The Quick Read: The right program depends on what the property is today, not on the repayment plan alone. A stabilized rental with a paying tenant usually fits long-term DSCR financing best, while a distressed or unfinished property fits short-term hard money.
- A repayment plan is a record of back rent owed. Lenders do not count it as income.
- Rent that counts is typically the lower of the signed lease and the appraiser’s market rent, backed by deposits that match.
- Hard money cash-out reviews the property’s rental income and your exit plan. On this program it typically tops out at 65% of value on a cash-out refinance.
- DSCR cash-out on a standard rental reaches about 75% LTV on most files, but it tests rent coverage on the new, larger payment.
- Sizing down the cash-out or waiting for a cleaner payment record often fixes a tight file.
Is “Hard Money Cash-Out” Really What You Need?
Many investors search for hard money because they want cash from a rental and a tenant is behind. Hard money is short-term capital. It is built to buy, rehab or bridge a property, and it is sized on the asset and the plan to leave the loan.
A rental with a tenant in place and a payment history is a different animal. That property usually belongs in long-term DSCR financing, which is a non-QM product. Non-QM means the loan is not built to the qualified-mortgage rules that govern standard home loans. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
So the honest answer to “which program is best” is that the best program for your situation depends on the property’s condition and the tenant’s status. Lendmire is a broker that shops a wholesale network of lenders, so the job is matching the scenario to the program. Lendmire does not lend directly. This article covers both paths so you can see where each one fits. If your main question is whether a cash-out is possible at all, Lendmire’s piece Can You Get a Cash-Out Refinance While a Tenant Is on a Repayment Plan? covers that angle.
Key Terms Defined
Repayment plan: a written agreement in which a tenant pays back overdue rent over time, usually on top of or alongside regular rent.
Arrears: the back rent a tenant owes. A repayment plan is the paper record of how it will be paid.
Hard money loan: short-term, interest-only business-purpose financing sized on the property’s value and your plan, not on rent coverage.
DSCR (debt service coverage ratio): monthly rent divided by the full monthly housing payment, meaning principal, interest, taxes, insurance and any HOA dues (PITIA). A 1.00 means rent equals the payment.
Cash-out refinance: a new, larger loan that pays off the old one and hands you the difference.
Seasoning: how long you must own the property before a lender will refinance on its current value. About 6 months is the common expectation for DSCR cash-out.
Market rent: what an appraiser says the unit would rent for today, usually shown on a rent schedule form.
How Underwriting Treats a Tenant on a Repayment Plan
Think of the file in five steps. Each step explains why a plan helps your paperwork but not your income.
Step 1: The lender picks a rent figure. The appraiser completes a rent schedule. For a single-family rental that is typically Form 1007, and for two to four units it is Form 1025. The Fannie Mae Selling Guide names both forms. DSCR loans are not agency loans, but the appraisal tools look much alike. The underwriter then compares market rent to the signed lease. The lower figure typically controls.
Step 2: Coverage is tested on the new payment. A cash-out makes the loan bigger, so the same rent covers less. Rent can cap your proceeds before equity does. Clearing 1.00 also does not mean positive cash flow, since repairs, vacancy, management and utilities sit outside the ratio.
Step 3: The lender wants proof the rent arrives. A lease shows what rent should be. Bank deposits show what the tenant actually pays. A rent ledger, an explanation letter and the signed repayment plan complete the picture.
Step 4: Plan payments are separated from rent. If the tenant pays back rent on top of regular rent, deposits will be higher than the lease. The file should show which part is regular rent and which part is arrears. Underwriters typically count lease rent, not the extra, as qualifying income.
Step 5: Structure gets adjusted if coverage is tight. You can take less cash out, re-tenant before applying, or wait for a longer clean payment record.
A late tenant is not a late mortgage. Your own credit and your payment history on the existing loan are separate from the tenant’s behavior. The plan also does not change the tenant’s legal obligations, and a refinance does not start or stop any eviction process.
Where Does Your Tenant Fall on the Ladder?
