The Quick Read: A San Marcos rental cash-out refinance lends the lower of two limits: a loan-to-value cap on the appraised value, or the loan size at which the rent still covers the full monthly payment. Equity alone never sets the number.
- On a standard rental, cash-out tops out around 75% LTV across most of the network. Short-term-rental collateral caps at 70% on a cash-out.
- Seasoning of about 6 months from the recorded deed is the common expectation.
- Coverage of 1.00 is where select programs start, and rent is measured against principal, interest, taxes, insurance and HOA dues (PITIA).
- Net cash is the new loan minus the payoff minus closing costs, so it is always smaller than 75% of value.
- Texas homestead cash-out rules do not apply to a rental. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
San Marcos is the worked example here, but the mechanics are the same for any investor. The point of this guide is to show how the loan amount gets built, step by step, so you can estimate proceeds before you apply. For the full program picture, see the complete DSCR loans guide.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Nov 5, 2026
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As of Nov 5, 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.
What Does a Rental Cash-Out Refinance Actually Do?
It replaces your current loan on a rental with a larger one and hands you the difference in cash. The new loan pays off the old lien, covers closing costs, and whatever remains goes to you.
Across Lendmire’s wholesale network of DSCR lenders, these loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. DSCR loans are designed for non-owner-occupied investment properties, and they are reviewed differently from a standard owner-occupied mortgage.
One label matters. If any cash comes back at closing, the file is a cash-out. A refinance that only pays off the old loan is a rate-and-term refinance, which on select programs can reach up to 85% LTV. Cash-out carries the lower 75% ceiling and the seasoning expectation. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Does Texas Law Cap Your Rental Cash-Out at 80%?
No, Texas law does not cap a rental cash-out at 80%, and the 75% cash-out ceiling in this post comes from lender program guidelines rather than from the state. Texas’ well-known homestead limits do not reach a rental. Article XVI, Section 50(a)(6) of the Texas Constitution governs cash-out loans on a homestead. Fannie Mae’s Selling Guide says such a loan must be secured by a single-unit principal residence that is the borrower’s homestead, and that investment properties, second homes and 2-4 unit properties are not eligible.
That means a San Marcos landlord does not face the homestead waiting period or the homestead equity cap. A rental cash-out runs on the lender’s own DSCR guidelines instead, and final terms depend on those guidelines, property type, leverage, and the borrower’s complete credit picture.
One edge case deserves a flag. If the property was once your homestead and is now a rental, an earlier homestead lien may need curative paperwork before it refinances on investment terms. Have a title company or attorney confirm that before you count on proceeds.
How Is the Loan Amount Calculated, Step by Step?
The loan amount comes from five steps, and the tightest limit wins.
1. Establish value. After seasoning, the appraisal sets the value. Inside the seasoning window, the loan is generally sized on the price you paid plus documented improvements.
2. Apply the LTV cap. On a standard rental cash-out, the ceiling is about 75% of value. On short-term-rental collateral, it is 70%.
3. Order the rent schedule. The appraiser reports market rent on Form 1007 for a one-unit property or Form 1025 for 2-4 units. Those are agency form names that DSCR lenders borrow, but agency rules do not govern the file. That rent conclusion becomes the numerator in the coverage ratio.
4. Test the coverage. DSCR is monthly rent divided by the full monthly obligation: principal, interest, taxes, insurance and any HOA dues. Many select programs start at 1.00. Strong coverage opens better pricing and leverage.
5. Net out the payoff and costs. New loan minus existing payoff minus closing costs equals cash to you.
Here is the arithmetic in the abstract. Picture a property that appraises at $200,000. At the 75% ceiling, the maximum loan is $150,000. If your payoff is $100,000, gross cash is up to $50,000 before closing costs. That is illustrative arithmetic, not a quote, and the real loan can land lower.
Why lower? Because the two caps compete. On a thin-rent property, the coverage test can cap the loan below the LTV ceiling, since a larger loan carries a larger payment against the same rent. Equity can be abundant while rent is the binding constraint.
Which Limit Binds: Equity or Rent?
Whichever produces the smaller loan. Two San Marcos owners can hold the same equity and walk away with very different cash.
| Scenario | LTV cap | Coverage test | Likely binding limit |
|---|---|---|---|
| High equity, strong rent | Room to 75% | Clears comfortably | LTV cap |
| High equity, soft rent | Room to 75% | Thin or short | Coverage |
| Low equity, strong rent | Limited by payoff | Clears comfortably | LTV cap and payoff |
| Low appraisal | Effective LTV rises | Rent unchanged | LTV cap |
A low appraisal deserves special attention. It raises the effective LTV on the same request, so a loan that fit at your expected value may exceed the cap at the appraised one.
