The Quick Read: The lender sizes the new loan on its own appraisal, caps it at about 75% of that value, and then checks that the rent covers the larger payment, so the smaller of those two limits sets your loan and your cash back, never your projected after-repair value.
- The 75% ceiling applies to the long-term rental loan that pays off your bridge. A hard money loan used as the refinance itself runs lower, up to 65% of value on a cash-out or rate/term refinance, and that varies by lender, property, and experience.
- Break-even is simple: payoff plus exit costs, divided by 0.75, is the minimum appraisal that returns any cash.
- Rent coverage is tested again on the new, bigger loan, so thin rent can cap the loan before the leverage limit does.
- Seasoning, which is the time since you took title, decides whether the lender uses the new appraisal or your cost basis.
- Credit, reserves, and property type can pull the real number below 75%.
Most investors learn the 75% figure first and the other tests later. That order causes surprises at the appraisal. This guide walks through the full sequence the way an underwriter reads it, then shows where the rule bends.
What Does “Hard Money Cash-Out Refinance” Actually Mean?
The phrase covers two different transactions, and the leverage number changes with each. One is a hard money loan used as the refinance vehicle. The other is a refinance into long-term rental financing that pays off a hard money loan and may return cash.
Here is how they compare.
| Factor | Hard money as the refinance | Rental loan that pays off hard money |
|---|---|---|
| Typical purpose | Short-term cash-out or rate/term | Long-term hold after stabilization |
| Leverage | Up to 65% of value | About 75% LTV on a cash-out |
| Term | 6-18 months, interest-only | Typically 30-year fixed spine |
| Underwriting focus | Property, plan, exit | Appraisal, rent coverage, credit, reserves |
A hard money loan is a short-term, asset-based loan from a private or specialty lender. It is underwritten on the property, the plan, and the exit rather than your personal income. Terms run 6 to 18 months, interest-only, with no prepayment penalty on the current program. Everything here varies by lender, property, and experience, and nothing is a commitment to lend.
The 75% number in the title belongs to the second column. That is a DSCR loan, meaning a debt service coverage ratio loan that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Across the wholesale network Lendmire places files with, cash-out on a standard rental tops out around 75% LTV. The rest of this guide follows that exit.
Key Terms Defined
LTV (loan-to-value): the loan amount divided by the appraised value of the property.
ARV (after-repair value): your estimate of what the property is worth once the rehab is done. The lender does not size the loan on it.
Appraised value: the number from the new lender’s appraiser, based on comparable sales and the property’s actual condition.
Cost basis: what you paid for the property plus documented improvements.
Seasoning: the waiting period since your deed was recorded. It controls which value the lender may use.
Payoff-only vs. cash-out: a payoff-only refinance retires the bridge loan and returns little or no cash. A cash-out refinance returns meaningful proceeds after the payoff.
DSCR: monthly rent divided by the full monthly obligation (principal, interest, taxes, insurance, and any HOA dues).
PITIA: that full monthly obligation, as one abbreviation.
How Does Underwriting Treat the File, Step by Step?
Underwriting runs in a fixed order: classify the deal, check seasoning, appraise, apply the leverage cap, test rent coverage, then verify credit, reserves, entity, and title. Each step can lower the loan. None of them can raise it above the cap.
| Step | What happens | What the underwriter checks |
|---|---|---|
| 1. Classify | Payoff-only or cash-out | Whether fees or cash roll into the loan |
| 2. Season | Count from recorded deed | Which value basis applies |
| 3. Appraise | Value plus market rent | Comps, condition, rehab proof |
| 4. Cap | Apply the LTV limit | Score and coverage tiers |
| 5. Cover | Rent against the new payment | Whether DSCR clears the program floor |
| 6. Verify | Credit, reserves, entity, title | Payoff statement and lien release |
| 7. Close | Hard money is paid first | Remainder, if any, goes to you |
Step 1: Classification. Lenders usually treat paying off a bridge with no cash back more lightly than a cash-out. The dividing line is how much you take home. A common line is a small cash amount at closing, and it varies by lender. If you roll extra fees, a rehab cushion, or leftover draw money into the new loan, the file can flip to cash-out and pick up the stricter rules.
Step 2: Seasoning. About 6 months of ownership is the common expectation for a cash-out across the network. Before that point, lenders generally size the loan on the lesser of your cost basis or the appraised value. After it, the new appraisal controls. A hard money origination does not waive any of this, because seasoning is the exit lender’s policy.
Step 3: Appraisal. The appraiser sets the value and also supports a market rent figure. For a two-to-four unit property, the rent figure is reported on Form 1025, the small residential income property appraisal report. DSCR lenders in the network set their own rules. Hand the appraiser an itemized list of the rehab work. Without it, the comps may not reflect what you actually built.
Step 4: Leverage cap. The maximum loan is 75% of the appraised value on a standard rental cash-out, subject to credit and coverage tiers. The loan must also cover your bridge payoff and closing costs. If it does not, you bring cash to the table.
