The Quick Read: It depends on three numbers: the new loan size, which is capped at about 70% of appraised value on short-term-rental collateral and may be smaller if rent coverage limits it, the full private-note payoff, and the closing costs and reserves that come out before you see a dollar. Your cash is what is left after those deductions.
- Net cash formula: (appraised value × the short-term-rental cash-out cap, or a smaller loan if rent coverage binds) − private-note payoff − closing costs and prepaids − required reserves.
- The 70% cap limits the loan, not your proceeds. A large payoff on a young note can leave little or nothing.
- Payoff means the whole payoff: principal, accrued interest, and any exit, extension, or prepayment charges.
- If no cash comes back, the file is generally a payoff-only refinance, which is treated differently from a cash-out.
- Rent coverage can bind before equity does, and clearing the coverage floor is not the same as positive cash flow.
What Is the Cash-Out Formula, Step by Step?
Net proceeds equal the new loan minus every deduction taken at closing. Title wires the private lender first. Then it pays closing costs and prepaids. Whatever remains goes to you, or into a reserve account if the program requires one.
DSCR Cash-Out Calculator
Run the cash-out numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Nov 5, 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 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.
Here is the order of operations as a waterfall:
| Line item | Effect on your cash |
|---|---|
| New loan amount | Starting point |
| Private-note principal | Subtracted |
| Accrued and daily interest | Subtracted |
| Exit, extension, or draw fees | Subtracted |
| Prepayment penalty (if any) | Subtracted |
| Closing costs and prepaids | Subtracted |
| Required reserves | Held back |
| Net cash to you | What remains |
The new loan itself is the lower of two ceilings. The first is value: for short-term-rental collateral, cash-out leverage tops out at up to 70% of appraised value, subject to lender guidelines. The second is rent coverage: the property’s income has to cover the new payment at a ratio of at least 1.00 on a refinance. Whichever ceiling is tighter sets the loan.
Short-term-rental purchases can reach up to 75% on the strongest files, but a cash-out or refinance is held to the lower 70% figure. That five-point gap is real money, so plan around the lower number.
Why Isn’t the 70% Cap My Cash?
The cap limits the loan, and your proceeds come after the payoff. A loan at 70% of value does not hand you 70% of value. It hands you 70% minus the note, minus costs.
Private notes surprise borrowers here. Many are interest-only, so the principal never shrinks. Interest accrues daily. If the note is near maturity, an extension fee may be added. If the note is in default, penalty interest can grow the payoff each week. Each of those lands on the payoff statement, and each reduces your cash.
Closing costs take a bite too. They include lender fees, title, appraisal, and prepaid items such as insurance and taxes set aside at closing. They vary by file, so treat any percentage as a planning assumption, not a quote.
How Does the Math Look in Real Files?
These examples use percentages of appraised value, not dollars. The inputs are modeled assumptions, not market data. Costs are modeled at 3% of value.
Ample equity. Say the private-note payoff, including accrued interest and fees, is 40% of value. The loan is capped at 70% of value on short-term-rental collateral. Cash before reserves is 70 − 40 − 3, or about 27% of value. Required reserves then come out of that.
Thin equity. Run the numbers on a payoff of 66% of value. The same 70% cap and 3% costs leave 70 − 66 − 3, or about 1% of value. That file works as a payoff, not as a source of cash. If an extension fee gets added before closing, the cash goes negative and the borrower brings money to the table.
Appraisal shortfall. Suppose you expected a value of 100 and the appraisal comes back at 92. Seventy percent of 92 is 64.4. A payoff of 62 plus costs of 3 totals 65. You are about half a point short. The shortfall can be closed by paying the note down further before closing, bringing cash to the table, or waiting for value to rise.
Break-even appraisal. You can work backward. Divide payoff plus costs by the cap. Using 65 and 70%, you need an appraisal of roughly 92.9% of what you expected just to break even with zero cash out. Each additional point of appraised value above that level adds about 0.7 points of value to your proceeds.
