The Quick Read: The two loans differ mainly in which income the lender is allowed to count. A long-term rental loan counts lease rent or market rent, which is simpler to prove and usually easier to fit inside a condo’s rules.
- A short-term rental cash-out tops out around 70% LTV on short-term-rental collateral, while a long-term rental cash-out tops out around 75% LTV across most of the network.
- The short-term path typically expects a 640+ credit score and about 12 months of hosting history. Long-term files commonly want around 660.
- Association rules decide which path you are on before any lender does.
- Both paths review the building, and both put HOA dues in the coverage math.
- Passing the coverage test does not mean the unit cash flows. Repairs, vacancy and management sit outside it.
The Honest Answer: Who Each Option Is For
Choose the short-term rental cash-out if your condo legally allows nightly stays, you have a real hosting record, and the revenue is strong enough to survive the lender’s adjustments. Choose the long-term rental loan if the declaration bans or limits short stays, your hosting history is thin, or you want a file built on a lease. Neither loan is better in the abstract. Both are tools for the same building with different income stories.
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A non-warrantable condo adds a second layer. The project itself has a trait that keeps it out of standard agency lending, so the loan is placed through non-QM lending. Lendmire is a mortgage broker that arranges both loan types through select lenders in its wholesale network, so this comparison reflects how the programs line up across many lenders rather than one lender’s page. For the full picture of how these loans work, see the complete DSCR loans guide.
Side-by-Side
The figures below are ceilings and typical ranges from select lenders in the network. They are not guarantees, and every file is underwritten individually, subject to lender guidelines.
| Factor | STR Cash-Out | Long-Term Rental Loan |
|---|---|---|
| Review basis | Property’s short-term rental income vs. payment | Property’s lease or market rent vs. payment |
| Income evidence | Platform statements, bank deposits, or projection | Lease and/or appraiser rent schedule |
| Hosting history | About 12 months typically expected | Not required |
| Cash-out leverage | Up to 70% LTV (STR collateral) | Around 75% LTV (standard rental) |
| Credit score | 640+ expected | Around 660 typical; 620 floor in parts |
| Coverage floor | 1.00 on refinance | 1.00 where select programs start |
| Association permission | Must allow nightly stays | Must allow leasing |
| Condo project review | Applies | Applies |
The 1.00 floors in the table describe the standard path on both sides. Coverage below 1.00 is a separate path on the long-term side, available through select lenders in the network with leverage and terms adjusted. Reserves vary by lender, leverage, loan size and transaction type, and larger loans typically step up. Loan amounts run up to $3,000,000 on standard programs.
Key Terms Defined
Non-warrantable condo: A condo whose project fails standard agency project review, so a loan on a unit cannot be sold to the agencies. The label describes the building, not you.
DSCR (debt service coverage ratio): Monthly rent used for lender review divided by the full monthly payment. That payment is principal, interest, taxes, insurance and HOA dues.
PITIA: Principal, interest, taxes, insurance and association dues. It is the payment figure a DSCR loan tests rent against.
LTV (loan-to-value): The loan balance as a percentage of the property’s appraised value.
Seasoning: The waiting period after you buy before a cash-out refinance is allowed. About 6 months is the common expectation in the network.
Condotel: A condo building run like a hotel, often with a rental pool or a manager handling stays for owners.
Cash-out refinance: A new loan larger than your current payoff, with the difference paid to you. Even a free-and-clear condo is treated as a cash-out when you borrow against it.
Why the Condo Label Changes the Conversation
A non-warrantable project is one the agencies will not buy loans on. That does not make the unit unfinanceable. It means the lender uses its own project rules instead of the agency checklist.
Here is the brief contrast. Fannie Mae’s Selling Guide on ineligible projects lists projects run by a hotel or resort manager that also facilitates short-term rentals for owners. That is why many resort-style buildings land in the non-warrantable bucket. Agency policy also keeps shifting. Because the definition moves, treat the label as a starting point and ask why your building carries it.
The reason matters more than the label. A building non-warrantable because of investor concentration may still allow a short-term path if the association documents permit it. A building with a mandatory rental pool or a deed restriction on rental use may block one or both strategies. Select lenders differ on how they treat each cause, and some project types are simply not offered. Check the project’s status with a broker before you plan around either path.
When Short-Term Rental Cash-Out Is the Better Fit
This path fits when three things line up: permission, history and cushion. Permission means the declaration, rules and any rental-pool agreement allow short-term stays. History means you have roughly a year of hosting records that match your bank deposits. Cushion means the revenue still clears coverage after the lender adjusts it.
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. Covenants can bind owners even where local law is friendly. Amendments can also tighten stay minimums after you buy.
Here is why the income story matters. Nightly revenue can run well above lease rent, so it can support a larger loan on the same unit. But the lender decides how much of that revenue counts. Lenders commonly reduce gross revenue for vacancy and expenses, and the method varies. The standard rent schedule is not built for this. Fannie Mae’s appraiser guidance states that Form 1007 was not designed for short-term rentals and cannot estimate a nightly fee. So DSCR programs lean on platform statements and market-data projections instead.
On a refinance, actual history carries the most weight. Projections are more common on purchases. A condo you recently converted from a tenant to nightly stays may not have enough record. In that case the file can fall back to long-term rent, or a select lender may accept a different evidence package.
