The Quick Read: Usually not. On a full cash-out refinance of a one-unit home you live in, agency guidelines generally don’t let rent from your own home count toward qualifying, and projected rent is harder still because a lender can’t verify it, subject to lender guidelines and full file review.
- Accessory-unit rent exceptions apply to purchases and no-cash-out or limited cash-out refinances, not full cash-out, and FHA excludes ADU rent on cash-out.
- Where rent can count, lenders typically credit 75% of documented or appraised rent, and ADU rent is capped at 30% of total qualifying income.
- Boarder income and live-in aide rent generally need a documented payment history, so rent from a roommate who hasn’t moved in has nothing to verify.
- If the rent can’t count, you can qualify on your own income, restructure as a limited cash-out, take less cash, wait and document 12 months of rent, or compare a different product.
- Underwriters typically ask for a signed lease, proof of deposits, an appraiser’s market-rent schedule, and confirmation the unit is legal and permitted.
The Quick Read: Usually not. On a full cash-out refinance of a one-unit home you live in, agency guidelines generally don’t let rent from your own home count toward qualifying, and projected rent is harder still because it can’t be verified. The accessory-unit exceptions exist, but they apply to purchases and no-cash-out or limited cash-out refinances, not full cash-out. The practical question becomes whether you qualify without the rent, or whether a different loan structure fits your goal.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.24% as of October 29, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
Why Is Projected Rent So Hard to Use on a Cash-Out Refinance?
Rent from the home you live in generally cannot be used to qualify. Fannie Mae’s rental income rules say rental income from a principal residence, meaning a one-unit home or the unit you occupy in a 2-4 unit property, generally can’t be counted. Exceptions exist for boarder income and for principal residences with accessory units.
Three things stack against you on a full cash-out:
1. The transaction type. A cash-out refinance is a different product from a limited cash-out refinance. It carries its own leverage cap and pricing.
2. The property type. A home you live in is underwritten as a primary residence, not a rental.
3. Verification. Rent you hope to collect isn’t a record. Lenders have to base their decision on information they can verify, and a plan to rent a room next year isn’t a document.
Across the wholesale programs Lendmire places files with, the conventional cash-out lane is built around your existing income, credit and equity. Conventional cash-out reaches 80% LTV on a one-unit principal residence and 75% on a two- to four-unit principal residence, subject to lender guidelines and full file review. The rent you might earn is not part of that equation unless one of the narrow exceptions below applies.
Quick Answer by Setup
| Your setup | Rent counts on full cash-out? | Where it may help |
|---|---|---|
| Room rented in your one-unit home | Generally no | Boarder rules, limited cases |
| Accessory unit (ADU) on a one-unit home | No | Purchase or limited cash-out |
| Unit you live in within a 2-4 unit home | No, for your own unit | Other units, per program |
| Rent from units you don’t occupy | Program-dependent | Documented history helps |
Treat the table as a map, not a promise. Each program has its own conditions, and each file is reviewed on its own facts.
Key Terms Defined
Principal residence: The home you live in as your main address.
Accessory dwelling unit (ADU): A separate unit on the property with its own living, sleeping, cooking and bathroom space, reachable without walking through the main home.
Boarder income: Rent paid to you by someone who rents a room in your home.
Limited cash-out refinance: A refinance that pays off your current mortgage and closing costs with only incidental cash back.
Cash-out refinance: A refinance that replaces your mortgage with a larger one so you can take equity as cash.
Projected rent: Rent you expect to earn but are not yet collecting, usually supported by an appraiser’s market-rent opinion.
What Do Fannie Mae, Freddie Mac and FHA Each Say?
Each agency treats accessory-unit rent a little differently, but they land in the same place on full cash-out.
Fannie Mae. The ADU exception covers a one-unit principal residence with an existing ADU. Under Fannie Mae’s subject-property rental income rules, it is limited to purchase or limited cash-out refinance transactions, and ADU rent is capped at 30% of total qualifying income. ADUs aren’t eligible with a 2-4 unit dwelling or a manufactured-home primary residence, and properties with multiple ADUs are ineligible.
