A refinance keeps you in the property. A sale ends the ownership and frees the whole equity.
The Quick Read: A short-term rental cash-out refinance usually releases less cash than a sale, because the new loan is capped at the smaller of a value limit (up to 70% for short-term-rental collateral) and a rent-coverage test, and your old payoff and closing costs then come out of that loan.
- The check equals the new loan minus your existing payoff, closing costs and any prepayment charge.
- Short-term-rental collateral tops out around 70% loan-to-value on a cash-out, while a standard long-term rental reaches about 75%.
- Typical guidance includes a 640+ credit score, about 12 months of hosting history and rental coverage of at least 1.00 on a refinance, subject to lender guidelines.
- The rent test often binds before the value cap, so owing little does not mean unlimited cash.
- A refinance keeps you in the property with a larger payment, while a sale frees the full equity, less selling costs and taxes.
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.
How Is the Cash Actually Calculated?
The cash is the smaller of two loan sizes, minus what you still owe and minus the closing costs. One loan size comes from value. The other comes from rent. Whichever is lower becomes your loan, and everything after that is subtraction.
Here is the sequence across the wholesale network of DSCR lenders Lendmire places files with:
1. An appraisal sets the property’s value.
2. The lender documents the short-term rental income.
3. The lender may adjust that income before using it.
4. The lender runs the coverage test, which divides monthly rent by the full monthly housing obligation.
5. The loan is sized at the lower of the value-based amount and the rent-based amount.
6. The payoff costs and any holdbacks come off the top.
Run it on an index. Say the property appraises at 100 units and the program caps short-term-rental cash-outs at 70%. The maximum loan is 70 units. If you owe 40, gross cash is 30. Closing costs, which usually run a few percent of the loan, come out of that 30. Prepaid items and any prepayment charge on the old loan come out too.
That is the ceiling. It is not a promise. A lender may size the loan lower for credit, reserves or income reasons.
Which Limit Binds First: Value or Rent?
Usually the rent test, once the loan gets large. A bigger loan means a bigger payment. The coverage ratio is rent divided by that payment, so each extra dollar borrowed thins the ratio. At some point the ratio hits the program floor before the value cap does.
Say you own a property outright. Your equity is huge, but the loan can only be as large as the rent can carry. Owing little does not mean unlimited cash. The value cap and the rent test both set the ceiling.
On a short-term-rental refinance, the coverage floor in the network is 1.00 on most files. Purchases run a little higher, at 1.10. Stronger ratios open better pricing and leverage. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted, so a thin file has a path. That path usually means a smaller loan and less cash.
One caution on the ratio itself. Clearing 1.00 means rent covers principal, interest, taxes, insurance and HOA dues. It does not mean the property cash-flows. Repairs, vacancy, management, utilities and capital spending sit outside the calculation. Plan the redeployed cash around real operating numbers, not just the ratio.
How Does Short-Term Rental Income Get Counted?
A short-term rental has no lease, so the lender documents income another way. The common options are the appraiser’s short-term-rental analysis, a 12-month property-management statement, and 12 months of bank statements showing platform deposits. On a seasoned property, actual trailing history is the strongest evidence.
One detail matters for your number:
- Haircuts. Some programs count only part of gross revenue before it enters the ratio. A smaller counted income means a smaller rent-based 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. If nightly rentals are not allowed, modeled income is worthless to the lender.
What Shrinks the Check?
- Your existing payoff. The old loan is paid off at closing. A cheap old loan disappears, and any prepayment penalty on it comes out of your cash.
- Closing costs. These are taken from the proceeds at the table, so you receive the net.
- A low appraisal. The value cap multiplies by whatever the appraiser says, not by what you hoped.
- An income haircut. Less counted rent means a smaller rent-based loan.
- Reserves. Programs commonly want around 6 months of PITIA, which is principal, interest, taxes, insurance and association dues. Requirements vary by lender, leverage and loan size, and some programs let proceeds count toward reserves while others do not.
An illustrative sensitivity run, using index numbers, with the same payoff of 40:
| Scenario | Value | Loan | Gross cash |
|---|---|---|---|
| Base case at 70% cap | 100 | 70 | 30 |
| Appraisal comes in 10% low | 90 | 63 | 23 |
| Rent test binds at 60 | 100 | 60 | 20 |
A 10% miss on value cut gross cash from 30 to 23, a drop of roughly a quarter. A tight rent test cut it from 30 to 20, which is a third. Costs come off both.
Who Qualifies?
