The Quick Read: A hard money cash-out refinance can fund the down payment on your next rental. The right program is the one that fits your property’s condition, the equity you hold, and your plan for leaving the loan, because these loans are short, interest-only, and sized on value, with refinance leverage typically capped at 65% of value.
- Cash-out refinance leverage on a hard money loan is up to 65% of value, so the cash you pull is smaller than most investors expect.
- Terms run 6 to 18 months, interest-only, with no prepayment penalty. Every figure here varies by lender, property, and experience.
- “Cash-out” is not “cash in hand.” The old loan payoff, fees, and any reserve come out first.
- The program that wins on paper can fail if you have no exit. Plan the move into long-term financing before you close.
- Qualification is asset-based: the property, the plan, and the exit. Credit still matters, and 620 is the typical floor.
What a Hard Money Cash-Out Refinance Does
You own a property with equity. A hard money lender gives you a new, short-term loan against its value. That loan pays off whatever sits on the property now, and the remainder comes to you as cash. You then use that cash as the down payment on another purchase.
The flow is simple:
1. The new hard money loan pays off the existing loan.
2. Closing costs and any required reserves come out.
3. The balance goes to you.
4. You use that balance toward the next property.
Hard money lenders underwrite the asset. They look at what the property is worth, what you plan to do with it, and how you will repay. That is why the loans work for files a bank would turn down, such as a property that is vacant, mid-rehab, or held by an investor with irregular income.
Lendmire is a mortgage broker that arranges these loans through select lenders in its wholesale network, across 41 markets including Washington, D.C. It does not lend directly. That distinction matters for the next question.
What Makes the Best Program for Your Situation?
There is no single best program. Lenders in the network write these loans differently, so matching the file to the right one is most of the work.
Here is what the lenders that write this product typically look at:
- Underwriting basis. Value of the property and the business plan, not your tax returns.
- Property type. Non-owner-occupied residential, one to four units. Commercial, land, and owner-occupied homes are not on the sheet.
- Loan size. Up to $5,000,000, larger by exception. Smaller balances vary by lender.
- Credit. A 620 minimum score, with extra conditions below 660. First-time investors can qualify at the lower leverage tiers.
- Term structure. 6 to 18 months, interest-only, with no prepayment penalty. There are no multi-year options on the current program.
- Exit fit. Whether the loan can be refinanced into long-term financing when the term ends.
A broker shops several lenders against those points. A bank sees one product. A broker sees many sets of guidelines and can say which overlays will fit and which will not.
How Much Cash Can You Actually Pull?
A cash-out or rate-and-term refinance on a hard money loan goes up to 65% of the property’s value. That is the ceiling, not the typical payout.
Run the logic in percentages. Say your property is worth a given amount and the existing loan balance is 40% of that value. A new loan at 65% of value pays off the old one and leaves roughly 25% of value. Closing costs, fees on the old loan, and any reserve shrink that further.
That leftover cash then becomes your down payment. Hard money on a bridge purchase without rehab goes up to 80% of purchase price, which means a 20% down payment. So in this example, the cash from a property could cover the down payment on a purchase of roughly the same price, before costs. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Compare that to purchase financing for the next property. Fix-and-flip hard money runs up to 93% of project cost for investors with five or more completed projects, 90% with two or more, and 85% with fewer than two. Each tier is capped at 75% of after-repair value. The top tier is reserved for experienced investors.
No program is a true 100% purchase loan. Rehab funds can cover up to 100% of the rehab budget, but they are released in draws against completed work. That is a budget figure, not a purchase leverage figure.
Hard Money vs. DSCR vs. Other Refinance Paths
Before you pick, line up the options by how they are underwritten.
| Factor | Hard Money Cash-Out | DSCR Cash-Out |
|---|---|---|
| Underwriting basis | Property value and plan | Rent vs. full payment |
| Term | 6-18 months, interest-only | 30-year fixed is the spine |
| Refinance leverage | Up to 65% of value | Around 75% on standard rentals |
| Best fit | Transitional or unstable property | Stabilized, leased rental |
| Main risk | Maturity before exit | Rent too thin for the loan |
DSCR stands for debt service coverage ratio. It compares a property’s monthly rent to its full monthly payment: principal, interest, taxes, insurance, and any association dues. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines.
A DSCR cash-out refinance on standard rentals tops out around 75% of value across most of the network. Short-term rental collateral is lower, at 70%. Most programs also expect about six months of ownership first, which is called seasoning. Seasoning is the waiting period between buying a property and refinancing it for cash.
Lendmire’s piece Best DSCR Cash-Out Refinance Program to Finance Another Investment Property covers that path in full. Hard money exists for the cases where the property is not ready for it.
When Hard Money Fits and When It Does Not
It fits when:
- The property is vacant or between tenants, so rent-based underwriting has nothing to work with.
- You just finished a rehab and need to take cash out before a long-term loan is available.
- You own the property free and clear and want equity moved now.
- You are inside the seasoning window of a long-term program and cannot wait.
It does not fit when:
- The property is stabilized, leased, and well past seasoning. A long-term loan usually costs less over time, and its term runs far longer.
- You cannot show a plausible exit within 18 months.
- You need more cash than 65% of value would leave after your payoff.
- The next deal depends on proceeds landing on a tight contract date and you have not confirmed the sequence.
Here is a thinking-out-loud call on the middle case. Say a property is leased but only just seasoned. The hard money route gives you less cash than a long-term cash-out would. So the stronger play might be to wait for seasoning and use the long-term program, unless the next deal will not wait. The right answer turns on that deadline.
