The Quick Read: The lender treats it as a title problem and responds according to what the encroachment is and whether the title insurer will insure over it. The lender’s real protection is its title policy, so a minor, curable encroachment usually becomes a condition to clear before cash-out proceeds are released, while a serious one can stall the file until it is cured. The lender reads the survey, the title commitment, and any cure documents together.
- The title insurer’s treatment of the encroachment drives most of the outcome.
- A fence off by inches is a different problem from a building crossing the lot line.
- A refinance may not need a new survey, which means an old problem can surface or stay hidden.
- Cures include recorded easements, boundary line agreements, and removal of the structure.
- Cash-out proceeds wait until title clears to the lender’s requirements.
You may have owned a rental for years without ever seeing a survey. A cash-out refinance can be the first event that puts one in front of anyone. This article walks through what happens next, where the exceptions are, and what you can do before you apply.
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What Is a Survey Encroachment, and How Does It Show Up?
An encroachment is a physical object that crosses a property line. It might be your fence on the neighbor’s land, your neighbor’s garage on yours, or a driveway, wall, or building that wanders over the boundary. It shows up on a survey, where the surveyor draws it on the plat and often adds a note describing it, as GS Land Surveying explains for ALTA surveys.
Two lookalikes get confused with it. An easement is a legal right to use someone’s land. A boundary dispute is a disagreement over where the line actually sits. Practitioners at Effective Agents separate the three because each is cured differently. A recorded easement is often the cleaner fix.
Who Decides: The Lender or the Title Insurer?
Both, but the title insurer carries more weight than most investors expect. A DSCR cash-out refinance is secured by a first-lien mortgage, and the lender’s protection is a loan policy of title insurance. The lender wants that policy to cover the collateral without a carve-out for the problem.
Here is the mechanism. A loan policy typically carries a general survey exception unless survey matters have been resolved to the insurer’s satisfaction. It usually sits in Schedule B, according to Starfield & Smith. That exception removes coverage for what an accurate survey would show, including encroachments, overlaps, and boundary disputes, per the ABA Real Property, Trust & Estate section.
When a survey is submitted, the insurer can swap the general exception for a specific one that lists only what the survey actually shows. Adams and Reese notes that title companies typically delete the exceptions for encroachments, overlaps, and boundary disputes when handed a recent ALTA/NSPS survey that meets the minimum requirements.
If nobody orders one, the exception stays and the lender is uninsured against the issue. A careful lender does not like that.
What Does the Lender Look At?
Three things, in plain terms: whether the collateral is insurable, whether the property stays marketable, and whether the problem threatens access, use, or rebuilding. The lender is not asking whether your rent covers the payment. That is a separate test.
DSCR compares rent to PITIA, which is principal, interest, taxes, insurance, and any association dues. Across the wholesale network, most programs we place files with start around 1.00 coverage, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. None of that matters if title will not clear. A file can have strong coverage and still sit on a title condition.
Four factors tend to decide how the title side lands:
- Which structure encroaches. A fence differs from a building.
- Which direction it runs: onto the neighbor’s land or onto yours.
- Whether the insurer will insure over it with an endorsement or an agreement.
- Whether the neighbor is cooperative.
LegalHelp says a building straddling the lot line hurts marketability far more than a fence off by a few inches.
Is a Survey Required on a Cash-Out Refinance?
Not always. On refinances, title underwriters often waive a new survey and rely on an older one plus an owner’s affidavit that nothing has changed, as TC Title & Escrow describes it. That page is regional, so treat it as a general picture rather than a rule.
The catch is plain. If no survey is run and the affidavit is the only check, an encroachment goes undiscovered. It does not go away. Whether a given lender in the network requires a survey is a program-level question your broker confirms before you pay for anything.
Does cash-out change the answer? Not by itself. The extra leverage in a cash-out is capped at 75% LTV on an investment-property cash-out across most of the network, but the survey decision comes from the title underwriter, not from the loan purpose. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Step by Step: From Survey to Closing Table
1. Title commitment. The title company issues it and lists Schedule B exceptions. A subject-to-survey-matters item is the standard survey exception.
