The Quick Read: A DSCR refinance can usually add lender and third-party fees to the new loan balance, but only up to the program’s leverage cap on the appraised value, and only while the property’s rent still covers the larger monthly obligation under lender guidelines. The room you have is the cap, minus your payoff, minus the fees. Anything beyond that comes out of your pocket.
- Fees are financed by adding them to principal, or by trading them for a higher note rate. Neither option is free.
- On a standard rental cash-out, the ceiling is typically 75% of appraised value. Fees count against that room.
- Financing fees raises the payment, which can lower your coverage ratio.
- Thin equity, a prepayment penalty on the old loan, and small balances are where the general rule breaks.
What does “financing” refinance fees actually mean?
Financing a fee means the lender pays it at closing and you repay it through the new loan. Nothing is waived. The cost moves from your bank account into the balance, or into the interest rate. Both routes are common in refinancing. You either roll costs into the principal or accept a higher rate in exchange for a lender credit.
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 29, 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 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.
Rolling costs into the balance means you pay interest on those costs for as long as you hold the loan. The higher-rate route avoids a bigger balance, but the extra cost lasts for the whole life of the loan.
Across the wholesale network Lendmire works with, no single published rule sets a dollar or percent amount of financeable fees. That is why the honest answer is a method, not a number: find your room under the cap, then see what fits.
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. Lendmire’s complete DSCR loans guide covers the basics if the structure is new to you.
How does underwriting build the loan amount?
Underwriting builds the new loan as a stack. It starts with the payoff of the existing loan, then adds accrued interest, then the closing costs and any prepaid or escrow items you want funded. The total cannot exceed the program’s leverage cap applied to the appraised value.
Here are the steps in order:
1. Appraisal. The property is appraised, and the appraisal includes a rent schedule. Single-family files typically use the 1007 rent schedule form, and 2-4 unit files use the 1025 operating income form.
2. Maximum loan. The lender applies the leverage cap to the appraised value. That product is the ceiling for the whole stack.
3. Payoff and costs. The payoff, interest, fees, and any funded prepaids are totaled.
4. Room check. If the stack is under the ceiling, the fees fit. If it exceeds the ceiling, the shortfall comes in as cash at closing, or the fees get trimmed.
5. Classification. If money is left over after the stack, that remainder goes to you and the loan is a cash-out. If nothing is left over, it is a rate-and-term refinance.
6. Coverage test. The lender divides monthly rent by the full monthly obligation (principal, interest, taxes, insurance, and any HOA dues). The result is the coverage ratio.
The classification step is the one investors miss most often. Fees paid out of the new loan are part of the payoff stack. They do not turn a rate-and-term refinance into a cash-out by themselves. Cash that reaches you is what does that.
Which fees can usually be financed?
Most fees tied to the refinance itself can be included in the loan amount when room exists under the cap. Prepaids and escrow deposits can often be included too, subject to the program. The table shows the general pattern. Each program sets its own treatment.
| Cost type | Usually added to the loan? | Note |
|---|---|---|
| Lender and origination fees | Typically yes, within the cap | Counts against available room |
| Appraisal with rent schedule | Often yes | Priced by property type |
| Title and settlement fees | Typically yes | Varies by state |
| Prepaids and escrow deposits | Often, program-dependent | Handled differently from fees |
| Prepayment penalty on old loan | Sometimes, if room exists | Separate exit cost |
| Cash reserves | No | Paid from your own assets |
Reserves matter here because financing fees does not reduce them. Most programs want around 6 months of the full monthly obligation in reserve, and loans above $1,500,000 typically step up to about 9 months. Conservative rate-and-term files at modest leverage under that size can sometimes see reserves waived. All of that varies by lender, leverage, loan size, and transaction type.
If you want help sorting which line items are which, Lendmire’s piece How to Tell Lender Fees From Prepaids on a Rental Cash-Out Refinance covers it.
What limits the amount you can finance?
Four things set the limit: the leverage cap, the appraised value, the size of your payoff, and the coverage ratio after the new payment. The cap is the first gate, and the ratio is the second.
On a standard rental, the typical ceilings across the network are:
- Purchase: 75%-80% of value on an investment property, with select high-leverage programs reaching 85% for stronger credit.