The network’s short-term-rental cash-out guidance runs along these lines, though every file is reviewed individually:
- Loan-to-value up to about 70% on a cash-out of short-term-rental collateral.
- A credit score of 640 or higher.
- About 12 months of host or landlord experience.
- Coverage of at least 1.00 on a refinance.
- Loan sizes up to $3,000,000 on standard programs.
- About 6 months of ownership, the common seasoning expectation. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Manufactured homes, log homes, and barndominiums are not offered in these programs. A short-term rental in one of those categories needs a different solution than a DSCR cash-out.
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide covers the full qualification picture.
Refinance or Sell: What Does Each Give You?
A refinance keeps the asset and releases a capped slice of the equity. A sale releases all of it, less selling costs and taxes. Neither is simply better. They are different products.
| Factor | Cash-Out Refinance | Sale |
|---|---|---|
| Equity released | Capped slice of value | Full equity, less costs |
| Ownership | You keep the property | Ends |
| Ongoing income | Continues, with a bigger payment | Stops |
| Debt | Rises | Paid off |
| Selling costs | None | Commission and seller costs |
| Tax event | Borrowed cash is not a sale | Sale gain can be taxed |
A sale also triggers any gain. Depreciation you claimed on a rental lowers your basis, and the IRS explains that depreciation-related gain can be taxed differently from other gain. A 1031 exchange can defer that, and the Lineage 1031 explainer notes it requires a qualified intermediary and avoiding boot, the cash or other value you take out of the exchange. The IRS statutory deadlines are 45 days to identify replacement property and 180 days to receive it. Tax treatment varies; consult a qualified professional.
The bigger question is what you can do with the cash. Proceeds from a refinance can fund the next purchase while the original property keeps producing. But the new, larger payment reduces monthly cash flow. Compare the return on the redeployed cash against that drag. If the return is thin, taking less than the maximum is often the smarter call.
Common Misreadings
“I can pull out 80%, like on a home.” Owner-occupied cash-out rules do not carry over. Short-term-rental collateral caps near 70%, and standard long-term rentals near 75%.
“Nightly rate times 30 is my rent.” Qualifying income is documented history or a modeled projection, usually adjusted before use.
“A refinance and a sale deliver similar net cash.” A sale releases more equity. A refinance releases less, but it is borrowed money and you keep the property.
“Higher down payments fix everything.” More equity lowers the payment and can lift the coverage ratio. It never erases leverage caps, credit floors, reserve rules or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Key Terms Defined
Cash-out refinance: a new loan larger than your current balance, with the difference paid to you as cash.
Loan-to-value (LTV): the loan amount divided by the property’s appraised value.
DSCR: debt service coverage ratio, meaning qualifying monthly rent divided by the full monthly housing payment.
PITIA: principal, interest, taxes, insurance and association dues, the full monthly obligation used in the ratio.
Seasoning: the waiting period a lender expects between buying a property and refinancing it.
Prepayment penalty: a fee some loans charge if you pay them off early, which comes out of your proceeds.
Frequently Asked Questions
Can I cash out a short-term rental I just bought?
Usually not right away. Programs expect seasoning, commonly about 6 months, and about 12 months of hosting history. Without operating history, the income has nothing to stand on. Check the specific program before planning around the cash.
Will the lender use my Airbnb income or long-term rent?
It depends on the documentation. Platform statements, a management statement or an appraiser’s analysis can support short-term income. If those are unavailable or local rules block nightly rentals, the lender falls back to long-term rent, which may shrink the loan.
Is cash from a refinance taxable like sale proceeds?
Borrowed cash is not a sale, so it does not trigger a sale gain. Interest, costs and how the funds are used can still matter.
What if my rent does not cover the larger payment at 1.00?
Then the rent test caps the loan below the value cap. Select lenders in the network offer paths below 1.00 coverage, with leverage and terms adjusted, which usually means less cash.
When does selling beat refinancing?
When you want the full equity, when the larger payment would turn the property into a drag, or when you plan a 1031 exchange into something better. Refinancing wins when the property keeps earning and you can put the cash to work.
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. As a mortgage broker, Lendmire arranges these loans through select lenders in its wholesale network, across 41 markets including Washington, D.C. Programs change, and every file is reviewed individually, so nothing here is a commitment to lend. Call 828-256-2183 or request a quote.
A sound way to decide is to run the sale and the refinance side by side, then keep whichever leaves you with the stronger position a year from now.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
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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References
1. IRS FAQ: Property (basis, sale of home, etc.)
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 Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance on a Home They Own? · 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
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.