The Quick Read: A vacation home you use part of the year can be cash-out refinanced through five main routes, each defined by how the lender counts the rent: documented short-term-rental income, the appraiser’s market rent schedule, a program that picks the higher or lower of the two, a standard long-term-rental loan, or an adjusted structure through select lenders. Which one fits depends on your hosting history, your coverage ratio, and your equity.
- On a cash-out refinance of a short-term rental, leverage tops out around 70% LTV on the network’s programs, with a 640 credit score and about 12 months of hosting history expected.
- Coverage on these files is at least 1.00, meaning the counted rent covers the full monthly obligation.
- Standard long-term rentals reach about 75% LTV on a cash-out refinance, so the loan type you pick changes how much equity you can reach.
- The income method (documented history, appraiser’s rent schedule, or a blend) can change the result on the same property.
- Everything is subject to lender guidelines, credit approval, and property review. None of this is a commitment to lend.
Why a Part-Year Vacation Rental Is Its Own Category
You own a beach cottage or a mountain cabin. You stay a few weeks a year, and guests fill most of the rest. A lender has to decide what that property is.
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That decision shapes everything that follows. A true second home is financed on your personal income. An investment property is financed on what the property earns. Your cottage sits in the gray zone between the two, and the loan you can get depends on which side the lender puts it on.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. In practice, a property that is run as a rental, with guests booked and income documented, fits a DSCR program. How much personal use a given program tolerates varies by lender, so ask before you apply.
Part-year personal use does not automatically make a house a second home. Lenders look at how the property is actually used and operated. The tax system has its own personal-use day count, published by the IRS in Publication 527, and it was built for a different purpose than lender occupancy rules. Don’t assume one test answers the other.
Key Terms Defined
Cash-out refinance: a new, larger loan that pays off your existing mortgage and hands you the difference in cash.
DSCR (debt service coverage ratio): the property’s monthly rent divided by its monthly PITIA. A result of 1.00 means rent exactly covers the payment.
PITIA: principal, interest, taxes, insurance, and any association dues. It is the full monthly housing obligation on the loan.
LTV (loan-to-value): the loan balance as a percentage of the appraised value. Lower LTV means more equity stays in the property.
Seasoning: the waiting period a lender wants between buying a property and refinancing it.
Form 1007: the appraiser’s market rent schedule for a single-family property. Form 1025 does the same job for a two-to-four-unit property.
Hosting history: the record of past guest bookings, usually shown through platform statements or bank deposits.
How Underwriting Actually Treats the File
Underwriting here follows a set order. Knowing the order tells you where a file can stall.
Step 1: Classify the property. The lender decides whether it is an investment rental. If personal use is heavy, the property may not fit a DSCR program at all, and you would look at income-based financing instead.
Step 2: Choose the income method. The lender counts rent one of three ways: the appraiser’s rent schedule, your documented short-term-rental history, or a data-service projection. Programs differ on which one drives the number. Some use one method only. Some take the higher of two. Some take the lower. Ask this before you pay for an appraisal.
Step 3: Adjust for operating costs. Many programs reduce gross short-term-rental income by an expense factor before running the ratio. Nightly rentals cost more to operate than leased ones, and lenders know it.
Step 4: Run the coverage test. Counted rent divided by PITIA gives the DSCR. On short-term-rental cash-outs, 1.00 is the floor. Stronger ratios open better pricing and leverage.
Step 5: Run the equity test. Appraised value times the leverage cap, minus your payoff, is the room you have. On a cash-out refinance of a short-term rental, that cap is up to 70% LTV. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Step 6: Take the lesser of the two. The cash you can pull is limited by whichever test is tighter. Strong rent with thin equity gets you little cash. Deep equity with weak rent gets you little too.