When Does Rent Coverage Limit the Loan Before Equity Does?
Sometimes the property has plenty of equity but not enough income. The lender sizes the loan so that rent covers the full monthly obligation (principal, interest, taxes, insurance, and any HOA dues) at the required ratio. That ratio is called the debt service coverage ratio, or DSCR. For short-term rentals, the refinance floor in these programs is 1.00. Some select lenders in the network go below 1.00 with leverage and terms adjusted, but that is a different path from the 1.00 programs, not a lower floor on the same one.
Private notes often hide this problem. An interest-only note carries a small payment. A new amortizing loan carries a larger one. The coverage test runs on the new payment, not on what you pay today. A property that looked fine on the old note can come up thin on the new loan.
Run it as a decision table:
| Binding limit | What it means | Result |
|---|---|---|
| Value | Appraisal × 70% is the smaller number | Loan capped by equity |
| Rent | Coverage supports a smaller loan | Loan shrinks, cash shrinks |
| Payoff size | Payoff plus costs eats the loan | Little or no cash back |
Take a quick case. Equity would allow a loan at 70% of value, but rent supports only 60%. A payoff of 50 and costs of 3 leave about 7% of value. Rent, not equity, set that cash. Clearing 1.00 also does not mean the property cash-flows. DSCR compares rent to the monthly obligation only, and repairs, vacancy, management, utilities, and capital expenses sit outside it. A slow season can leave a thin-coverage rental short.
How Do Lenders Count Short-Term-Rental Income?
Appraisals value the building, not your hosting business. A rent schedule from the appraiser, typically on a Form 1007, often lands below what a well-run short-term rental earns. Lenders then decide what income counts. Some lean on trailing hosting history, some on a market-data projection, and some on the appraiser’s rent schedule. AirDNA’s explainer on coverage ratios shows how the same ratio applies to short-term properties.
Short-term-rental financing usually expects about 12 months of landlord or host experience. The minimum credit score is 640. A property with no history may fall back to a projection or long-term rent, and that usually shrinks the loan. 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.
Pulling payout statements and a data report before the appraisal gives the lender less to question. The stronger files show both tests cleared: enough equity and enough rental coverage.
Is Paying Off a Private Note Automatically a Cash-Out?
No. If the new loan covers only the payoff and costs, with no cash back, it is generally a payoff-only refinance, also called rate-and-term. It becomes a cash-out when money comes back to you. The CFPB’s research team treats a refinance as cash-out when the new loan is more than 5% larger than the old balance. Lenders apply their own definitions, so confirm the cutoff on your file.
The label matters because it sets leverage and seasoning. Seasoning is the waiting period a lender wants after you buy before it will let you pull cash out. On cash-outs, about 6 months from title recording is the common expectation. Payoff-only files can carry different leverage and lighter seasoning, depending on the program. That is why an appraisal that supports only payoff plus costs can still produce a workable refinance, just without cash.
The same logic works if you already own the property free and clear. There is no payoff to deduct, so the file is a cash-out in the plain sense.
Edge Cases That Change the Number
- Young note, seasoning clock. If the private note funded your purchase, cash-out seasoning generally runs from the recorded deed. A recorded lien at purchase also means delayed financing, an idea built for all-cash buyers, generally does not rescue the file. Delayed financing caps proceeds near documented cost anyway.
- Maturity pressure. If the note matures before the refinance, an extension fee gets added to the payoff and shrinks your cash. Ask the private lender about an extension in writing before you apply.
- Prepayment penalty or lock-out. A penalty comes out of proceeds. A lock-out can block the payoff until it expires or is waived.
- Unrecorded, seller, or related-party notes. These need extra paper: the note, proof of the balance, and a written release. Expect more questions about how the lien is documented.
- LLC ownership. Holding the property in an LLC can work, subject to lender program eligibility. The entity, its operating agreement, and the guarantor’s credit all get reviewed.
