire’s explainer on subordination agreements, mortgage priority follows recording order, and a written, recorded subordination agreement can override that order. The second-lien holder can decline to sign. So a second lien carries a recording event, and a negotiation, down the road. Cheap today, uncertain later.
For the dollar comparison between a second and a large cash-out at the same balance, see how much a second lien costs vs a jumbo cash-out at the same balance. It stays on cost.
Where These Files Get Stuck
Recording cost almost never kills a file; documents do. These are the points that cause the most friction on both structures:
- Stale payoff or lien information. A cash-out depends on a clean payoff of the old first. A second depends on an accurate read of the first’s covenants.
- Entity paperwork gaps. A missing resolution or an out-of-date good-standing certificate stalls the recording package. It affects who signs, not the tax rate.
- Lease and rent evidence. Coverage runs on rent used for lender review. A thin lease or a missing rent schedule leaves the lender with a gap to review.
- Reserves documentation. Reserves vary by lender, leverage, loan size, and transaction type. Show the balances early.
- Title surprises. Old liens, unreleased mortgages, and judgment items surface during clearing title. A second lien sits behind whatever is already there.
One more point, and it matters. DSCR compares rent to PITIA only. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation. An investor who draws cash and stacks a second payment can pass the lender’s test and still run the property thin. A larger down payment on a purchase lowers the payment and can lift the ratio, but it never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
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.
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.
Key Terms Defined
Recording fee: A flat government charge to record and index the loan documents, usually per instrument or per page.
Mortgage recording tax: A state or local tax on the recorded debt, which scales with the loan amount in states that charge one.
Junior lien: A lien that sits behind the first mortgage in priority, such as a second mortgage.
Subordination agreement: A recorded document in which a lien holder agrees to rank behind another lien.
Consolidation, Extension and Modification Agreement (CEMA): A tool that assigns an existing mortgage to the new lender so tax can fall mainly on added debt.
Seasoning: The ownership period expected before a cash-out is available, measured from title recording.
The Verdict
Neither option wins on recording cost alone.
Choose the DSCR cash-out if you want a clean lien stack, one payment, a larger draw, or you have no reason to keep the existing first. Expect recording charges to track the whole new balance in states that tax recorded debt.
Choose the second lien if the first lien is worth keeping, the draw is modest, the first lien’s documents allow a junior lien, and a second-lien lender is available for the property. Expect the taxable base to be only the new money, and plan for a subordination step if the first is ever refinanced.
Where the two are close, get a recording estimate under both from the title agent before deciding. In flat-fee states the numbers may be nearly identical. In loan-amount-tax states, they will not be.
Frequently Asked Questions
Does a second lien always cost less to record?
Not always. It often does where a state taxes the recorded loan amount, since only the new money is taxed. But it adds its own title and recording items, and a future subordination if the first is refinanced. In flat-fee states, the difference is small.
Does a cash-out refinance always re-tax the whole balance?
No. New York’s consolidation approach can limit the tax mainly to added debt, though not every DSCR lender will do one. Florida’s treatment of existing balances depends on the facts of the transaction. The title agent should confirm it for your state.
Can the first mortgage block a second lien?
Yes. Some first-lien instruments limit or prohibit additional liens. Read the subordinate-financing language before applying, and check it on every file.
Does an LLC change recording costs?
It mostly changes who signs, not the tax. Entity documents such as the operating agreement and signing resolution have to be in order, subject to lender program eligibility. The tax base still depends on the recorded debt.
Are these closing costs deductible?
That is a question for a qualified tax professional. Treatment can differ by cost type and property use, and this article does not make a deduction claim.
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 DSCR loans through select lenders in its wholesale network, across 41 markets including Washington, D.C. For program fundamentals, start with Lendmire’s complete DSCR loans guide. Qualification is subject to lender guidelines, and nothing here is a commitment to lend.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. CFPB, Regulation Z §1026.37 commentary
2. Starfield & Smith, Florida documentary stamp and intangible tax refresher
3. New York State Tax Department, mortgage recording tax notice for Otsego County
4. Ben James Taylor, NYC mortgage recording tax and CEMA explainer
5. HousingWire’s explainer on subordination agreements
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: Can You Do a DSCR Cash-Out Refinance on a Multifamily Building? · Should You Close a DSCR Cash-Out in an LLC or Personal Name? · Can a DSCR Lender Do a High-LTV Cash-Out on a Rental?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.