The Quick Read: Few banks write this loan directly, because most depository lenders underwrite a short-term rental on the owner’s personal income, while the lenders that qualify primarily on property-level rental income covering the payment, subject to lender guidelines, are non-bank DSCR lenders reached through a broker. A paid-off property is not a shortcut. The whole new loan counts as cash-out, so the payment is larger than a smaller refinance would create, and the coverage test runs against that larger payment. Program details vary by lender and every file is reviewed individually.
- Short-term rental cash-out typically tops out around 70% loan-to-value across Lendmire’s wholesale network.
- Expect a credit score of about 640 or higher and roughly 12 months of hosting history.
- The minimum coverage ratio on a short-term rental refinance is 1.00 on the programs in Lendmire’s network. That is a floor for those programs, not a universal standard.
- The income method the lender accepts often matters more than the headline booking revenue.
- 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.
Which Banks Offer an STR Cash-Out Refinance on a Paid-Off Property?
No public list of banks exists, and none would stay accurate. Every lender sets its own rules for nightly-rental income, and no agency or regulator sets one standard. What can be described accurately is the three lanes where this loan gets written, and what each lane looks at first.
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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.
A conventional bank or credit union reviews the borrower’s personal income and debt-to-income ratio. Nightly bookings are hard to fit into that model, so this lane is the hardest for a short-term rental. A community or regional bank holding loans in its own portfolio has more flexibility, but the result is usually relationship-driven and inconsistent from one branch to the next. The third lane is the non-QM DSCR lender, which drives lender review mainly on the property’s income. Investors usually reach these lenders through a broker.
Lendmire is a mortgage broker that arranges financing through select lenders in its wholesale network, across 41 markets, including Washington, D.C. It is not a lender and does not approve loans. The brokerage does not rank or name lenders. The right program depends on the property, the credit profile, how much leverage is needed, and how the income can be documented.
| Factor | Bank or credit union | Portfolio bank | DSCR via broker |
|---|---|---|---|
| Income basis | Personal income, DTI | Case by case | Property income |
| STR income | Hard to use | Varies by bank | Common path |
| Flexibility | Low | Moderate | Program-driven |
| Personal DTI review | Yes | Often | Generally not |
What Is Underwriting Actually Doing, Step by Step?
Underwriting a paid-off short-term rental follows a fixed sequence, and each step can stop the file. Knowing the order lets an investor fix problems before they cost an appraisal fee.
Step 1: Classify the property. The lender decides whether the file is a long-term rental, a short-term rental, or something in between. Short-term rentals run through a separate program path. Not every DSCR lender has one, which is one reason a broker that sees many programs matters.
Step 2: Establish the income. Three methods are common. The first is trailing booking history, meaning platform statements from Airbnb or Vrbo, or sometimes a property manager’s report. The second is a projection of future income, which some programs accept when hosting history is thin. The third is long-term market rent from the appraiser’s rent schedule, which serves as the conservative fallback. Many programs apply a haircut to short-term income before running the numbers, because nightly revenue is seasonal and volatile.
Step 3: Order the appraisal. The appraisal sets value, and value sets maximum leverage. It also produces a rent schedule. Form 1007 covers a one-unit property and Form 1025 covers two to four units.
Step 4: Run the coverage ratio. The formula is qualifying income divided by the full new monthly obligation: principal, interest, taxes, insurance, and HOA dues where they apply. On a short-term rental refinance the coverage floor is 1.00 on the programs Lendmire’s network offers. Select lenders can go lower, with leverage and terms adjusted, as the structures section below explains.
Step 5: Set the loan amount. The loan is the lesser of two numbers: the leverage cap applied to appraised value, and the amount the rental income can support. For short-term rental collateral on a cash-out, the cap is up to 70% of value on the strongest files.
Step 6: Review entity, credit, reserves, and title. Reserves vary by lender, leverage, loan size, and transaction type, and commonly run around 6 months of the full monthly obligation. Larger loans can step up from there. If the property sits in an LLC, the lender will want the operating documents, subject to lender program eligibility. Cash-out also carries a seasoning expectation, commonly about 6 months, measured from when title was recorded.