One more point, and it trips up new investors. DSCR compares rent to PITIA only. Clearing 1.00 does not mean the property produces positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
The Five Options Side by Side
| Option | Income counted | Leverage on cash-out | Best for |
|---|---|---|---|
| 1. Documented STR income | Hosting history | Up to 70% LTV | Strong booking record |
| 2. Appraiser’s rent schedule | Form 1007 market rent | Up to 70% LTV | Thin or seasonal history |
| 3. Higher-of or lower-of program | Blend of both methods | Program-specific | Gap between the two figures |
| 4. Standard long-term rental loan | Lease or market rent | About 75% LTV | Renting on leases |
| 5. Adjusted structure | Varies by lender | Adjusted by lender | Tight coverage |
Leverage figures are typical ranges from select lenders in Lendmire’s wholesale network, subject to lender guidelines.
Option 1: Cash-Out on Documented Short-Term-Rental Income
This is the cleanest route for an owner with a real booking record. The lender counts what the property has actually earned over about 12 months of hosting history, usually shown through platform statements or bank deposits. After the expense factor, that income goes into the coverage test.
The upside is obvious. A well-run vacation rental often earns far more than a lease would, so the ratio looks better. The tradeoff is the leverage cap: on a cash-out refinance of a short-term rental, the ceiling is up to 70% LTV, with a 640 credit score and a 1.00 coverage floor.
Watch the months you personally occupied the house. Blocked-off weeks produce no income, and the lender sees that in the statements.
Option 2: Cash-Out on the Appraiser’s Rent Schedule
Every DSCR appraisal includes a rent schedule. The appraiser estimates what the property would rent for on a long-term basis. Some programs use that figure to qualify the loan, even on a short-term rental.
This route fits a property with thin or seasonal booking history. It can also fit a house you only recently began renting. The catch: the appraiser’s number is often well below what a busy vacation rental really earns. In a resort town that gap can be wide, and it can push the ratio under the floor.
So Option 2 is steadier, but it usually counts less income than Option 1. Run both numbers before you choose.
Option 3: A Program With a Higher-Of or Lower-Of Rule
Some programs don’t pick a method for you. They take the higher of the appraiser’s figure and your documented income. Others take the lower, as a conservative check.
If your two numbers sit far apart, this choice can decide the whole deal. The higher-of rule rewards a strong booking record. The lower-of rule drags you toward the appraisal.
Option 4: A Standard Long-Term-Rental Cash-Out
Sometimes the better move is to drop the short-term label. If you rent the property on leases for part of the year, or your booking history is too short for a short-term program, a standard rental cash-out may fit. Across most of the network, a cash-out refinance on a standard long-term rental tops out around 75% LTV, while a short-term-rental cash-out stays at 70%. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
That five-point difference in leverage is real money on a larger property. Credit expectations on the short-term side start at a 640 score. About 6 months of seasoning is the common expectation on cash-out files.
The tradeoff is income. A standard loan counts lease or market rent, not peak-season bookings. Lendmire’s piece Short-Term Rental Cash-Out Refinance vs. Long-Term Rental Loan on a Rented Vacation Home walks through that choice in detail.
Option 5: An Adjusted Structure Through Select Lenders
When coverage is tight, the structure can change instead of the property. Here the program is the same kind of DSCR cash-out, built differently. Several variations exist:
- Interest-only periods. These lower the early monthly obligation and can lift the ratio. They are available through select lenders in the network.
- Extended terms. A 40-year amortization stretches the payment. It is also available through select lenders.
- Adjustable structures. ARM options exist for investors who want them, though the 30-year fixed remains the spine of the network.
- Coverage below 1.00. Most programs start at a 1.00 coverage floor. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
Each variation has a cost. Lower leverage, tighter terms, or different pricing usually come with the extra flexibility. Loan sizes run up to $3,000,000 on standard programs, and above $2,500,000 the network generally holds to 30-year fixed structures.
Where the General Rule Breaks
The appraisal and the bookings disagree. An appraisal can come in strong on value but light on rent. Some programs use only the rent schedule. Others allow a documented variance. Channels differ, which is why the same house can get different answers from different lenders.
History is short. About 12 months of hosting experience is the usual expectation for short-term-rental programs. If you have less, Option 2 or Option 4 may carry the file. Some programs accept projected income to supplement a short record. Treat that as a question to ask, not something to count on.