2. Survey decision. A new survey is ordered, or an old one plus an affidavit is accepted.
3. Surveyor work. A published survey needs a current title commitment and every Schedule B exception document handed to the surveyor.
4. Encroachment drawn. The surveyor notes it on the plat. The title company then lists it as a specific exception.
5. Underwriter’s choice. The Fractional Analyst lists the typical options: escrow holdbacks, price credits, cure work, named title exceptions, or changed endorsement requests. If a structure crosses onto a neighboring parcel, the insurer may offer an encroachment endorsement or first require a boundary line agreement.
6. Cure documents. The borrower records whatever fixes the problem.
7. Closing. The lender’s conditions come from the title commitment, the survey, and the cure documents. Cash-out proceeds are not released until title clears to the lender’s requirements.
Build that into your plans rather than assuming the cash arrives on a fixed schedule.
What an Endorsement Fixes (and What It Doesn’t)
The ALTA 28.1 endorsement, titled Encroachment—Boundaries and Easements, covers loss from an existing building encroaching onto adjoining land, or an adjoining building encroaching onto the insured property. It does not reach an encroachment the insurer has carved out as an exception, because anything named in an exception sits outside the coverage.
The ALTA 25 series, called same-as-survey, insures that the legal description matches the survey. That is useful. It is not a cure.
So an endorsement helps when the insurer is willing to insure over a known issue. It does not rescue a file where the insurer has named the encroachment as an exception.
Severity Triage: What the Lender Usually Does
| Severity | Typical lender response | Who resolves it |
|---|---|---|
| Minor (fence, small overhang) | Condition or specific exception | Borrower and title company |
| Moderate (driveway, shed, wall) | Easement or agreement required | Borrower, neighbor, attorney |
| Major (building crosses the line) | Cure before cash-out funds | Attorney, possibly court |
These are patterns from title and survey practice, not guarantees. Every file is underwritten individually. Boundary issues change disclosures, title treatment, and sometimes price, but rarely prevent a sale outright. LegalHelp adds that unresolved issues can stall or block a closing.
How Encroachments Get Cured
Typical documents are a recorded encroachment easement, a boundary line agreement, a lot-line adjustment or deed correction, removal of the structure, or a quiet title action. Lebovitz Law describes the boundary line agreement, deed correction, and quiet title routes. Agreements should be recorded with the county so they appear in future title searches.
If the neighbor will not cooperate, the options narrow. Removal of the structure is within your control. A quiet title action is not quick or cheap, and it belongs in an attorney’s hands.
One flag deserves its own paragraph. Adverse possession and prescriptive claims can turn a long-tolerated encroachment into an ownership claim, a risk attorneys such as Vok Law raise. If a neighbor has used part of your lot for years, or you have used part of theirs, bring in a local real estate attorney before you apply.
A Worked Scenario: The Fence Over the Line
Picture a duplex you have owned for several years. Rent comfortably covers the full monthly obligation, and equity sits well inside the 75% cash-out ceiling. You apply for a cash-out refinance to fund the next rental. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The title commitment comes back with the standard survey exception. The title company asks for a survey, and it shows your back fence sitting a few inches onto the neighbor’s lot. The company lists it as a specific exception.
From here the file branches:
- The insurer will insure over it. The lender accepts the specific exception with an endorsement or a short agreement, and the deal works on.
- The insurer wants an agreement. You and the neighbor sign a recorded easement or boundary line agreement. The condition clears when it is recorded.
- The neighbor refuses. You move the fence. A fence is cheap to move compared with a building.
Now change one fact. If a garage straddled the line, the same steps would apply, but the odds of a quick cure drop and the need for an attorney rises. The strong DSCR number did not change. The title problem did.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
DSCR Lender vs. Conventional Lender
| Factor | DSCR lender | Conventional lender |
|---|---|---|
| Qualification | Rental income vs. payment | Personal income and debts |
| Survey rules | Set by title underwriter and program | Set by title underwriter and investor |
The title mechanics are largely the same. Agency lenders add their own rules; Fannie Mae’s Selling Guide says it will not purchase or securitize a loan with an unacceptable title impediment and cites survey exceptions. DSCR loans are not agency products, so that guide does not set DSCR policy. It simply shows why lenders in general take survey exceptions seriously. For the broader picture of how these loans work, see the complete DSCR loans guide.