Step 7: Fund. A free-and-clear owner has no old lien to pay off, so the proceeds go to the borrower after the new first lien is recorded.
How Do Appraisers and Lenders Treat Nightly Income?
Fannie Mae’s appraiser update states that Form 1007 covers the one-unit investment property case. It also says the form was not designed for appraising single-family short-term rentals and cannot be used to estimate a nightly fee. It asks for monthly market rent based on comparable leased properties. This is appraisal-form guidance only. DSCR loans are not agency products, and the form names are the only part that carries over.
McKissock explains that business income is outside the scope of the 1007 and that determining income belongs to the lender. Class Valuation reports that appraisers experienced with these properties add a narrative addendum titled Short-Term Rental Projected Income Analysis. HousingWire argues that forcing short-term income onto the 1007 can distort coverage and produce artificially low ratios, including in non-QM channels.
The practical effect is simple. A property can fail coverage when the lender uses the monthly market rent and pass when the lender uses twelve months of booking history. Lenders in the network differ on which method they accept, so confirming the method before ordering the appraisal saves money. The appraisal also does not credit the business. Furniture and operating income sit outside the real-property value, so a strong booking stream does not raise the appraised value on its own.
Why Free and Clear Is Not a Free Pass
A paid-off property feels like the easiest case. It is easy in one way: there is no existing lien to retire, and equity is not the constraint. Coverage is the constraint.
With no old loan, every dollar borrowed is new cash-out debt. The coverage test runs against the full new obligation. An owner who borrows to the 70% cap on a paid-off property takes on the largest payment that property can carry, and that payment is what the rental income must cover.
Run a modeled example with assumed inputs, not market data. Say a paid-off short-term rental appraises at a fixed value, and at 70% loan-to-value the coverage ratio comes out at 0.94. That is below the 1.00 floor on a standard short-term refinance. If the borrower requests 60% instead, the payment shrinks and coverage rises. It improves a little less than proportionally, because taxes and insurance do not shrink with the loan. A ratio near 1.05 is a reasonable expectation in this model. The lever is the loan amount, and the investor controls it.
The lesson holds across the network. A larger down payment, or here a smaller loan, lowers the payment and can lift coverage. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
What Structures and Variations Exist?
Most files use the 30-year fixed structure as the base. Extended terms, such as a 40-year schedule, and interest-only periods are available through select lenders in the network, and adjustable structures exist for investors who want them. Loan sizes run up to $3,000,000 on standard programs. Above $2,500,000, the network generally holds to 30-year fixed structures.
Investors reach for sub-1.00 coverage when the property has a real appreciation story, or when a thin first-year booking history understates what the property will earn. It is a structural choice with a cost. Lower leverage and stronger credit are part of the trade. An investor who needs sub-1.00 coverage at every property under review is usually looking at the wrong property, not the wrong loan.
A no-ratio structure also exists, but only through select lenders, and generally for borrowers who already own a primary residence. It is not a mainstream option for a short-term rental refinance.
Programs also differ on hosting history. Short-term rental programs usually expect about 12 months of host experience, and refinances tend to be stricter on that point than purchases. A newer rental may need a purchase-style projection path, or a long-term-rent basis until the history builds.
Where the General Rule Breaks
- Little or no hosting history. Some programs accept a projection. Others want about 12 months of platform statements before they will consider a refinance.
- Two-to-four-unit properties. Form 1025 applies instead of the 1007, and whether short-term income counts varies by program.
- Local rules. City, county, and HOA restrictions can disqualify short-term income entirely. If nightly rentals are not legally allowed, a projection carries no weight, and the lender falls back on monthly rent.
- Property type. Manufactured homes, whether single- or double-wide, log homes, and barndominiums are not offered in the network’s DSCR programs.
- Thin property coverage with strong deposits. A bank-statement loan may fit better. It is a different program with different leverage, and it is reviewed on documented income under the applicable program, subject to lender guidelines.
