The Quick Read: Most big banks do not write hard money loans, because hard money is short-term capital sized on property value, so a paid-off rental usually gets cash out through a wholesale network: a hard money cash-out, typically up to 65% of value, or a DSCR cash-out (a long-term loan sized on rent coverage), typically around 75% on a standard rental. Lendmire is a mortgage broker. It places these loans through select lenders in its network and matches the file to the program.
- A free-and-clear rental still counts as a cash-out refinance. With no old mortgage to pay off, the whole loan amount is proceeds before costs.
- Owning the property outright does not raise the leverage cap. Cash-out caps sit below purchase caps either way.
- Hard money runs 6-18 months, interest-only. A DSCR cash-out is a long-term loan built on a 30-year fixed spine.
- Hard money is sized on the property, the plan, and the exit. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
- All figures here vary by lender, property, and experience. Nothing here is a commitment to lend.
Do Banks Actually Offer Hard Money?
Rarely. Big retail banks and other depository institutions lend against their own guidelines, and those guidelines lean on personal income, tax returns, and debt ratios. Hard money is a different animal. It is private, short-term, asset-based capital.
So the better question is who writes these loans for a paid-off rental. In practice, three groups do:
- Private and hard money lenders, who size on value and exit plan.
- Non-QM lenders, who write long-term DSCR loans on rent coverage.
- Smaller portfolio lenders, whose appetite for investor cash-outs changes with their own balance sheets.
No honest list of banks exists for this product, and any list would be stale within months. A broker works the problem from the other direction. It shops a network of wholesale lenders and matches your property, credit, and leverage need to the program that fits. The best match for your situation depends on the property type, your credit profile, how much cash you want out, and what you plan to do next.
What a Free-and-Clear Cash-Out Actually Is
A cash-out refinance is any new loan that returns money to you at closing. A paid-off rental fits that definition perfectly. There is no payoff line, so nothing gets deducted for an old lien.
Investors often assume no mortgage means no refinance. That’s backwards. Zero debt is the cleanest starting point a lender can see.
It is not a leverage bonus, though. A free-and-clear property gets the same cash-out cap as a financed one. Equity is the raw material. The program sets how much of it you can pull.
Two different products get lumped under the phrase hard money cash-out:
1. A hard money cash-out. Short-term, interest-only, sized on value and exit plan.
2. A DSCR cash-out. Long-term, sized on rent coverage plus value, with credit and reserves in play.
Investors who want cash out without a pile of personal income paperwork often find the second product closer to what they are after. The first suits a shorter plan with a defined exit.
How the Underwriting Works, Step by Step
Both programs start with the same lien picture, then split. Here is the sequence for each.
Hard money cash-out
1. Collateral check. The property must be a non-owner-occupied residential rental, 1-4 units. Loan amounts run up to $5,000,000 on the program we place, larger by exception, and smaller balances vary by lender.
2. Title and lien check. The lender wants a clean first-lien position. Free and clear makes this straightforward.
3. Value. An appraisal sets the number. A hard money cash-out typically tops out at 65% of value, and a rate-and-term refinance on this program carries the same 65% ceiling. Both vary by lender, property, and experience.
4. Borrower check. Credit starts at a 620 minimum, with extra conditions below 660. Underwriting stays asset-based: property, plan, and exit.
5. Terms. Expect 6-18 months, interest-only, with no prepayment penalty on the current program.
DSCR cash-out
1. Collateral check. The same non-owner-occupied rule applies. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered.
2. Value. An appraisal with a rent schedule sets the value ceiling and supports the rent figure.
3. Coverage test. DSCR is monthly rent divided by the full housing payment: principal, interest, taxes, insurance, and any HOA dues. That payment is called PITIA. On a free-and-clear rental, the new loan is the only debt, so its payment is the whole denominator.
4. Leverage test. Cash-out tops out around 75% LTV on a standard rental across most of the network. Short-term rental collateral caps at 70%.
5. Seasoning. About six months of ownership is the common expectation for a cash-out.
6. Credit and reserves. A 620 floor exists in parts of the network. Most programs want around 660, and 700+ unlocks the strongest leverage tiers. Reserves commonly run around six months of PITIA. They vary by lender, leverage, loan size, and transaction type.
7. Closing. Entity vesting and business-purpose paperwork apply, subject to lender program eligibility if the property sits in an LLC. Net cash is the gross loan minus costs and escrows.
One point trips up new investors. A DSCR above 1.00 does not mean positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it.
You can read the full mechanics in Lendmire’s complete DSCR loans guide.
Hard Money, DSCR Cash-Out, or a Bank: Side by Side
The three paths differ in structure more than in headline leverage. Here is the comparison.
| Factor | Hard Money Cash-Out | DSCR Cash-Out | Big-Bank Cash-Out |
|---|---|---|---|
| Sized on | Property, plan, exit | Rent coverage plus value | Personal income and debts |
| Typical term | 6-18 months, interest-only | Long-term, 30-year fixed spine | Long-term |
| Cash-out leverage | Up to 65% of value | Around 75% standard; 70% STR | Varies by bank |
| Credit | 620 minimum, conditions under 660 | 620 floor in parts; most want 660 | Varies by bank |
| Best fit | Short runway, clear exit | Hold-and-rent for the long term | Strong W-2 or tax-return profile |
Notice the surprise. Hard money often lends less on a cash-out than a DSCR loan does on a standard rental. Its appeal is flexibility and a lien-based approach, not extra leverage.