Tenant status drives the path more than any other factor. This table shows how DSCR underwriting typically reads each situation. Treatment varies by lender and property.
| Tenant situation | Rent the lender leans on | What the file needs | Usual best move |
|---|---|---|---|
| Current, on a clean plan | Lower of lease or market | Lease, deposits, signed plan | DSCR cash-out |
| Plan with recent misses | Often market rent only | Ledger, explanation letter | Wait or size down |
| Months behind, no plan | Weak or none | New lease or vacancy | Cure or re-tenant first |
| Eviction filed | Depends on the lender | Case status, exit plan | Hard money or wait |
| Month-to-month or expired lease | Market rent, thinner proof | Fresh signed lease | Renew, then apply |
| Vacant and rent-ready | Market rent | Rent schedule, listing | DSCR or hard money |
A vacant, rent-ready unit can be easier to underwrite than a non-paying tenant. Market rent applies cleanly, and there is no payment record to explain.
Hard Money or DSCR: Which Program Fits This Property?
Both products can produce cash. They solve different problems, and the tenant affects each one differently.
| Factor | Hard money cash-out | DSCR cash-out |
|---|---|---|
| What it underwrites | Property value and exit plan | Rent coverage of the payment |
| Tenant sensitivity | Lower, but the exit lender cares | High: rent evidence drives sizing |
| Typical term | 6-18 months, interest-only | 30-year fixed spine |
| Leverage on cash-out | Up to 65% of value | About 75% LTV on standard rentals |
| Best fit | Distressed or unstabilized property | Stabilized, rented property |
Here is what the network’s hard money program looks like in practice. Figures vary by lender, property and experience, and nothing here is a commitment to lend.
- Leverage: cash-out and rate-and-term refinances typically reach up to 65% of value on this program.
- Term: 6-18 months, interest-only, with no prepayment penalty. There are no multi-year options.
- Credit: a 620 minimum score, with additional conditions below 660. Underwriting stays asset-based, so the property, the plan and the exit still matter.
- Property: non-owner-occupied residential, one to four units, with loan amounts up to $5,000,000 and larger by exception.
On the DSCR side, cash-out on a standard rental tops out around 75% LTV across most of the network. About 6 months of seasoning is the common expectation. A 1.00 coverage ratio is where select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. For the documents behind those files, see Lendmire’s guide DSCR Cash-Out Refinance Requirements While a Tenant Is on a Repayment Plan. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The gap between 65% and 75% matters. Hard money gives you less cash on a stabilized rental, and the loan matures within months. You then need a refinance into long-term financing before the maturity date. The tenant’s payment record shows up in that second file anyway.
Cash Out Now, Re-Tenant First, or Take Two Steps?
This is the real decision. Here are the three paths and when each makes sense.
Cash out now. This works when the tenant is current, the plan has a clean payment record, and the new payment still clears your target coverage on lease or market rent. The file is documented and the rent is arriving.
Re-tenant or cure first. This works when payments have stopped, or the plan broke during the application. A fresh lease with a paying tenant, or a rent-ready vacant unit, gives the underwriter a cleaner story. You give up some time, but you often gain better sizing.
Two steps. If you need cash for a hard deadline, a short-term hard money loan can bridge the gap. You then refinance into long-term DSCR financing once the property is stabilized. Many investors take this route, and Lendmire brokers the DSCR side of it. The risk is that the maturity date arrives before the tenant situation clears, so build in room.
A useful rule: if the tenant situation is likely to be cleaner in six months than it is today, waiting usually costs less than a short-term loan you may have to refinance under pressure.
A Worked Example in Ratios
Take a hypothetical one-unit rental, using illustrative ratios only. The tenant is on a repayment plan and pays regular rent plus a plan installment.
Today, before any cash-out: the lease rent covers the existing payment at roughly 1.4x.
After a full-size cash-out: the loan is larger, so the same rent now covers the payment at roughly 1.1x. That still clears 1.00 on the DSCR side, but with little cushion.
If the plan installment is counted by mistake: deposits look stronger, but the underwriter strips out the arrears portion. Coverage reverts to the lease figure, and any proceeds sized on the inflated number shrink.
If the plan breaks mid-file: the unit may be treated as unreliable income, or the lender may fall back on market rent with weaker evidence. A smaller cash-out, which means a smaller payment, can bring coverage back above your target.
The lesson is plain. Test the deal on the new, larger payment, then ask what happens if rent stops for a stretch. A ratio that only works when everything goes right is a thin file.