Does an Encroachment Affect Value and Cash-Out Amount?
It can. An unresolved encroachment affects marketability, and the appraiser and underwriter weigh that. The cash-out amount comes from rent used for lender review, PITIA, reserves, and the 75% LTV ceiling, and it is never a guaranteed figure. If a title issue forces a restructure, the proceeds can shrink or wait. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Most DSCR cash-out files also need about 6 months of ownership from title recording, and credit typically starts around 620 in parts of the network, with most programs wanting about 660 and 700 or higher for the strongest leverage tiers. Reserves commonly run around 6 months of PITIA, and about 9 months on loans above $1,500,000. Those are typical ranges from select lenders in the network, subject to lender guidelines and not a commitment to lend.
What to Do Before You Apply
- Pull any old survey and your existing title policy and read the exceptions.
- Ask early whether the title company will insure over a known issue.
- Order a survey yourself if you suspect a problem, so you are not learning it mid-file.
- Budget for survey, attorney, and recording costs. They vary too widely to guess at.
- Keep tenants informed if cure work touches shared driveways or access.
- Hold the property in the name you plan to borrow in. An LLC borrower may be available through select lenders, subject to program eligibility, and the title side works the same way.
A larger down payment or a stronger coverage ratio never erases a title condition. The strongest files clear both tests: enough equity and enough rental coverage, plus clean title. A broker who shops several wholesale lenders can match your scenario to the program that fits. For a related situation where something outside the loan complicates a refinance, see Lendmire’s piece What a DSCR Cash-Out Refinance Lender Says About a Rental Listed for Sale?.
Key Terms Defined
Encroachment: a physical object, such as a fence or building, that crosses a property line.
Survey exception: a carve-out in a title policy for matters an accurate survey would reveal.
Endorsement: an add-on to a title policy that extends coverage to a specific risk.
Loan policy: the title insurance that protects the lender, not the owner.
Boundary line agreement: a recorded agreement between neighbors fixing where the line sits.
PITIA: principal, interest, taxes, insurance, and any association dues, the payment rent is measured against.
Frequently Asked Questions
Does an encroachment always kill a DSCR cash-out refinance?
No. Boundary issues often change title treatment, disclosures, or price without stopping the deal, and minor ones usually become a condition to clear. A serious one, such as a building across the line, can stall closing until it is cured, and cash-out proceeds are not released until title clears.
Does a lender survey protect me as the borrower?
No. In residential practice the survey is usually called a location, mortgage, or title survey, and only the title company and the lender may rely on it, per the ABA article. If you want your own protection, ask about an owner’s policy and the endorsements available to you.
Will title insurance cover an encroachment I find after closing?
Probably not unless an endorsement or a specific provision covers it. Standard coverage excludes matters a survey would reveal, and an encroachment carved out as a specific exception is not covered even with an endorsement. Ask what your policy excludes before you close.
Can I skip the survey on a refinance?
Sometimes. Skipping the survey leaves the exception in place and the risk unmeasured. Your broker can confirm what the program and title company require.
Who pays to fix an encroachment?
Usually the owner who wants the loan to close. Costs depend on the cure: a recorded agreement is far cheaper than removing a structure or litigating. A local real estate attorney can tell you which route fits, especially if adverse possession or an active dispute is involved.
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. Lendmire is a mortgage broker arranging DSCR investor loans through select lenders in its wholesale network across 41 markets, including Washington, D.C.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
4. ABA Real Property, Trust & Estate
6. LegalHelp
9. Lebovitz Law
10. Vok Law
11. Fannie Mae Selling Guide B7-2-05
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: 5 DSCR Cash-Out Refinance Options and the Approval Process Step by Step · DSCR Cash-Out Refinance to Refinance a BRRRR With Lender-Ready Financials: The 2026 Guide · Where to Get a DSCR Cash-Out Refinance With Only 15 Percent Equity
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.