The Quick Read: Usually yes, as long as the program allows financed costs and the new loan, costs included, stays under the program’s maximum cash-out loan-to-value ceiling. Rolling costs in does not by itself decide the outcome. It can shrink your cash, raise your balance, or leave no room under the ceiling.
- Two limits decide the file: the equity ceiling and the income test.
- On a primary residence, cash-out typically tops out at 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio.
- On a second home, cash-out typically runs up to 75% LTV. Investment-property cash-out tops out around 75% LTV.
- Financed costs raise your balance and payment, which your deposit-based income has to carry.
- Whether costs can be financed is a program question, so ask before you apply.
Lendmire is a mortgage broker, not a lender. It places files with select lenders in its wholesale network, and every file is underwritten individually. Nothing here is a commitment to lend.
Key Terms Defined
Bank statement loan: A mortgage that is reviewed on documented income under the applicable program, subject to lender guidelines. The lender reads 12 months of business or personal bank statements instead of tax returns.
Cash-out refinance: A new, larger mortgage that pays off the old one and hands you the difference.
Closing costs: The fees to originate and close the new loan. Because a refinance is a new mortgage, they apply every time.
LTV (loan-to-value): The new loan balance divided by the appraised value. A 75% LTV means the loan equals three-quarters of value. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Expense factor: The share of business deposits a lender treats as operating costs. It is subtracted before income is counted. Each lender sets its own.
DTI (debt-to-income): Your monthly obligations compared with your qualifying monthly income.
What Decides the Answer: Two Limits, Not One
Every file has an equity limit and an income limit. The tighter one wins.
The equity limit is the program’s maximum cash-out LTV. The appraisal sets value, and the program sets the percentage. That product is the most the new loan can be, whatever your income looks like.
The income limit comes from your statements. The lender averages eligible deposits across the statement period. On business accounts it applies an expense factor. The result is your qualifying income, and the new payment has to fit inside it.
Rolled-in costs press on both limits at once. They add to the balance, which eats equity room. They also lift the payment, which eats income room. Checking only one of the two limits leaves half the picture out.
How Do Rolled-In Costs Actually Work?
You have three ways to handle closing costs on a cash-out refinance. The table shows how each one moves your numbers.
| Route | Cash you bring | New balance | Cash you receive |
|---|---|---|---|
| Pay upfront | Costs in full | Unchanged | Full proceeds |
| Roll into the loan | None | Higher | Full proceeds |
| Deduct from proceeds | None | Unchanged | Reduced |
Paying upfront keeps the balance lowest but takes cash out of your pocket on day one. Rolling in raises the balance, so you pay interest on the fees for the life of the loan. It only works if the larger total still fits under the LTV ceiling. Deducting from proceeds keeps the balance flat, but your check gets smaller.
The arithmetic is simple. Maximum loan, minus the payoff of existing liens, minus costs financed or deducted, equals cash to you. Closing costs and cash to close are different numbers on the closing sheet. “Zero cash to close” does not mean zero costs. It means the costs were financed or came out of proceeds.
Size matters here. On a large loan, closing costs add up to real money, which is why the choice among the three routes matters.
One caution. Agency rules about rolling costs into a no-cash-out refinance do not govern non-QM bank statement loans. Each program sets its own rules on which costs can be financed. Ask the broker before you assume.
Does the Equity Ceiling Leave Room for the Costs?
Here is the part that trips people up. Costs can only be financed if the loan stays under the ceiling after you add them.
Run three modeled scenarios on a primary residence, using the 80% cash-out ceiling with a fixed expense ratio. These are illustrations, not market data or quotes. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
| Scenario | Payoff vs. value | Result with costs rolled in |
|---|---|---|
| Healthy equity | Well under the ceiling | Costs fit, solid cash out |
| Thin equity | Close to the ceiling | Little or no room, cash needed |
| Small cash-out | Modest gap to ceiling | Costs swallow most proceeds |
In the healthy case, the payoff sits far below 80% of value. Costs roll in and a meaningful check remains. In the thin case, the payoff is already near the ceiling. Adding costs pushes the total over, so you either bring cash or the cash-out nets zero. In the small case, the file clears the ceiling, but costs eat so much of the gap that the refinance barely pays.
Appraisal risk sits on top of all three. A lower value cuts the ceiling and your cash at the same time. A file that worked at the expected value can go thin at a lower one.
The ceiling also depends on occupancy. Here are the cash-out figures, each tied to its property type:
- Primary residence: typically up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. The accountant route is the lower ceiling.
- Second home: typically up to 75% LTV, depending on loan size and credit.
- Investment property: typically around 75% LTV.
The 90% figure you may see applies to primary-residence purchase and rate-term transactions only. It does not apply to cash-out. Loan sizes in the network generally run from about $125,000 to $3,500,000, subject to lender guidelines.
Does the Income Test Still Pass With a Bigger Payment?
Usually it does, unless the payment was already stretched. Financed costs raise the payment, and your qualifying income is fixed by your statements.
The method works like this. The lender totals eligible deposits over 12 months and divides by the months to get an average. On business accounts, it subtracts an expense factor, then applies your ownership share. Personal statements are generally read closer to raw deposits. Business statements take the expense factor. A CPA-prepared ratio can support a different factor at some lenders.
Do not treat any one expense factor as a rule. Each program sets its own, and the formula is not universal. Lendmire does not promise a specific factor, because the factor belongs to the lender and the program.