Step 5: Rent coverage. The lender divides rent by PITIA on the new loan. A bigger refinance means a bigger payment and a lower ratio.
Step 6: Credit, reserves, entity, title. Expect to provide the payoff statement, the note and lien release, entity documents, insurance, and a lease or market rent schedule. Credit and reserves are covered below.
Step 7: Funding. The new loan pays off the hard money lender first. Anything left comes to you.
What Is the 75% Math, Really?
The loan is the lower of 75% of appraised value and whatever the rent can support. Cash back is that loan minus your payoff, accrued interest, exit fees, and closing costs. Run the sequence in order, and the answer is often smaller than the headline suggests.
Use index units so the example stays program-neutral. Say the appraisal comes in at 100 units. A 75% cap gives a maximum loan of 75 units. Suppose your bridge payoff plus all exit costs total 72 units. Cash back is 3 units. That is a cash-out on paper and a payoff-only in practice.
This is a modeled assumption, not a market fact. It shows the shape of the problem: the cushion between payoff and cap is usually thinner than investors expect.
What Is the Break-Even Appraisal?
The break-even appraisal is payoff plus exit costs, divided by 0.75. Any appraisal below that number means you bring cash to closing. Any appraisal above it returns cash. Knowing this number before you order the appraisal tells you whether the exit works.
Using the same 72-unit payoff-plus-costs from above, break-even is 72 ÷ 0.75 = 96 units. Here is how the outcome shifts as the appraisal moves against a 100-unit expected value.
| Appraisal | 75% cap | Result vs. 72 units owed |
|---|---|---|
| 105 | 78.75 | About 6.75 cash back |
| 100 | 75.00 | 3.00 cash back |
| 96 | 72.00 | Break-even, no cash |
| 95 | 71.25 | About 0.75 to bring |
| 90 | 67.50 | About 4.50 to bring |
A miss of only 4% against your expectation erases the entire cash-out. A miss of 10% turns it into a cash-to-close file. That is why a projected after-repair value is a planning tool, not a loan basis.
Many investors think of 75% as a promise. It is a ceiling, and score tiers, coverage tiers, and property type pull the real figure down. For perspective, one securitized-loan due diligence filing shows a 75% maximum cash-out LTV for a borrower with a 688 score at one originator. That is a market-wide data point from a single originator, not a Lendmire program term. Across the network Lendmire places files with, cash-out likewise tops out around 75% LTV for standard rentals, and the figure steps down in lower tiers. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
How Does Rent Coverage Limit the Loan?
Underwriters run two separate tests on the same loan: a value-based limit and a rent-based limit. The lower one binds. Because cash-out increases the loan, it also lowers coverage, and thin rent can stop the loan before the 75% cap does.
DSCR is monthly rent divided by PITIA. Above 1.00, rent exceeds the monthly obligation. Select programs start at 1.00, which is a floor for those programs rather than a universal standard. Stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted, and the details depend on the lender and the file.
Picture a rehabbed duplex where the rent comfortably covers a payoff-only loan at about 1.3x. Pull another slice of equity out, and that same rent might cover the larger loan at roughly 1.05x. Pull out more, and you drop below the floor. The value test passes. The rent test fails first.
One caution matters for every scenario. Clearing 1.00 is not the same as positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
Where Do Credit and Reserves Come In?
Credit and reserves set which leverage tier you land in. A 620 score is the floor in parts of the network, most programs want around 660, and 700 or higher opens the strongest leverage tiers. Reserves vary by lender, leverage, loan size, and transaction type, and they commonly run about 6 months of PITIA.
Conservative rate-term files at modest leverage under $1,500,000 can see reserves waived. Larger loans typically step up to about 9 months. Standard loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures.
Do not assume a bigger down payment fixes everything. More equity lowers the monthly obligation and can lift DSCR. It does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
What Happens to the Proceeds?
Proceeds are paid in a fixed order: the hard money payoff comes first, then accrued interest and exit fees, then closing costs and any reserve funding, and finally whatever remains goes to you. Rolling extras into the loan can reclassify the file.
| Order | Deduction | Notes |
|---|---|---|
| 1 | Hard money principal | Per the payoff statement |
| 2 | Accrued interest and exit fees | Confirm the per diem on the statement |
| 3 | New-loan closing costs | Appraisal, title, lender fees |
| 4 | Reserve funding, if required | Varies by program |
| 5 | Cash to you | Often smaller than the cap implies |
The reclassification trap catches people who ask the lender to add a rehab cushion or unused draw money to the balance. That can push a payoff-only into cash-out treatment, with the stricter seasoning and leverage that follow. If your goal is only to retire the bridge, keep the loan sized to the payoff.
What Do Underwriters Flag, and What Should You Have Ready?
The usual stall points are documentation, appraisal gaps, seasoning mismatches, thin coverage, and short reserves. Most of them are preventable if you assemble the file before the bridge maturity date approaches.
