The Quick Read: The best program is the one that accepts your hosting income, allows cash-out on short-term rental collateral, and sizes the new loan large enough to clear both liens plus closing costs. No single program wins for every borrower, because the answer depends on leverage, credit, rental history, and how the property is titled. A broker that shops several wholesale lenders can match the file to the program that fits.
- Cash-out on short-term rental collateral typically tops out around 70% LTV, with a 640+ credit score and about 12 months of hosting history expected.
- The new first loan pays off the first and second mortgage together, so the payment is larger and coverage is lower than on the old first alone.
- Coverage above 1.00 is not the same as positive cash flow.
- The loan is capped by the lower of two tests: equity and rental coverage.
What Does “Best Program” Actually Mean Here?
“Best” is a fit test, not a ranking. Three questions decide it. Does the program count short-term rental income? Does it allow cash-out on that collateral? Is the maximum loan big enough to pay off the first mortgage, the second lien, and costs, with something left over?
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
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.
Across the wholesale network, programs differ on the answers. Some want a documented hosting record. Some lean on a market-data projection. Some apply a haircut to gross platform income before dividing by the payment. A file that fails one program can clear another with the same property.
That is the broker’s edge. One lender’s page shows one program. A broker sees many and routes the file to the match. No lender names here, by design. The right lender depends on your property, credit, leverage, and paperwork.
How a Cash-Out Refinance Retires a Second Mortgage
A cash-out refinance replaces your existing mortgage with a larger one and pays you the difference. Paying off a second lien is one of the cleanest uses. The new first-lien loan funds at closing, and the title company sends payoff money to both old lenders. You receive whatever is left.
The steps run in this order:
1. Request payoff statements on the first mortgage and the second lien. Ask for a written lien release on the second.
2. Confirm the second lien is closed, not just paid down. A paid-down credit line can stay open and redrawable. If no closure request is signed, a new lien can reappear behind the new first loan.
3. Document the income basis. On a refinance, platform statements or property-manager reports are the natural evidence of hosting history.
4. Appraisal and rent schedule. The appraisal typically comes with a 1007 rent schedule. That form shows long-term market rent, not short-term revenue, so the file leans on platform history or a data-service projection to show the real income.
5. Size the loan. Both liens, closing costs, prepaids, and any required reserves come out of proceeds before cash reaches you.
6. Fund and settle. Settlement reconciliation confirms both payoffs and shows your net.
The CFPB explains that a cash-out refinance pays you the difference in cash and often carries closing costs. It adds that the cost may be higher or lower than a home equity line, depending on terms.
Keep the Second Lien or Replace It?
Paying off a second lien is not always the right move. The table shows the structural difference.
| Factor | Replace both liens | Keep first, handle second alone |
|---|---|---|
| First mortgage | Replaced with a new loan | Stays in place |
| Second lien | Paid off at closing | Paid down or refinanced separately |
| Payment | One consolidated payment | Two payments |
| Coverage test | New, larger payment | Existing first only |
| Fits best | High-cost or variable second | Low-cost first you want to keep |
The new loan reprices everything. If your first mortgage is cheap and your second is small, folding them together can cost more than it saves. If the second lien is variable and large, one fixed first loan can simplify the picture.
The CFPB’s home equity guide notes that lenders typically want owners to keep 10% to 20% of a home’s value as equity. That is the owner-occupied view. Investment and short-term rental files run tighter, as the next section shows.
What Network Programs Typically Look For
Here is the picture from the wholesale network. Treat these as typical ranges, subject to lender guidelines and full file review.
- Leverage: cash-out on short-term rental collateral typically tops out around 70% LTV, while cash-out on a standard long-term rental tops out around 75% LTV. The gap is deliberate. Lenders price hosting income as less stable than a lease.
- Credit: a 640+ score is the usual expectation on short-term rental files. Across the network, most standard programs want around 660, and 700+ opens the strongest leverage tiers.
- Hosting history: about 12 months is common on a refinance.
- Coverage: 1.00 is where select programs start on refinances. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better terms.
- Loan size: up to $3,000,000 on standard programs (smaller balances available through select lenders). Above $2,500,000 the network generally holds to 30-year fixed structures.
- Seasoning: about 6 months of ownership is the common expectation before cash-out.
- Reserves: they vary by lender, leverage, loan size, and transaction type. Around 6 months of PITIA is common, and larger loans typically step up.
- Structures: the spine is the 30-year fixed. Extended terms and interest-only periods are available through select lenders in the network, and adjustable structures exist for investors who want them.
Entity title matters too. A DSCR cash-out can accommodate LLC vesting, subject to lender program eligibility. That makes it a cleaner route than many owner-style second-lien products when the property already sits in an entity.
For the full program picture, see the complete DSCR loans guide.
How Short-Term Rental Income Gets Counted
Coverage is rent divided by PITIA: principal, interest, taxes, insurance, and any HOA dues. The question is which rent.
Two paths are common. One uses documented platform or manager statements, a trailing record of what the property earned. The other uses a data-service projection or the appraiser’s market-rent figure. Many lenders will not use projections at all, and some apply a haircut to gross platform income before running the number. Ask the lender which income it uses before you apply.
Here is why that matters. Picture a property with strong hosting history but a modest long-term market rent. Under a statements-based program, coverage clears comfortably. Under a market-rent program, the same property may land below 1.00. Same house. Different program. Different answer.
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.