- Agency contrast. Conventional financing under agency rules treats short-term income differently, and it limits how many financed properties one borrower can hold. When that cap is reached, DSCR becomes the practical route for an investor still scaling.
What the Decision Looks Like in Practice
Three investor profiles show how the choice usually splits.
An investor with one paid-off short-term rental, strong personal income, and a clean tax return may find a bank or credit union workable. The cost can be lower, and a conventional file avoids the extra friction of a non-QM product. That route breaks down if the bank will not count the nightly income or if the investor already holds several financed properties.
An investor with a small portfolio held in LLCs, or with tax returns that show heavy depreciation and expenses, usually finds the property-income route cleaner. A DSCR loan generally does not count in personal debt-to-income review, which matters once conventional slots run out. The trade is typically lower leverage on short-term collateral, and a prepayment structure that varies by program.
An investor who just finished renovating and has only a few months of bookings should wait or use a different basis. Rushing a refinance with thin history means a lower income figure or an outright decline.
One more distinction belongs here. Clearing 1.00 coverage is not the same as positive cash flow. The ratio compares rent to the full monthly obligation and nothing else. Repairs, vacancy, management fees, utilities, and capital expenses all sit outside it. Short-term rentals add seasonality and rule risk, so cash reserves matter more than the ratio suggests.
The decision also depends on what the proceeds will do. Pulling equity to buy another rental where coverage still works is easy to defend. Pulling equity to cover operating shortfalls on the same rental is a warning sign.
Key Terms Defined
Free and clear: A property with no mortgage or lien against it, so the owner holds all the equity.
Cash-out refinance: A new loan that pays the borrower in cash, and on a paid-off property the entire loan amount is cash-out.
DSCR (debt service coverage ratio): Qualifying rental income divided by the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues.
Seasoning: The time a borrower has held title before a lender will allow a cash-out, commonly about 6 months in the network.
Hosting history: The record of nightly bookings, usually twelve months of platform statements, that proves a short-term rental’s income.
Form 1007 / Form 1025: The appraisal rent schedules for one-unit and two-to-four-unit properties.
Frequently Asked Questions
Do banks do short-term rental cash-out refinances?
Some do, but few write them routinely. Most depository lenders qualify the borrower on personal income, which makes nightly bookings hard to use. A portfolio bank may flex on this, and a DSCR lender reached through a broker handles it as a standard product line. The best fit depends on the property and the borrower.
Does a paid-off rental still count as cash-out?
Yes. With no existing loan, the whole new balance is cash-out, which sets leverage and seasoning rules. On a short-term rental cash-out, the network typically caps leverage at up to 70% of value, subject to lender guidelines.
What credit score and hosting history do these programs expect?
Short-term rental programs typically look for a score of about 640 or higher and roughly 12 months of host experience. Stronger credit can improve leverage and terms. Reserves vary by lender, loan size, and leverage, and commonly run around 6 months of the full monthly obligation.
Will the appraiser use my Airbnb revenue?
Not on the standard rent schedule. The appraiser reports market rent from monthly leases, and the lender decides how nightly income is counted. Some appraisers add a separate narrative analysis for short-term income.
Does a 1.00 coverage ratio mean the property cash-flows?
No. The ratio compares rent to the full monthly obligation only. It leaves out repairs, vacancy, management, utilities, and capital expenses, so a property can clear 1.00 and still lose money after operating costs.
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. Reach the team at 828-256-2183, or start with the brokerage’s complete DSCR loans guide for the full picture. Qualification is subject to lender guidelines and credit approval, and this article is not 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
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. Fannie Mae Appraiser Update
2. McKissock
4. HousingWire: Short-Term Rentals Are Breaking the Appraisal Playbook
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 Requirements Before Buying a Second Home or Rental · Top Short-Term Rental Cash-Out Refinance Providers on a Free-and-Clear Rental · Short-Term Rental Cash-Out Refinance Requirements for an Out-of-State Investor
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.