The Quick Read: Usually your check equals the smaller of two loan sizes, minus what you owe the family lender, minus closing costs and any prepayment charge on the old note, where one size comes from appraised value (capped at up to 70% on short-term-rental cash-outs) and the other from the rent the property supports at the required coverage ratio.
- Recorded family lien: Title pays it off from the new loan, and what remains is your cash.
- Unsecured family loan: Nothing is recorded, so title has nothing to pay off. Repaying the family member is your choice.
- Payoff-only refinance: It returns no cash. Cash above the payoff is a cash-out, and the seasoning clock (about 6 months across most of the network) applies.
- Thin equity: A large family note can use up most of the leverage cap before you see a dollar.
What Is the Formula for Net Cash?
Net cash is the new loan amount, minus the payoff on the family note, minus closing costs, minus any prepayment charge on the old note. The leverage cap limits the loan. It does not set your cash.
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.
A 70% cap sounds like 70% of the property’s value in your pocket. It is the ceiling on the new loan, and everything you already owe comes out of that ceiling first.
Across the wholesale network Lendmire places files with, short-term-rental collateral generally tops out at up to 70% LTV on a cash-out. LTV, or loan-to-value, is the loan balance divided by the appraised value. Treat these as typical ranges from select lenders, subject to lender guidelines and not a commitment to lend.
Here is the waterfall, shown as shares of appraised value so you can scale it to any property:
| Step | Illustrative share of value |
|---|---|
| New loan at the 70% cap | 70 points |
| Family-note payoff | minus 50 points |
| Left before costs | 20 points |
| Closing costs and old-loan fees | minus a few points |
| Your check | what remains |
Those inputs are modeled assumptions, not market data. The payoff equals half the value in this picture. If the rent supports a smaller loan than the cap allows, subtract from that smaller loan instead. The Lendmire calculator can turn percentages into an illustrative dollar estimate for your own numbers.
Which Loan Size Controls: Value or Rent?
The smaller of the value-based loan and the income-based loan controls, and short-term rentals add a wrinkle because the income itself has to be documented.
DSCR stands for debt service coverage ratio. It compares the property’s rent to its full monthly obligation: principal, interest, taxes, insurance, and any HOA dues, together called PITIA. A cash-out raises the balance, so it raises the obligation, and the ratio falls as you pull more cash. For short-term rentals, the refinance floor on most programs we see is 1.00, meaning rent covers the full payment.
Lenders count short-term income in different ways. Some use projections from a third-party data vendor. Some use platform history. Some use whichever is lower. Programs typically expect about 12 months of hosting experience and a credit score around 640 or higher, subject to lender guidelines. A program that haircuts projected income produces a smaller income-based loan, and that shrinks your cash even when the property has plenty of equity.
Clearing 1.00 also does not mean the property cash flows. DSCR looks at rent against PITIA only. Repairs, vacancy, management, utilities, and capital spending sit outside 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.
How Does the Type of Family Loan Change the Check?
The answer depends on whether the family loan is recorded against the property. A recorded lien must be paid off. An unrecorded loan does not have to be.
| Situation | What happens at closing | Effect on cash |
|---|---|---|
| Recorded lien (family note on the title) | Title wires the payoff and releases the lien | Check shrinks by the full payoff |
| Unsecured family loan | Nothing for title to pay | No automatic reduction |
| Seller-financed or family-sale purchase | Recorded note is paid off | Check shrinks by the payoff |
A recorded family lien. This is the cleanest case. The new first-lien loan pays off the old note, title obtains a payoff letter, and the old lien is released. Whatever is left after costs goes to you. If the payoff is close to the leverage cap, the file works as a payoff-only refinance with little or no cash back.
An unsecured family loan. Say a parent lent you money for the down payment or a rehab, with a signed note but no lien. Title has nothing to wire, so the loan does not come out of the closing statement. Repaying it from your proceeds is your decision after the funds reach you. Confirm how your loan officer wants that documented.
A seller-financed or family-sale purchase. If the family member sold you the property and carried a recorded note, the situation matches the first row. The note gets paid off at closing, and your cash is what remains.
What if the Payoff Exceeds the Cap?
If the payoff exceeds the leverage cap, you bring cash to closing, because the new loan cannot cover the old note. If the appraisal comes in short of payoff plus costs, the options are a smaller payoff, cash from you, or waiting until value or the note balance changes.
Run this check before you apply. Take your best estimate of appraised value, multiply by the cap, and compare it to your payoff plus closing costs. If the payoff alone eats most of the cap, a cash-out is the wrong tool and a payoff-only refinance may be the real goal.
Does Seasoning Apply When a Family Member Financed the Purchase?
Yes. Most programs in the network expect about 6 months of ownership before a cash-out, measured from the date the deed was recorded, though lenders differ on the details.
A payoff-only refinance is treated more gently. The moment you take cash above the payoff, it becomes a cash-out and the seasoning clock applies.
Some investors ask about delayed financing, a narrow exception for buyers who paid all cash. It waives seasoning only. It does not waive coverage, reserves, the appraisal, or leverage limits. A purchase financed with a recorded family or seller note is generally not an all-cash purchase, so the exception usually does not fit.