Worked Example: The Two-Test Rule
Take a short-term rental with a first mortgage and a second lien. Say the appraised value supports a 70% cash-out ceiling on short-term rental collateral. Subtract both payoff balances and costs. What remains is the equity test. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Now run the second test. The new loan must carry the new PITIA at the required coverage. Fold the second lien into the first and the payment rises. Coverage falls. If the income only reaches the low end of the range, the coverage test may cap the loan below what the equity test allows.
Whichever test binds first sets the loan. Some borrowers find the equity test binding. Others find coverage binding. Run both before you apply.
Two cautions:
- Coverage compares rent to PITIA only. Clearing 1.00 is not positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation.
- Paying off a second lien can leave you with little or no cash back. That is fine if the goal is to clear the debt. It is a surprise if you expected proceeds.
Does Paying Off a Second Lien Count as Cash-Out?
It depends on the program. When the second lien funded something other than the original purchase, many programs treat the payoff as cash-out. That classification brings the cash-out leverage cap and the seasoning expectation. A few programs treat a payoff of purchase-money debt differently. Confirm the classification with the specific program before you assume a higher rate-and-term leverage applies.
Where the General Rule Breaks
Business-purpose rule. 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. If the second lien was a personal-purpose loan, some programs limit how proceeds may be used or how the payoff is classified. Check first.
Previously personal-use property. A property that was a second home or personal retreat before becoming a rental may need a documented conversion and a shorter hosting record. Expect a closer review.
Thin hosting history. Under about 12 months of documented hosting, the file narrows to fewer programs.
Prepayment penalty on the old loan. Check the existing loan before you retire it. A stepped penalty can eat the savings. DSCR cash-out loans often carry their own stepped penalty, which matters if you plan to sell or refinance again soon.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs.
Larger down payment or equity does not erase the rules. More equity lowers the payment and can lift coverage. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests.
Key Terms Defined
Cash-out refinance: a new, larger loan that replaces your current mortgage and pays you the difference.
Second lien: a loan secured by the same property that ranks behind the first mortgage, such as a home equity loan or credit line.
Lien release: a written confirmation from the second lender that the lien is closed and removed from title.
Coverage ratio (DSCR): monthly rent divided by monthly PITIA.
PITIA: principal, interest, taxes, insurance, and HOA dues.
Seasoning: the period you must own the property or hold the loan before certain refinance options open.
Combined loan-to-value: all liens on the property added together, divided by appraised value.
Which Route Fits Which Situation?
| Your situation | Usual route |
|---|---|
| Strong hosting history, high-cost second | Cash-out that retires both liens |
| Cheap first mortgage, small second | Pay down the second; keep the first |
| Property titled in an LLC | DSCR cash-out accommodating entity title |
| Under about 12 months of hosting | Wait, or look at long-term rental underwriting |
| Coverage below 1.00 | Select-lender path with leverage and terms adjusted |
Document Checklist
Clean paperwork leaves fewer gaps for the lender to question:
- Payoff statements for both liens, plus lien-release instructions
- Platform or property-manager statements covering the hosting history
- Current lease or rent evidence if any portion is rented long-term
- Entity documents if the property is titled in an LLC
- Insurance evidence for short-term rental use
- HOA questionnaire, if applicable
- Reserve documentation
Insurance is a quiet derailer. A standard homeowner policy often excludes short-term rental use, so get a policy that covers it before the file goes in.
Frequently Asked Questions
Can a short-term rental cash-out refinance pay off a second mortgage?
Yes. The new first-lien loan can retire the first mortgage and the second lien together at closing. The title company pays both payoffs from proceeds, and you receive the remainder. The loan must still clear leverage, credit, and coverage tests on the larger balance.
How much can I borrow on a short-term rental cash-out?
Typically up to about 70% LTV on short-term rental collateral, compared with about 75% on a standard long-term rental. Credit usually needs to be 640 or higher, with about 12 months of hosting history. The final amount is the lower of the equity test and the coverage test, subject to lender guidelines.
Will rolling in the second lien hurt my coverage ratio?
Usually, yes. The new payment covers a larger balance, so coverage drops against the old first-mortgage-only number. Run coverage on the combined payment before applying. If it lands under 1.00, select lenders in the network offer a sub-1.00 path with leverage and terms adjusted.
Should I keep my first mortgage and pay the second off separately?
If your first mortgage is low-cost and your second is small, that can beat consolidating, because a cash-out refinance reprices the whole balance. If the second is large or variable, one fixed first loan can simplify things. It depends on the numbers.
Does the loan ignore my credit?
No. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Credit, reserves, and property eligibility are still reviewed. A 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage.
Next Step
If you are weighing a cash-out refinance against leaving your second lien in place 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 your goals. As a mortgage broker, Lendmire arranges DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Call 828-256-2183 or request a quote. Programs change and every file is reviewed individually; nothing here is a commitment to lend.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. DSCR investor loans, including short-term rental cash-out refinances, are arranged through select lenders in Lendmire’s wholesale network across 40 states plus Washington, D.C., and every loan is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
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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: What Other Types of Loans Are Similar to a HELOC
2. CFPB – Using home equity to meet financial needs
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: Best Short-Term Rental Cash-Out Refinance Program to Maximize Cash Out · Best Short-Term Rental Cash-Out Refinance Program on a Free-and-Clear Rental · Best Short-Term Rental Cash-Out Refinance Program Without Selling the House
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.