If coverage falls short of 1.00, a separate path exists. Programs below 1.00 are available through select lenders in the network, with leverage and terms adjusted. Whether that path applies to a cash-out depends on the program, so ask before you assume.
Clearing 1.00 also does not mean positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities and capex sit outside it.
What Does San Marcos Add to the Picture?
Soft rent and softer values are the local risk, and both feed the appraisal. Apartment List puts the San Marcos median rent at $1,061, down 7.8% year over year. RentCafe shows an average of $1,601, down 3.15%. The two use different methods, so treat them as two readings of the same softness rather than one number. On the value side, Redfin reports a median sale price near $314K for the three months ending in June, down 7.7% year over year.
Lower values shrink the base the 75% cap applies to, and lower appraised rent weakens the coverage test. In a student and visitor town, an owner who expects last year’s rent may meet a more conservative appraiser. Underwriters generally credit the more conservative of the lease and the market rent, so do not assume your signed lease sets the numerator.
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.
Where Does the General Rule Break?
Several situations change the sizing.
- Inside the seasoning window. About 6 months from the recorded deed is the common expectation. Before that, cash-back loans size on cost plus documented improvements, not the after-repair appraisal. BRRRR investors should plan for this before counting on proceeds.
- Cash buyers. Delayed financing sizes the loan near your documented cost, capped by the usual cash-out LTV, which lets an all-cash buyer recover capital without waiting out the full window.
- Payoff-only refinances. If no cash comes back, the file is treated as rate-and-term. The cash-out label brings the stricter ceiling and seasoning.
- Short-term rentals. Cash-out is capped at 70% on this collateral. Expect a 640+ score and about 12 months of hosting history, and note that income is documented separately because the 1007 is built for monthly rent.
- 2-4 units. These use the 1025 with unit-level rents. Commercial ground-floor income is excluded from the gross rent.
- Ineligible property. Manufactured homes, log homes and barndominiums are not offered in these programs.
What Else Shapes the Final Number?
Credit, reserves and vesting. A 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months above $1,500,000. Standard loans run up to $3,000,000, and above $2,500,000 the network generally holds to 30-year fixed structures. Holding title in an LLC is possible, subject to lender program eligibility.
A larger equity cushion can lower the payment and lift coverage, but it never erases credit floors, reserve rules or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. Loan structures include the 30-year fixed, with extended terms, interest-only periods and ARMs available through select lenders.
Higher leverage costs more in pricing. That is one more reason to borrow only what the property needs.
Key Terms Defined
Seasoning: The time you must own a property, counted from the recorded deed, before a cash-out sizes on appraised value.
LTV: The loan balance divided by the property’s value.
DSCR: Monthly rent divided by the full monthly obligation (PITIA).
PITIA: Principal, interest, taxes, insurance and association dues.
Form 1007: The rent schedule an appraiser completes for a one-unit rental.
Form 1025: The small-income-property appraisal report used for 2-4 units.
Delayed financing: A cash-out on a recent all-cash purchase, sized near documented cost.
Frequently Asked Questions
Can I do a cash-out refinance on a rental in San Marcos?
Yes. Texas’ homestead cash-out rules govern primary residences, not investment property. A rental runs on the lender’s DSCR guidelines, with about 75% LTV as the typical ceiling on a standard rental and about 6 months of seasoning, subject to lender guidelines.
Will I get 75% of my home’s value in cash?
No. The 75% is a ceiling on the new loan, not on your cash. Your payoff, closing costs and the coverage test all reduce proceeds, and a low appraisal can cut them further.
Does my actual lease set the rent used?
Not necessarily. The appraiser’s market rent from Form 1007 or 1025 becomes the numerator, and underwriters generally lean toward the more conservative figure between lease and market rent.
Does a rehab raise my loan right away?
Not inside the seasoning window. Cash-back loans there size on price paid plus documented improvements. After seasoning, the appraisal governs, and an improvement may support a higher appraised value, depending on comps and underwriter review.
What if my rent does not cover the payment?
Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. Availability for a cash-out depends on the program, so ask before relying on it.
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. For Texas owners, the real question is rarely how much equity exists. It is how much rent the appraiser will credit in a softening market.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
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. 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. Fannie Mae Selling Guide B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility
2. apartmentlist.com: San Marcos
3. RentCafe, San Marcos Average Rent and Market Trends
4. Redfin, San Marcos Housing Market
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: How to Get a DSCR Cash-Out Refinance When a Conservator Manages the Rental · How Much a DSCR Cash-Out Refinance Releases at the Standard Cap · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance Right After Rehab?
Guides: Investment Property Cash-Out Refinance in San Marcos, TX · Investment Property Cash-Out Refinance in Texas
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- 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.