Freddie Mac. The rule is narrower. For an ADU on a one-unit primary residence, the mortgage must be a purchase or a “no cash-out” refinance. Freddie Mac’s ADU fact sheet repeats the 30% cap and the 75% treatment of lease-documented rent.
FHA. HUD Mortgagee Letter 2023-17 states that for a one-unit property with an ADU, rental income from the ADU cannot be used as effective income to qualify for a cash-out refinance.
One more note: agencies reorganize and update these topics from time to time, so the current guide controls over anything you read here.
Projected Rent vs. Documented Rent
Documented rent has a better chance of counting than projected rent, and that’s true even in the exceptions.
With an ADU under Fannie Mae’s rules, the lender has to document your current housing payment before using subject-property rental income. For new rent, the lender multiplies gross rent by 75%, then subtracts the property’s full payment, and the refinance method relies on a lease or tax-return schedule. The appraiser supports market rent with a rent schedule or small-income-property form. For an ADU, the appraiser must explain that the rent is for an ADU on a one-unit principal residence. Fannie Mae’s ADU and boarder guidance also says that with fewer than 12 months of property-management experience and a housing payment, rent used for lender review can’t exceed that housing payment.
On FHA, when you have limited or no rental history, the lender must document proposed rent with an appraisal showing fair market rent. When rent is used on a one-unit-with-ADU property, the lender must verify two months of reserves after closing, and ADU rent can’t exceed 30% of total monthly effective income.
Here’s the catch. A lease from a tenant who hasn’t moved in doesn’t beat a tax-return history. A lender can approve from an appraisal’s rent opinion in some programs. A lender can’t approve from your intention.
A Worked Example
Picture a homeowner with a one-unit home, a finished basement apartment, and a debt-to-income ratio that sits just over the program ceiling without any rent.
- Purchase or limited cash-out refinance. The basement ADU may qualify. The lender credits 75% of documented or appraised rent, capped at 30% of total qualifying income. That credit can pull the ratio back under the ceiling. Fannie Mae’s own ADU example shows a borrower over the limit without the rent and eligible with it.
- Full cash-out refinance. The same rent counts for nothing. The ratio stays over the ceiling, and the file doesn’t qualify on those terms.
Same house, same basement, same rent. The transaction type decides.
Remember, too, that the rent used for lender review isn’t the rent you’ll collect. Lenders trim it by 25%, and vacancies, repairs and taxes still fall on you.
What Are Your Options If the Rent Can’t Count?
If the answer is no, you have real alternatives, and the right one depends on why you wanted cash.
- Qualify on your own income. Many cash-out files work without any rent. Conventional credit starts at a 620 decision score on the wholesale programs, with a total ratio ceiling of 50% on the automated finding, subject to lender guidelines.
- Restructure as limited cash-out. If your real goal is to get the ADU rent counted, a limited cash-out refinance at 95% LTV on a one-unit principal residence pays off your current mortgage and closing costs with only incidental cash back. At Fannie Mae that’s the lesser of 2% of the new loan amount or $2,000; at Freddie Mac it’s the lesser of 1% of the new loan amount or $2,000. You get the rent credit, but not meaningful cash.
- Take less cash. Shrinking the amount can change the transaction type and the leverage.
- Wait and document. Twelve months of collected rent, with a lease, deposits and a tax-return trail, gives a lender something to verify.
- Use a different product. Lendmire’s cash-out refinance programs page lays out the conventional cash-out lanes, including a wholesale lane that reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio on a thirty-year fixed, primary residence and conforming balance. It carries its own six months of seasoning, and in Texas the homestead cash-out is capped at 80% by the state constitution.
Mortgage insurance is required above 80% LTV on the agency path, except in that wholesale no-MI cash-out lane. The borrower may request cancellation at 80% of the original value, and the servicer must end it automatically at 78%. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
What About Boarders, Live-In Aides and 2-4 Unit Homes?
The exceptions are narrow, and each comes with conditions.
Boarder income. Fannie Mae generally doesn’t allow it, but its HomeReady guidance says up to 30% of qualifying income can come from boarder income. That requires documented rent payments over a set history. Projected boarder rent doesn’t fit.