Then the new payment is tested against that income. Say your file cleared with a modest margin before costs. Adding a few percent of the loan amount to the balance shrinks that margin. If you were close to the DTI limit, the financed costs may be the difference between a fit and a miss. In that case, paying costs from cash or taking a smaller loan fixes it.
Lenders also scrub deposits. Large or non-business deposits may need a letter of explanation. Transfers between your own accounts should be easy to trace. Mixed personal and business deposits invite questions. Clean, labeled statements make the average easier to defend.
Reserves matter too. Most programs we place files with look for roughly 6 months of the housing payment, subject to lender guidelines.
What Can Go Wrong?
Sizing outcomes (the file works, but smaller):
- A low appraisal lowers the ceiling, so financed costs no longer fit.
- Thin equity leaves no room to roll costs in.
- A small cash-out gets absorbed by fees.
Denial outcomes (the file does not work):
- Qualifying income, after the expense factor, cannot carry the new payment.
- Deposits cannot be verified as income.
- Credit or reserves fall short of the program’s minimums.
- The program does not permit certain costs to be financed, and the borrower cannot cover them any other way.
A larger loan can also change the program tier. A loan that crosses a size line may face tighter credit and reserve expectations, depending on the lender and program, so ask your broker where those lines sit.
Owner-Occupied or Rental: Why Occupancy Changes the Path
Occupancy decides which rules apply to your file. This is the one regulatory point that changes what you should do.
An owner-occupied file, meaning a primary residence or second home, is a consumer mortgage. Consumer disclosure rules apply, and the lender must reasonably verify the income it relies on.
A bank statement loan on a non-owner-occupied rental, including a short-term rental, is a business-purpose loan. Federal rules exempt credit extended primarily for a business or commercial purpose, and the lender must determine in each case whether the transaction is primarily for an exempt purpose. The CFPB’s exam procedures treat credit to acquire or improve a rental that is not owner-occupied as business-purpose. Business-purpose investor loans are also exempt from the consumer closing disclosure regime.
The practical result: your occupancy decides the documentation path and the leverage ceiling. Keep the two lanes separate when you compare options.
When Rolling Costs In Is a Bad Idea
Skip it in three situations. First, when equity is thin, because the costs may push you over the ceiling or leave nothing to receive. Second, when the cash-out is small, because fees can swallow the proceeds. Third, when you plan to hold the loan briefly, because you pay interest on the financed fees without time to spread them out.
Think about the alternatives before you commit:
- A HELOC may fit if you want to keep your existing first mortgage.
- A DSCR cash-out is the stronger path when the property is rented and the rent carries the loan. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal deposits stop being the focus.
A bank statement cash-out suits the reverse case: your personal or business deposits are strong and the property’s rent is thin. For the broader picture, see the complete DSCR loans guide.
Term length follows each lender’s program sheet. Do not assume a 40-year or interest-only option exists on a bank statement loan, since those are DSCR-side structures.
How to Find Out Whether You’d Be Approved
Start with a short checklist. Your broker needs these items to match you to a program.
1. Value estimate and current payoff. These show how much room sits under the ceiling.
2. 12 months of statements. Use business or personal statements, whichever represents your income best.
3. Deposit explanations. Prepare notes on any large or unusual deposits.
4. Credit profile and reserves. Know your score and your liquid funds.
5. Occupancy. State clearly whether it is a primary residence, second home, or rental.
Then ask the broker four questions. Does this program allow costs to be financed? Which costs? What is the maximum cash-out LTV for my occupancy and loan size? What happens to my file if the appraisal comes in low? Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The best program for your situation depends on your property type, credit, leverage need, and documentation. A broker that shops multiple wholesale lenders can match the scenario to the program, which a single lender cannot do. If you are self-employed and want to see how the numbers work, Lendmire can help you compare bank statement loan options based on your deposits, the property, credit profile, leverage, and your goals.
Frequently Asked Questions
Can I roll all of my closing costs into the loan?
Not always. The program decides which costs may be financed, and the total loan must still sit under the cash-out LTV ceiling. If equity is thin, some or all costs have to be paid in cash or deducted from proceeds.
Do agency no-cash-out rules apply to my bank statement loan?
No. Agency rules on rolling costs into a no-cash-out refinance do not govern non-QM bank statement loans. Each program follows its own guidelines, so confirm what your file allows.
Can cash-out proceeds count toward reserves?
It depends on the program. Reserves are commonly around 6 months of the housing payment, and some programs allow proceeds to count while others do not. Ask before you assume.
Does a low appraisal change the plan?
Yes. A lower value shrinks the maximum loan and your cash at the same time. Financed costs may no longer fit, and you may need to bring cash or take a smaller loan.
Is a “no-cost” refinance really free?
No. The costs still exist. They are financed into the balance or deducted from your proceeds, and you pay for them through a larger loan or a smaller check.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging bank statement and other alternative-documentation mortgages — P&L-only, 1099-only and asset-based paths — through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. CFPB Regulation Z, § 1026.3
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Bank Statement Cash-Out Refinance vs Full-Doc Refinance to Buy Out a Business Partner · Can You Get Approved for a Bank Statement Cash-Out Refinance Before Seasoning Is Met? · How to Plan and Use a Bank Statement Cash-Out Refinance to Build an Emergency Fund
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.