- Rate-and-term refinance: up to 85% on an investment property under select programs, depending on credit and other tiers.
- Cash-out refinance: 75% on standard rentals, with about 6 months of seasoning as the common expectation.
- Short-term rental collateral: a 70% cash-out ceiling, with about 12 months of hosting history and a 640+ score expected. 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. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
These are typical ranges from select lenders in the network, subject to lender guidelines, and not a commitment to lend.
The simple formula is: maximum loan = appraised value × cap. Room for fees = maximum loan − payoff. If your fees are smaller than the room, they fit. If they are larger, the difference is yours to cover. Investopedia’s explanation of combined loan-to-value shows how lien structure feeds into the same leverage math.
Three modeled stacks (percent of appraised value)
These are modeled assumptions, not market data. All figures are percentages of appraised value, so no dollar amounts are needed.
- Ample equity, rate-and-term. Payoff sits at about 55% of value. Fees run about 3% of value. The new loan stacks to about 58%, well under any cap, and nothing comes back as cash. The fees fit, and the investor keeps cash for the next deal.
- Tight equity, cash-out. Payoff sits at about 73% of value on a standard rental with a 75% cash-out cap. Fees run about 3% of value. The stack reaches about 76%, which is over the cap. Roughly 2% of value fits, and the remaining 1% of value comes in as cash, or the investor negotiates fees down. No cash-out proceeds are available in this case.
- Strong equity, cash-out. Payoff sits at about 50% of value. Fees run about 3%. The stack reaches about 53%, and the remaining room up to the 75% cap (about 22% of value) is what could be taken as cash, subject to the coverage test. Here financed fees simply come out of the proceeds. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The takeaway is that tight equity is the main constraint, not the lender’s willingness. When equity is thick, fee financing is an easy yes. When equity is thin, it is a math problem you can see coming.
Does financing the fees change the coverage ratio?
Financing fees does not change the rent. It does raise the balance and, with it, the monthly obligation. That pushes the ratio down by some amount.
Run the numbers on a file sitting at 1.20x before fees. If financed fees lift the balance by roughly 5%, the ratio typically slips to somewhere around 1.16x-1.18x. Taxes and insurance do not grow with the balance, so the drop is smaller than the balance increase. That is a modeled illustration, not a program output.
A file at 1.02x tells a different story. The same increase can push it under 1.00x. Many select programs start at 1.00x, and a stronger ratio generally opens better pricing and leverage. A separate select-lender path takes coverage below 1.00x, with leverage and terms adjusted.
It helps to remember what the ratio measures. Rent against the full monthly obligation is all it compares. Clearing 1.00x is not the same as positive cash flow, because repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
Financed into the balance, traded for a higher rate, or paid in cash?
Each route has a different cost shape. Which is best depends on how long you hold the loan and how thin your cash is.
| Route | Upfront cash | Ongoing cost | Best fit |
|---|---|---|---|
| Pay in cash | Highest | None extra | Long holds, ample liquidity |
| Add to the balance | Low | Interest on the added balance | Equity-rich, cash-limited |
| Lender credit for higher rate | Lowest | Higher cost for life of loan | Short expected hold |
The break-even test is simple. Divide the upfront cost you avoid by the monthly cost you take on. The result is the number of months before financing costs more than paying cash. If you expect to hold longer than that, paying cash or negotiating the fees down often pencils better.
This one is a genuine toss-up for some investors. A buyer who plans to sell or refinance again soon may prefer the credit route. A long-term holder usually does better paying the fees. Tax treatment varies by how funds are used and how the property is held, so consult a qualified professional before relying on any deduction.
Where the general rule breaks
Thin equity. If payoff plus fees exceeds the cap, you bring cash. Cash-out files also tend to carry stricter requirements than rate-and-term files, including lower leverage and higher credit tiers. Most programs want around a 660 score. A 620 floor exists in parts of the network, and 700+ unlocks the strongest tiers.
Small balances. Many fees are fixed dollar amounts, so they weigh more on smaller loans. Standard programs run up to $3,000,000, and smaller balances route through select lenders in the network.