Have these ready:
- The hard money payoff statement with the per diem
- The note, draw history, and lien release plan
- An itemized scope-of-work and photos showing completed rehab
- The signed lease, or evidence supporting market rent, plus deposit records
- Entity documents, subject to lender program eligibility
- Current insurance for the property
- Proof of reserves
Hard money is short-term and interest-only, so every extra month of delay costs you carrying interest. Map the seasoning clock against your bridge maturity date. If seasoning ends after the bridge does, you need an extension, a payoff-only exit, or cash.
One practitioner pattern shows up often in files like this. The deal looks fine at the projected value, then the appraisal lands a few points under, and the investor discovers the payoff left no room. The investors who stay out of trouble run the break-even number before they order the appraisal and keep a plan B ready.
Where Does the 75% Rule Break?
Several situations pull the figure down or change the treatment. Short-term rentals use lower leverage. Lower credit or thinner coverage steps leverage down. Some property types are not offered at all. Unusual files get reviewed case by case.
- Short-term rentals. On short-term-rental collateral, cash-out tops out at 70%, compared with 75% on standard rentals. Expect a 640 or higher score and about 12 months of hosting history, with a 1.00 coverage floor on refinances. 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.
- Lower scores and thinner coverage. Leverage tiers step down as either one weakens. The sub-1.00 path through select lenders adjusts leverage and terms accordingly.
- Ineligible property types. DSCR on manufactured homes (single- and double-wide), log homes, and barndominiums is not offered in the network.
- Occupancy. These loans are for non-owner-occupied investment property. If you plan to live in the home, you are in a different product altogether.
- Exceptions. Some lenders will review an exception to seasoning or leverage when compensating factors are strong, such as high credit scores and healthy reserves. One securitization due-diligence filing documents a seasoning exception granted to use the current appraised value after a few months of ownership. That is an illustration of the type of exception, not something to count on.
DSCR loans are designed for non-owner-occupied investment properties. Credit extended primarily for a business purpose is generally treated as exempt from certain consumer-credit rules. That affects how the loan is documented, not whether the lender cares about your credit and reserves.
What Should You Do When the Numbers Do Not Work?
Pick the option that matches the gap. If the appraisal misses the break-even, you have a handful of workable moves: take payoff-only, wait for seasoning, extend the bridge, bring cash, or sell. The right one depends on how big the shortfall is and how long your bridge has left.
| Situation | Option | Tradeoff |
|---|---|---|
| Small appraisal miss | Bring cash to closing | Uses liquidity |
| Seasoning not met | Extend or wait | More bridge interest |
| Rent too thin | Smaller loan or sub-1.00 select path | Adjusted leverage and terms |
| Large value gap | Sell or hold the bridge longer | Gives up the exit |
| Cash back not needed | Payoff-only | Pulls equity out later |
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. For the long-term rental exit itself, Lendmire’s piece How Lenders Underwrite a DSCR Cash-Out Refinance at 75% Loan-to-Value goes deeper. The complete DSCR loans guide covers the full program picture.
A broker earns its place here by comparing programs across several wholesale lenders. One lender may want 6 months of seasoning and another may accept less with documented rehab. One may tier leverage tightly by score and another loosely. Matching the file to the right program depends on your property type, credit profile, leverage need, and documentation. All of it is subject to lender guidelines and individual underwriting.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals.
Frequently Asked Questions
Is 75% LTV guaranteed on a cash-out refinance?
No. It is a ceiling. Credit tiers, coverage tiers, property type, and reserves can pull the real number lower, and the rent test can limit the loan before the value test does. Underwriting is individual, and nothing here is a commitment to lend. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Does using hard money mean seasoning rules do not apply?
No. Seasoning belongs to the lender making the exit loan, and a hard money origination does not waive it. Before that, lenders usually size on the lesser of cost basis or appraised value.
What if the appraisal comes in lower than my after-repair value?
Your loan shrinks with it. At a 75% cap, every point of appraisal shortfall cuts the maximum loan by 0.75 points. Compute the break-even appraisal first: payoff plus exit costs, divided by 0.75. If you land below it, you either bring cash, take a smaller payoff-only structure, or extend the bridge.
Does clearing 1.00 DSCR mean the property cash flows?
Not necessarily. DSCR compares rent only to PITIA. Repairs, vacancy, management, utilities, and capital expenses sit outside it. A property can clear 1.00 and still have thin real-world margins after those costs.
Can I use a hard money loan as the cash-out refinance itself?
Yes, with lower leverage. A hard money cash-out or rate/term refinance runs up to 65% of value, with 6-18 month interest-only terms, and varies by lender, property, and experience. It suits a short bridge before a long-term loan, not a permanent hold.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. SEC ABS-15G filing, COLT II (688 score cash-out LTV)
2. SEC ABS-15G filing, EFMT (seasoning exception)
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Lenders Underwrite a Hard Money Cash-Out Refinance With Only Six Months of Reserves · How Lenders Underwrite a DSCR Cash-Out Refinance Without a Mortgage
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.