As a contrast, the agency world draws a similar line. Fannie Mae’s Selling Guide limits the loan under its delayed-financing exception to the documented initial investment plus financed costs. Its FAQ adds that the original purchase must have been arm’s-length, meaning no relationship between buyer and seller. DSCR loans are non-agency, so none of this governs them. It shows why lenders look hard at family-funded purchases.
What Documents Does a Family Payoff Require?
Expect a short list. Plan for each item before you apply.
| Document | Who provides it | Why it matters |
|---|---|---|
| Signed promissory note | You and the family lender | Shows the debt and its terms |
| Payoff letter | Family lender, via title | Fixes the exact amount owed |
| Lien release | Family lender, recorded by title | Clears the title |
| Bank transfer history | You | Shows where the funds came from |
The old note’s prepayment or lock-out clause is a common failure point. If the holder will not accept early payoff, the refinance cannot close until the clause expires or is waived. A prepayment fee on the old note comes straight out of your check. Even a friendly family note deserves a read for exit terms.
A gift is different from a loan. If the family money was truly a gift, there is no repayment and no payoff line. If it was called a gift but carries an expectation of repayment, do not paper it as a gift. Mislabeling creates problems at the lender’s review.
Tax treatment can depend on how the funds are used and how the property is held, including how the federal rules on below-market family loans apply; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
What Shrinks Your Check Besides the Payoff?
Four things pull the number down, and you control some of them.
Closing costs. They vary by lender and state. They come out of proceeds, so a thin pull can be mostly consumed by them.
The old note’s exit terms. A prepayment charge reduces the check. The new loan can also carry its own prepayment window, which normally starts at the new closing date.
Income documentation. A conservative income basis shrinks the rent-based loan size. Strong platform history over 12 months generally gives the lender more to work with.
Reserves. They vary by lender, leverage, loan size, and transaction type, and commonly sit around 6 months of PITIA. Whether proceeds count toward reserves differs by lender, so ask before assuming.
Credit also matters. Short-term-rental programs typically look for a 640 score or better, and stronger scores open better leverage and terms. Loan sizes run roughly up to $3,000,000 on standard programs, subject to lender guidelines. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, however strong the rental income looks.
Is a Thin Pull Worth It?
Often it is not, and the numbers show why. A cash-out makes sense when the check is large enough to justify new costs, a new balance, and a fresh prepayment window.
Picture two investors. The first has a family note equal to about half of value and a 70% cap. That leaves roughly 20 points of value before costs, and the file may work. The second has a note near 65% of value. About five points remain before costs, and costs can erase most of that. The second investor is better off asking whether a payoff-only refinance, with no cash back, replaces informal family terms with institutional ones at a sensible price.
Replacing a family note also changes the relationship. Informal notes often have flexible terms. A new first-lien loan has fixed terms, a coverage test every month, and a payoff schedule that does not bend. The 30-year fixed is the standard structure, and extended terms, interest-only periods, and adjustable structures are available through select lenders in the network for investors who want them.
If you want the full picture of how DSCR files are built, the complete DSCR loans guide covers it.
Key Terms Defined
Cash-out refinance: a new loan that pays off the old debt and returns the extra as cash to you.
Net proceeds: the cash you actually receive after the payoff, closing costs, and any old-loan charges.
Payoff letter: a lender’s written statement of the exact amount needed to clear a debt on a given day.
Lien release: the recorded document showing a debt secured on the property has been paid and the claim removed.
Seasoning: the waiting period a lender wants between buying a property and refinancing it with cash back.
Junior lien: a recorded debt that ranks behind the first mortgage, such as a family note secured on the property.
Frequently Asked Questions
Does paying off a family loan count as cash-out even if I receive no cash?
No. A refinance that only pays off the family note and closing costs, with no cash to you, is generally treated as a payoff-only refinance. Once any cash above the payoff reaches you, it becomes a cash-out and the seasoning expectation of about 6 months applies on most programs.
Can I leave the family loan in place and cash out anyway?
It depends on the lender. A retained second note adds to your combined obligations, and the coverage test has to hold with both payments in the picture. Many lenders want a recorded family lien paid off or subordinated, so confirm the structure before you apply.
Does an unrecorded family loan lower my cash-out?
Not automatically. With no lien, title has nothing to pay off at closing, so the loan does not come out of the closing statement. Repaying the family member afterward is your decision.
Will the family loan affect whether I qualify?
It can, through leverage and coverage. A large payoff leaves less room under the leverage cap, and a larger new balance lowers the coverage ratio. Short-term-rental programs also typically look for about 12 months of hosting history and a score of 640 or higher, subject to lender guidelines.
What if my family member refuses early payoff?
Then the refinance cannot close on that timeline unless the clause is waived or expires. Read the note’s prepayment and lock-out language before you apply, and get the holder’s written agreement to a payoff letter.
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. Call 828-256-2183 or request a quote.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that arranges investor loans through select lenders in its wholesale network, with DSCR financing in 40 states plus Washington, D.C. — 41 markets total. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. Program details change, and every file is reviewed individually. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
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References
1. Fannie Mae Selling Guide, B2-1.3-03: Cash-Out Refinance Transactions
2. Fannie Mae Top Trending Selling FAQs
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: Best Short-Term Rental Cash-Out Refinance Program in Retirement on a Fixed Income · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance Right After Rehab? · Short-Term Rental Cash-Out Refinance vs Long-Term Rental Loan Without an Escrow Account
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.