Live-in aide. Freddie Mac allows rent from a live-in aide for a borrower with a disability, with evidence of stable rental income for the most recent 12 months.
2-4 unit owner-occupied homes. Fannie Mae makes these eligible for subject-property rental income, but on your own unit the full payment is factored into net rental income. In practice, rent from the unit you occupy doesn’t help. Freddie Mac’s rental table says rent is eligible from units the borrower doesn’t occupy.
Occupancy. FHA cash-out is generally for principal residences. A conventional cash-out can be written on a primary residence, second home or investment property, and occupancy sets the leverage: 80% on a one-unit primary, 75% on the others. If you’ve moved out and the home is now a rental, that’s a different situation and a different conversation, not a loophole.
What Documentation Will an Underwriter Ask For?
Whatever the program, rent that can’t be documented generally doesn’t count. Expect to gather:
- A signed lease for each tenant or boarder
- Proof of deposits showing rent paid to you
- Tax-return schedules showing rental history, where relevant
- An appraiser’s market-rent schedule on the correct form
- Your current housing payment documentation
- Reserves, where the program requires them
Underwriters tend to question three things: whether the unit is legal and permitted, whether the tenant is a real arm’s-length occupant, and whether you’d qualify without the rent. Local zoning and permit rules vary, so confirm that the unit is legal where you live before building a plan around it.
Rental income also has tax consequences. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Common Misconceptions
- “Any projected rent counts.” It doesn’t. Principal-residence rent generally can’t be used outside the named exceptions.
- “ADU rent works on any refinance.” At Fannie Mae it’s purchase or limited cash-out. At Freddie Mac it’s purchase or no-cash-out. FHA excludes it on cash-out.
- “100% of the rent counts.” Fannie Mae and FHA use a 75% factor on projected rent.
- “Streamlines let me use rent for cash.” They don’t. The FHA Streamline and VA IRRRL are not cash-out products. HUD’s streamline handbook says an appraisal isn’t required, and these loans rely on little or no income underwriting, so projected rent isn’t a qualifying tool.
- “A lease alone is enough.” Fannie Mae also calls for the appraiser’s market-rent documentation.
Frequently Asked Questions
Can a future roommate’s rent count toward a cash-out refinance?
Generally no. Boarder income needs a documented payment history, and projected rent from a roommate who hasn’t moved in has nothing to verify. A lender must base its decision on verified records, so plan to qualify on your own income.
Does my roommate’s income count if they live with me?
A roommate’s income doesn’t count unless they sign the loan as a co-borrower, which makes them responsible for the mortgage and puts them on the loan. Rent they pay you is a separate question, governed by the boarder rules above.
Is a cash-out refinance the same as a limited cash-out refinance?
No. A limited cash-out pays off your existing mortgage and closing costs with only incidental cash back. A full cash-out lets you take equity as cash, with its own leverage limits and pricing. The ADU exception generally applies only to the limited version.
Can I use rent if I’ve already been renting the basement for years?
Documented history helps, but it doesn’t override the program rules. On a full cash-out of a one-unit primary residence, rent still generally doesn’t count. On a limited cash-out with a qualifying ADU, documented history makes the file stronger.
What if I’d qualify only with the rent?
Then the file needs a different structure: a limited cash-out if the ADU rules fit, a smaller loan, or more time to build documented history. Qualification is always subject to lender guidelines and full file review.
Next Step
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Everything here is subject to lender guidelines and is not a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. Fannie Mae Selling Guide B3-3.8-01, Rental Income
2. Fannie Mae Selling Guide B3-3.8-02, Rental Income on Subject Property
4. HUD Mortgagee Letter 2023-17
5. Fannie Mae ADU and HomeReady boarder guidance
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Cash-Out Refinance Program on a Single-Unit Home You Live In · Best Cash-Out Refinance Program on an Owner-Occupied Condo or Two-to-Four-Unit Home · Cash-Out Refinance Lenders to Fund Home Improvements With Home Equity
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.