Step by Step: From Payoff to the Next Closing
1. Classify the file. Is the property vacant, in rehab, leased, or free and clear? That drives which program applies.
2. Pull the numbers. Gather the payoff on the existing loan, the property’s likely value, and the next deal’s down payment need.
3. Test leverage. At 65% of value, subtract the payoff and an allowance for costs. That is your cash.
4. Match the lender. A broker compares guidelines on property type, credit, and leverage and places the file with the program that fits.
5. Document. Expect a payoff statement, the deed or purchase closing statement, a rehab budget and receipts if you renovated, entity documents if you hold in an LLC, and reserve statements.
6. Appraise. The new lender’s valuation sets the loan, not your own after-repair estimate.
7. Close and fund. The old loan is paid, costs come out, and the balance reaches you.
8. Deploy. Put the cash toward the next purchase.
The sequencing risk sits between steps 7 and 8. If the next contract has a hard date, confirm that the refinance funds ahead of it before you commit to either. An LLC holding title is common, and the loan can be set up that way, subject to lender program eligibility.
The Two-Property Test
Pulling equity from one property to buy another stacks two loans. Test both before you commit.
1. Property A after the refinance. Does its rent still carry the new interest-only payment and its other costs? A bigger loan raises the payment.
2. Property B on its own. Do its numbers work without relying on A’s equity?
3. Reserves left over. After the cash goes out, can you still cover several months of payments on both properties?
4. The exit for both. Will each loan be refinanced into long-term financing before its term ends?
Fail any one and the plan is thin. This is where investors get hurt: two short-term loans coming due in the same quarter, with one deal slow to stabilize.
Planning the Exit Before You Close
Hard money is short-term by design. The 6 to 18 month term means you need a way out from day one.
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized. Lendmire brokers that path. The long-term loan is sized on appraised value and rent, so the plan works best when you know early what rent the property will support.
A few points about that exit:
- Clearing a 1.00 coverage ratio is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and higher leverage.
- A passing coverage ratio does not mean the property cash-flows. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
- Credit also matters. Most long-term programs want around 660, and 700 or higher opens the strongest leverage tiers.
- Reserves vary by lender, leverage, loan size, and transaction type. Around six months of the full monthly payment is common.
If the rent will not support the payoff, extend or restructure early. Waiting for maturity removes your options.
Mistakes That Cost Investors Cash
- Counting gross proceeds as spendable cash. Payoff, fees, and reserves typically come first.
- Sizing the bridge to your own after-repair value. The new lender’s appraisal generally governs.
- Skipping the exit conversation. Ask which long-term programs the property may qualify for before you take the short-term loan.
- Stacking maturities. Two short-term loans due close together can create refinance pressure.
- Assuming a short-term rental will appraise on projected income. The standard appraisal rent schedule reflects long-term market rent, so other rent evidence may be needed. 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.
- Living in the property. Occupying it can undermine the investor-loan framing, as explained below.
A Note on Business-Purpose Treatment
These are business-purpose loans for non-owner-occupied rentals. Under CFPB Regulation Z, credit to acquire, improve, or maintain non-owner-occupied rental property is generally treated as business-purpose. That presumption fails if you expect to occupy the property for more than 14 days in the coming year.
Business-purpose does not mean no rules apply. As one Lexology legal commentary explains, such loans are not automatically exempt from compliance obligations. Use the proceeds for the investment plan, not personal spending.
Key Terms Defined
Cash-out refinance: A new loan that pays off the old one and gives you the leftover equity in cash.
Loan-to-value (LTV): The loan amount as a percentage of what the property is worth.
Loan-to-cost: The loan as a percentage of what the project costs, used for purchase-plus-rehab hard money.
Seasoning: The waiting period a lender wants between two events, usually buying a property and refinancing it for cash.
Interest-only: A payment structure where you pay only interest during the term, with the balance due at maturity.
Exit strategy: Your plan to repay the short-term loan, usually by refinancing into long-term financing.
Frequently Asked Questions
Can I use hard money cash-out proceeds as a down payment on another rental?
Yes, if the loan is structured as business-purpose and the proceeds go toward the investment plan. The cash arrives after the payoff, costs, and reserves come out. Confirm the funding sequence against your next contract date before you rely on it.
How much equity do I need to pull meaningful cash?
It depends on the existing balance. A refinance goes up to 65% of value, so you need a payoff well below that figure to leave useful cash. Every figure varies by lender, property, and experience, and nothing is a commitment to lend.
Can I refinance a hard money loan into something longer?
Often, yes. Many investors move into long-term DSCR financing once the property is stabilized and, where required, seasoned. The long-term lender sizes the loan on its own appraisal and the rent, so check that your payoff fits under that cap.
Does the property need a tenant?
Not for the hard money loan, which is underwritten on the asset. For the long-term exit, lenders usually rely on market rent from the appraisal. A signed lease helps but is not always required.
What if the next deal falls through after I take the cash?
You still carry the refinanced loan and its interest-only payments. This is why the two-property test and an early exit plan matter. Do not stack short-term debt on two properties without enough reserves to hold both.
Next Step
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. The complete DSCR loans guide covers the long-term side of that exit.
The quiet advantage in this strategy goes to the investor who knows the payoff date, the appraisal cap, and the next closing before signing the first loan.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. 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 Exempt transactions
2. Lexology: 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: How a Lender Counts Reserves on a BRRRR Cash-Out Refinance · DSCR vs. Conventional Cash-Out Refinance for a St. Charles MO Rental · Short-Term Rental Cash-Out Refinance Requirements When Your Mortgage Is Almost Paid Off
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.