Where the General Rule Breaks
You bought the rental with cash recently. Some lenders will cash out a recent all-cash purchase without waiting out the usual seasoning period. They may tie proceeds to the price you paid rather than the new appraisal. A purchase funded by a hard money lien generally does not count as a cash purchase, because a lien existed at closing. Ask the lender early how it treats your purchase history.
You finished a rehab. Some programs shorten seasoning when completed renovations are documented. Others don’t. Any lift in appraised value depends on comps and underwriter review.
Coverage lands under 1.00. Here the paths split. A 1.00 floor is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Either way, a bigger cash-out means a bigger payment and a thinner ratio.
The property is a short-term rental. DSCR cash-out on STR collateral is capped at 70%. Lenders typically expect a 640+ score and about 12 months of hosting history. 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.
You plan to live there. 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. Federal rules treat credit for a non-owner-occupied rental as business purpose, but the label follows the real use of the money. A plan to occupy the property for more than 14 days in the coming year can pull a loan toward consumer rules, according to Doss Law’s business-purpose summary. Don’t dress up a personal-use loan as an investor loan.
Your state adds its own layer. Business purpose does not mean exempt from every rule. A Hunton law-firm paper notes that some states license lenders on residential-secured loans whether the purpose is consumer or business. That is one reason a broker matters here. Lender footprints differ by state.
The property type is not eligible. Hard money collateral is limited to 1-4 unit residential, with ground-up construction going to 10 units. Commercial, land, and owner-occupied property are not offered on the sheet. Treat that as a hard stop, not a hurdle.
Who This Fits (and Who It Doesn’t)
Fits well:
- An investor who wants to recycle trapped equity into a down payment, a rehab, or reserves.
- A hold-and-rent owner who wants a long-term DSCR structure and can live with the payment.
- A borrower whose income documents are messy or complicated, with a property that rents cleanly.
- An investor with a clear exit, such as a sale or a stabilization-then-refinance plan.
Poor fit:
- Anyone who needs more than about 65% of value out through hard money. The cap is the cap.
- An owner whose rent barely covers a payment at the leverage they want.
- A borrower with credit under the program floors.
- Anyone who plans to occupy the property.
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized. Lendmire brokers that path when it fits. It is one route, not a rule.
Cash-out proceeds are loan proceeds, not income. 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.
Key Terms Defined
Free and clear: A property with no mortgage or lien against it.
Cash-out refinance: A new loan that returns money to the borrower at closing.
Hard money: Short-term, asset-based private lending sized on property value and the exit plan.
DSCR (debt service coverage ratio): Monthly rent divided by the full housing payment, used to test whether the property covers its own debt.
PITIA: Principal, interest, taxes, insurance, and any HOA dues. The full monthly housing payment.
LTV (loan-to-value): The loan amount as a percentage of the property’s appraised value.
Seasoning: The waiting period between taking title and refinancing.
What to Do Next
Gather the basics before you talk to anyone. You want proof of clean title, the current lease or rent history, an entity document if the property sits in an LLC, and a rough sense of how much cash you actually need. Then decide which exit you can live with: a hold, a sale, or a refinance.
If you are buying, rehabbing, or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire arranges financing as a broker through select lenders across 41 markets, including Washington, D.C.
Frequently Asked Questions
Do traditional banks offer hard money loans?
Rarely. Big banks lend against their own income-based guidelines, while hard money comes from private lenders and non-QM channels. A broker with a wholesale network can match a paid-off rental to the lenders that actually write it. The right fit depends on the property, your credit profile, and how much leverage you need.
Does a paid-off rental count as a cash-out refinance?
Yes. Any new loan that returns cash at closing is a cash-out refinance. With no payoff line, the full loan amount is proceeds before costs. The cash-out leverage cap still applies, and owning the property outright does not raise it.
How much can I borrow against a free-and-clear rental?
Typically up to 65% of value on a hard money cash-out. A DSCR cash-out runs around 75% LTV on a standard rental, and short-term rental collateral caps at 70%. Credit, reserves, and rent coverage all shape the final number, and every file is underwritten individually.
Do I need income documents and good credit?
Not personal income documents for hard money, since underwriting is asset-based and looks at the property, the plan, and the exit. Credit still matters, with a 620 minimum and extra conditions below 660. A DSCR loan also leans on rent coverage and reserves rather than personal income, and most of those programs want a score around 660. Requirements vary by lender, property, and experience.
What if I bought the rental with cash recently?
Some lenders treat a recent all-cash purchase differently from other cash-outs, sometimes tying proceeds to the price you paid. If a hard money loan funded the purchase, it generally won’t count as cash. Tell your broker the purchase history up front so the file goes to the right lender.
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
2. Doss Law: Business Purpose Exemption Simplified
3. Hunton: Beware of Business Purpose
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Do a DSCR Cash-Out Refinance When an Heir Can’t Be Found? · Best Portfolio DSCR Cash-Out Refinance Program on a Free-and-Clear Rental Property · How to Close a Conventional Cash-Out Refinance on a Duplex 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.