The leverage tradeoff is real. On a short-term-rental cash-out, the ceiling is around 70% LTV on short-term-rental collateral, versus around 75% on a standard long-term rental cash-out. You trade five points of leverage for the chance to count higher income. On a non-warrantable project, lenders may pull leverage lower still, depending on the project and the lender. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Say you own a resort-adjacent condo with a clean 12-month hosting record and a modest loan balance. Gross revenue is well above lease rent. Even after the lender’s adjustment and with dues in the payment, coverage clears 1.0x with room to spare. That file suits the short-term path. Run it the other way and the benefit may vanish: with a high balance, high dues and a slow season in the trailing history, the adjusted revenue can drop toward 1.0x or below.
When a Long-Term Rental Loan Is the Better Fit
The long-term path wins when the building says no, the history says not yet, or the margin for error is thin. It is the more predictable file. A lease or an appraiser’s rent schedule is easy to document, and the lender does not need to judge a revenue model.
Start with the association. If the declaration bans short stays, requires board approval you cannot get, or caps the number of rented units, the nightly income does not count. A property that cannot legally operate as a short-term rental should not be underwritten on short-term income. The fallback is the long-term rent the lender can legally count, and this is exactly where the long-term loan comes in.
It also wins on leverage. A long-term rental cash-out reaches around 75% LTV across most of the network, five points above the short-term ceiling. Credit is a little easier at the floor too, with a 620 minimum in parts of the network, though most programs still want around 660. No hosting history is required. About 6 months of seasoning is the common expectation.
Think of an investor who bought a unit as a nightly rental, then learned the association is tightening rules. Rather than bet the refinance on an income stream that could be restricted, they lease the unit and refinance on the lease. The ratio is lower, but the file no longer depends on a rule change going their way. For a building with unsettled governance, that can be the stronger choice.
A larger down payment or more equity helps either path, but 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.
Dues, Coverage and the Gap Between Passing and Profiting
HOA dues sit in the payment side of the ratio on both paths. That makes the condo a different animal than a house. Take two units with identical rent. The one with higher dues has a lower coverage ratio, and a special assessment can push it lower still.
A strong ratio can also hide a weak building. A condo at 1.25x with unresolved association finances can be a riskier hold than a single-family rental at 1.05x. The ratio measures rent against the payment. It says nothing about a building with litigation, thin reserves or critical repairs.
And clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities and capital expenses all sit outside the calculation. Short-term rentals add volatility, so reserves matter more there. If your unit passes only in peak season, the numbers are telling you something.
Many investors ask whether a cash-out changes the test, and it does. The refinance raises the loan, so coverage is re-tested against the new, larger payment. A condo that cleared easily on the old balance can sit much closer to the line after you pull equity out. Lendmire’s piece Best Short-Term Rental Cash-Out Refinance Program on a Rural or Non-Warrantable Property covers program selection in more depth.
Entity treatment is the same under both options. Most programs let you vest individually or in an LLC, subject to lender program eligibility. Expect a personal guarantor either way, and expect the lender to review your credit and reserves. DSCR loans are designed for non-owner-occupied investment properties, and because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
A Balanced Verdict
Pick the path by answering these in order. Does the association allow nightly stays? If not, the long-term loan is your path. Do you have about a year of hosting records that match your deposits? If not, the long-term loan is usually cleaner. Does adjusted short-term income still clear coverage with dues included? If yes, and you want the extra income to carry more loan, the short-term cash-out earns a serious look.
If you answered yes three times, the short-term cash-out is built for you, with the lower leverage ceiling as the price. If any answer is no, start with the long-term rental loan and revisit the nightly strategy once the permission or the record is in place. This is a close call for many buildings, so weigh the leverage gap against the income gap rather than chasing the higher revenue number.
Frequently Asked Questions
Can a non-warrantable condo qualify for a short-term rental cash-out?
Sometimes. It depends on why the project is non-warrantable and whether the association documents permit nightly stays. Investor concentration is a different problem than a mandatory rental pool or litigation. Select lenders in the network review each cause under their own rules, subject to lender guidelines and property review.
Can I switch from short-term to long-term rent at refinance?
Yes, if the building allows leasing. You refinance on the lease or the appraiser’s market rent instead of platform revenue. Leverage on a standard rental cash-out is typically higher, around 75% LTV, though coverage will often be lower than your nightly revenue suggested.
Does the HOA have to approve short-term rentals for the loan to count that income?
Yes, the governing documents have to allow it. A DSCR file does not override a rental restriction in the declaration or rules. If the documents are unclear, get a written answer from the association before choosing the short-term path.
What credit score and reserves do these loans typically need?
The short-term path typically expects a 640+ score, and long-term files commonly want around 660, with a 620 floor in parts of the network and 700+ unlocking the strongest leverage. Reserves are commonly around 6 months of PITIA, and they vary by lender, leverage, loan size and transaction type.
Can I use an LLC on either loan?
Typically yes, subject to lender program eligibility. Expect the lender to review a personal guarantor’s credit, liabilities and reserves as well.
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 arranges these loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. You can also reach the team at 828-256-2183. Any illustrative calculator estimates are not a quote or a commitment to lend.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B4-2.1-03, Ineligible Projects
2. Fannie Mae Appraiser Update, June 2024
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 a Grandfathered Airbnb Still Get a Short-Term Rental Cash-Out? · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance Right After Rehab? · Best Short-Term Rental Cash-Out Refinance Program in Retirement on a Fixed Income
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.