- Thin coverage on the bigger payment. The loan may have to shrink, which reduces your cash.
- Ineligible property types. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs.
What Documents Does the Payoff Package Need?
Order the payoff statement early. It should itemize principal, accrued and per-diem interest, and every fee. Ask for a good-through date, because interest keeps running until the wire lands. Then confirm how the private lender will release the lien. Title needs that release to clear the old note.
A short checklist:
1. Payoff statement with a per-diem figure and a good-through date.
2. Copy of the note and any extensions or modifications.
3. Lien release instructions from the private lender.
4. Short-term-rental income evidence, such as payout reports and a data report.
5. Entity documents, if an LLC holds title.
6. Proof of insurance and any HOA information.
Loan sizes run from roughly $100,000 up to $3,000,000 on standard programs, subject to lender guidelines. Balances under the standard minimum route through select lenders. Reserves vary by lender, leverage, loan size, and transaction type. About 6 months of the full monthly obligation is common on a cash-out, and larger loans can step up. Reserves held back reduce the cash you can spend.
What Are the Alternatives If the Cash Is Too Thin?
When the formula returns little cash, think about what you actually need. If you need only to exit the note, a payoff-only refinance may do that job. If you need more time, a written extension from the private lender can buy it, though the fee lands on the payoff. If value is the problem, waiting for appraisal growth or documenting improvements can help. A sale is the last resort, and sometimes it is the cleanest exit.
For the full picture of how these loans work, see the complete DSCR loans guide.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction. For the rental-property rules, see IRS Publication 527.
Key Terms Defined
Net proceeds: the cash left for you after the private note, costs, and reserves come out of the new loan.
Payoff-only refinance: a refinance that repays the old note and costs without returning cash to you.
Cash-out refinance: a refinance where the new loan is larger than the payoff and costs, and the difference comes back to you.
Seasoning: the waiting period a lender wants between buying a property and pulling cash from it.
Loan-to-value (LTV): the loan divided by appraised value. Corporate Finance Institute explains how it sets the maximum loan against value.
DSCR (debt service coverage ratio): rent divided by the full monthly obligation. A ratio of 1.00 means rent equals the payment.
Break-even appraisal: the lowest appraised value at which payoff plus costs still fit under the loan cap.
Frequently Asked Questions
Can I pull any cash at all if my private note is large?
Only if the new loan, capped near 70% of value on short-term-rental collateral, exceeds payoff plus costs plus reserves. A large note on a young property often leaves nothing. In that case a payoff-only refinance may be the realistic outcome.
Does the appraisal prove my Airbnb income?
No. The appraisal supports value and a rent schedule. Lenders decide what income counts, often using hosting history or a market-data report. Plan on documenting both.
What happens if the appraisal comes in short?
The loan shrinks to the lower value. You can bring cash to closing, negotiate a smaller payoff, or wait. Run the break-even calculation before ordering the appraisal so you know your margin.
Does the rent have to cover the new payment?
Yes. The coverage test runs on the new payment, and the refinance floor for short-term rentals is 1.00 in the programs described here. Select lenders in the network have a separate path below 1.00 with leverage and terms adjusted.
Does cash-out money count as taxable income?
Loan proceeds are generally not income, but how the funds are used can affect deductibility. Keep clear records and speak with a qualified tax professional.
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.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 41 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
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References
1. AirDNA: Debt Service Coverage Ratio in Real Estate
2. CFPB Office of Research Blog: A Look at Cash-Out Refinance Mortgages and Their Borrowers
3. IRS Publication 527, Residential Rental Property
4. Corporate Finance Institute: Loan to Value Ratio
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: Short-Term Rental Cash-Out Refinance vs Long-Term Rental Loan at 75% Loan-to-Value · How Much Down Payment a Rental Cash-Out Refinance Can Cover · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance to Buy Out an Ex-Spouse?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.