Local rules. 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. A house that can’t legally host guests can’t count guest income.
Entity title. Loans to LLC-titled borrowers are available subject to lender program eligibility, which can matter if you hold the cottage in an entity.
Property type. Manufactured homes, log homes, and barndominiums are not offered through these programs. A rustic mountain cabin built as a log home would fall outside them.
Reserves. Reserves vary by lender, leverage, loan size, and transaction type. About 6 months of PITIA is common, and loans above $1,500,000 typically step up to about 9 months. Owners of seasonal rentals should check this early, because cash reserves are a separate requirement from the equity you want to pull out.
Tax treatment. 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.
A Worked Example in Ratios
Run the numbers on a hypothetical lakefront cottage, using modeled assumptions rather than market data. Say the existing mortgage equals 55% of the appraised value. On a cash-out refinance of a short-term rental, the cap is up to 70% LTV. The gap is about 15% of value, before closing costs and fees. That is your maximum room on the equity side. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Now the coverage side. Suppose documented hosting income, after the expense factor, clears the new obligation at roughly 1.15x. That passes the 1.00 floor with some cushion. The equity test sets the limit here.
Change one input. Assume the appraiser’s rent schedule is much lower and the program uses only that figure. Coverage might land near 0.90x. Under a program that starts at 1.00, that file stalls. Three paths could follow: a program that accepts documented hosting income, a select-lender path below 1.00 with leverage and terms adjusted, or a smaller loan. Each is subject to lender guidelines.
A smaller loan balance lowers the payment and can lift the 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. For a calculator-based look at these inputs, the site’s illustrative estimator can help, though it is only an estimate.
Which Option Fits You?
This one is a genuine judgment call, and it comes down to a few questions.
- Busy calendar, 12+ months of statements: Option 1 usually counts the most income.
- Seasonal bookings or a recent switch to renting: Option 2 or Option 4 may carry the file.
- Big gap between appraised rent and real income: ask for Option 3 programs.
- Renting on leases: Option 4 fits best, since it matches the income to the lease.
- Ratio just under the floor: look at Option 5 variations, knowing leverage and terms adjust.
Many investors build a short checklist first: booking statements, the insurance policy matching rental use, entity documents if applicable, and proof the property can legally host guests. For the full picture of how these loans work, see the complete DSCR loans guide.
Frequently Asked Questions
Can I still stay in the house a few weeks a year?
Often, yes, but it depends on the program. Lenders review how the property is operated and whether it is run as a rental. Personal-use limits vary by lender, so ask before you apply. If personal use is heavy, the property may fit income-based second-home financing better than a DSCR loan.
Does a coverage ratio above 1.00 mean the house makes money?
No. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses are outside the calculation. A ratio of 1.15x means rent covers the loan obligation with cushion, not that you profit after all costs.
How much cash can I take out?
The lesser of two tests. On a cash-out refinance of a short-term rental, leverage is up to 70% LTV, so appraised value times that percentage, minus your payoff, sets the equity room. Your counted rent must also clear the coverage floor on the new loan. Closing costs and fees reduce what you actually receive. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Do I need 12 months of hosting history?
Short-term-rental programs usually expect about 12 months. With less, the appraiser’s rent schedule or a standard long-term-rental loan may fit better. On a cash-out refinance of a standard rental, leverage is about 75% LTV, versus up to 70% for a short-term rental.
What credit score do I need?
Short-term-rental programs typically expect a 640 score. Standard rentals run from a 620 floor in parts of the network to around 660 on most programs. A 700+ score tends to open the strongest leverage tiers, subject to lender guidelines.
Compare Your Options Before You Apply
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.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that arranges investor loans through select lenders in its wholesale network, across 41 markets including Washington, D.C. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. Details change by program, 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. IRS Publication 527, Residential Rental Property
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: Banks That Offer a Short-Term Rental Cash-Out Refinance With No Mortgage · Top Short-Term Rental Cash-Out Refinance Providers on a Newly Built Rental
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.