A prepayment penalty on the old loan. A refinance pays off the existing note, so a protected period on that loan can apply. That penalty is a separate cost from closing fees. It may fit inside the stack if room exists, but it also reduces any cash coming back. Read the old note before you order the appraisal.
Agency-style cash-back rules. Conventional “limited cash-out” refinances allow a small amount of cash back while keeping the lower-leverage label. Fannie Mae’s Selling Guide describes that concept. DSCR programs set their own tolerance, so do not apply the agency number to a DSCR file.
Delayed financing, BRRRR, and hard-money payoffs. These exits are sized differently, often against acquisition cost or rehab basis as well as appraised value. They depend on each lender’s guidelines, so ask for the sizing method before you count on a number.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered through the network’s DSCR programs.
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.
Reading your fee sheet
DSCR loans are business-purpose loans and are exempt from the consumer-mortgage disclosure forms. Your lender will give you a fee sheet and a settlement statement instead. The consumer-finance concept still helps: the CFPB’s Loan Estimate explainer defines closing costs as the upfront costs charged to get your loan and transfer ownership. Use that definition as a mental model, but expect a different document.
Before you commit, ask for these items in writing:
- The total of all fees, with each line named, and which lines are duplicates under different names.
- Whether fees are added to the balance or paid through a lender credit with a higher rate.
- The prepayment structure on the new loan, since a loan with no penalty typically costs more than one with a step-down penalty.
- The maximum loan at the program’s cap, and the room left after payoff.
- The coverage ratio after fees are included in the balance.
When equity runs short
You have four options when the stack is over the cap:
1. Pay the shortfall in cash at closing.
2. Negotiate fees down or remove lower-value items.
3. Take a lender credit, which lowers the balance but raises the cost over time.
4. Take a smaller loan, or split the transaction into a rate-and-term refinance first.
A refinance with a smaller payoff can also fit better when the property has not yet seasoned.
Key Terms Defined
Financed fees: closing costs added to the new loan balance and repaid over the life of the loan.
Payoff stack: the existing loan balance, accrued interest, fees, and any funded prepaids added together.
Leverage cap: the maximum loan as a percent of appraised value that a program allows for a given transaction.
Lender credit: a reduction in upfront costs paid for with a higher interest rate on the note.
Rate-and-term refinance: a refinance that replaces the existing loan without paying cash out to the borrower.
Coverage ratio (DSCR): monthly rent divided by the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues.
Seasoning: the period you must have held the property or the existing loan before certain refinance structures are allowed.
Frequently Asked Questions
Can I roll all of my refinance fees into a DSCR loan?
Usually, as long as the stack fits under the program’s leverage cap and the rent still covers the larger payment. If payoff plus fees goes over the cap, the excess comes in as cash.
Does financing fees turn my rate-and-term refinance into a cash-out?
Generally no. Fees paid from the new loan are part of the payoff stack. Cash that reaches you after the stack is paid is what makes the loan a cash-out, and cash-out files carry a lower ceiling of about 75% on standard rentals.
Will financing fees hurt my coverage ratio?
Yes, they can. Fees raise the balance and the monthly obligation, while rent stays the same. A file with plenty of cushion barely notices, but a file sitting just above 1.00x can fall below it.
Can I finance fees on a purchase the way I can on a refinance?
Purchases work differently because the loan is sized against price and your down payment, typically 20%-25% down on most files. Fees on a purchase are generally paid with cash or negotiated through seller concessions, subject to program rules.
Is a lender credit better than paying fees in cash?
It depends on how long you will hold the loan. A short expected hold can favor the credit. A long hold usually favors paying cash or negotiating the fees down, because the higher cost repeats every month.
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.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits, subject to program terms. Recognized by Scotsman Guide as a Top Mortgage Workplace in 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. Investopedia: Combined Loan-to-Value
2. Fannie Mae Selling Guide B2-1.3-02: Limited Cash Out Refinance Transactions
3. CFPB Loan Estimate Explainer
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a DSCR Lender Lends on an Unseasoned Rental · Is It Worth Comparing Lenders on a DSCR Refinance of a Rental? · Can You Get a DSCR Loan on a Kauai Vacation 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
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.