Document Checklist for a Tenant-on-a-Plan File
Assemble these before you talk to a broker. A complete package avoids stalls.
- Executed lease, or a fresh month-to-month agreement if the lease expired
- Bank statements showing deposits that match the lease
- A rent ledger showing regular rent and plan installments separately
- The signed repayment plan
- A short letter explaining how the arrears arose and how the plan is going
- For two to four units, a rent roll that reconciles to each lease
- Proof of the existing loan’s payment history on your own mortgage
Edge Cases Where the General Rule Breaks
A plan on paper with no payments arriving. This supports almost nothing. The plan documents a debt, and a debt is not income.
A late but current tenant. This is a documentation issue. A tenant months behind with no plan is an income problem, and the lender may use market rent, exclude the unit, or ask you to wait.
A below-market legacy lease. The lower lease figure controls, so coverage and proceeds shrink. A lease above market adds nothing, because the lower number wins.
Short-term rentals. The Form 1007 is designed for monthly long-term rent and does not capture nightly-rate income. STR files run on a separate program track. 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.
Two to four units with mixed tenants. Each unit’s rent is evaluated against the rent roll, which must reconcile with the leases. One delinquent door can drag down a whole building’s file.
A hard money payoff with cash back. This is generally treated as cash-out, not rate-and-term, even when you think of it as simply replacing the short-term loan.
An eviction or legal filing in progress. Treatment depends on the lender. Some will not move forward, and others review it case by case.
Common Mistakes
- Assuming the tenant must move out. A tenant in place is the normal state for a DSCR cash-out.
- Treating a signed lease as proof of income. Lenders want deposits that match it.
- Counting plan installments as rent. They are repayment of a debt.
- Sizing the deal on the old payment. Cash-out raises the payment, and coverage is tested on the new one.
- Using hard money on a stabilized rental without an exit. Hard money loans mature in months, not years.
Who Should Skip This Move
Skip a cash-out for now if the tenant is months behind with no plan and no deposits. Skip it if your coverage only clears 1.00 when every dollar of arrears is counted. Skip it if you would have to refinance out of hard money before the tenant situation resolves. In each case, curing the tenancy first costs less than a file that stalls or a short-term loan that comes due at the wrong time.
If a property is unfinished or not yet rentable, hard money is the right tool. It funds the work, and you refinance after the property is stabilized. Eligibility depends on the property, the investor profile and current lender guidelines. For more on the long-term side, read Lendmire’s complete DSCR loans guide.
Frequently Asked Questions
Can I get a hard money cash-out refinance while my tenant is on a repayment plan?
Often yes, because hard money reviews the property’s rental income and your exit plan more than the tenant’s payment history. The program in the network typically reaches up to 65% of value on a cash-out refinance. Terms vary by lender, property, and experience. Your exit lender will still examine the tenant record later.
Do repayment plan installments count as rental income?
Generally no. Underwriters count lease rent or market rent, whichever is lower, and treat arrears payments as repayment of a debt. The file should show regular rent and plan installments separately.
Is DSCR better than hard money for a stabilized rental with a paying tenant?
Usually yes, since DSCR cash-out reaches about 75% LTV on a standard rental and runs on a long-term structure. Hard money gives less cash and matures within months. The best program for your situation still depends on the property and the tenant’s record.
What if the plan breaks while my application is open?
The evidence changes. The lender may use market rent with weaker support, request an updated ledger, or ask you to re-tenant first. Taking less cash out can restore coverage if you still want to proceed.
Does a bigger cash-out make the coverage ratio worse?
Yes. A larger loan means a larger payment, so the same rent covers less. Reducing the cash-out is often the simplest fix when a file is tight.
Where to Go From Here
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. Where the property is already stabilized, the same conversation can cover long-term DSCR financing, subject to lender guidelines and not a commitment to lend. Lendmire arranges these loans across 41 markets, including Washington, D.C.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
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References
2. Fannie Mae, Appraiser Update
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 Lenders Underwrite a Hard Money Cash-Out Refinance With Only Six Months of Reserves · How to Plan and Use a DSCR Cash-Out Refinance to Build an Addition or ADU · How to Qualify and Apply for a Hard Money Cash-Out Refinance for an Out-of-State Investor
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.