The Quick Read: Fannie Mae will allow a cash-out refinance on a free-and-clear rental that sits in your LLC, but the loan goes to you personally, not the LLC. Title has to move out of the LLC and into your name before closing. The agency route runs on your personal income, so it works differently from a DSCR loan.
- Time the LLC held the property can count toward the six-month ownership test, if you control the LLC.
- Title must be in your individual name at closing, so you take on personal liability.
- A paid-off rental has no first mortgage, so the existing-loan-age test never comes into play.
- The loan is underwritten on your personal income, debts, credit, and financed-property count.
- DSCR files can often keep the LLC on title, subject to program eligibility.
What Does “Paid-Off” Change?
Paid-off simplifies the file, but it does not make the loan a simple refinance. With no mortgage to pay off, the lender sees a new first mortgage on a property with no lien. Fannie Mae’s Selling Guide section on cash-out refinances treats that as a cash-out transaction. Every dollar you take out is cash-out, because nothing is being paid off.
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Two rules often get mixed up here. One is the six-month ownership test. The other says any existing first mortgage being paid off must be at least 12 months old. Your property has no first mortgage, so the second rule does not apply. The ownership test still does.
Here is the catch. “Paid-off” says nothing about how you got there. You might have bought with cash. You might have financed it and paid it down. Both leave you free and clear. But they can lead to different paths, which comes up under delayed financing below.
How Does the Ownership Clock Work With an LLC?
If a borrower-controlled LLC owned the property, the time the LLC held it can count toward your six-month ownership requirement. The LLC must be majority-owned or controlled by you. That is the current text in the guide. The older version many people remember simply said the borrower must have acquired the property six months before the new loan is disbursed.
Picture an investor whose single-member LLC bought a duplex and held it for two years. The investor controls the LLC, so those two years count. The ownership test is met on day one of the application.
Confusion about this rule is old. Investor forums once debated whether LLC time still counted after a guideline change, as in this BiggerPockets thread from roughly a decade ago. Treat that thread as proof of the confusion, not as current guidance. The guide’s present wording counts the LLC’s time.
Does the Property Have to Leave the LLC?
Yes. To close, ownership must be transferred out of the LLC and into the individual borrower’s name. Two conditions get confused here, so here is the side-by-side.
| Rule | What it governs | What it requires |
|---|---|---|
| Ownership clock | Whether you’ve held it long enough | LLC time counts if you control it |
| Borrower type | Who signs the note | A natural person, not the LLC |
| Title at closing | Who owns it afterward | Individual’s name |
| Delayed financing | Waiver of the wait on cash buys | Arms-length purchase, documented |
Freddie Mac is similar. Its guide section requires title to move from the LLC or LP into the borrower’s name on or before the note date. So switching between the two agencies does not get you out of the deed step.
Agency loans are underwritten to a natural person. That is the root of all of this. The LLC can be the former owner. It cannot be the borrower.
How the Agency Underwriting Runs, Step by Step
1. Check title and entity. The lender confirms you majority-own or control the LLC and documents how long it held the property.
2. Qualify the person. A conventional cash-out reviews your personal income, debts, assets, and credit. The property’s rent is not the primary test.
3. Count your financed properties. Fannie Mae’s multiple financed properties rule caps second-home and investment borrowers at 10 financed properties on loans run through its automated underwriting. Your paid-off rental adds no mortgage to the count today. The new cash-out loan adds one.
4. Apply the leverage cap. The Fannie Mae Eligibility Matrix lists 75% as the maximum LTV on a one-unit investment cash-out. Borrowers with multiple financed properties also face added reserve requirements.
5. Appraise. Agency investment loans use a standard appraisal, often paired with a rent schedule or small-income-property form.
6. Deed out and close. The deed moves to you at or before closing. The new mortgage, title policy, and deed are recorded in your name.
7. Deed back, optionally. Many investors want to re-title into the LLC afterward. That has its own risks, covered below.
What decides the outcome is simple: LLC control, six months of ownership, your personal debt load and credit, your financed-property count, and the leverage cap.
Where the General Rule Breaks
Delayed financing for cash purchases. The six-month wait can be waived when you bought with cash. The original purchase must be arms-length, and a settlement statement must show no mortgage financing was used. The guide lets the buyer be a natural person, an eligible trust, or an LLC or partnership in which you hold 100%. Notice the wording difference. The seasoning test says “majority-owned or controlled.” The delayed financing test says 100%. A two-member LLC can pass one and fail the other.
This is not for every cash buyer. If you financed the property and later paid it off, you are not in delayed financing territory. You are back to the six-month test.
Limited cash-out. A related category covers a borrower who is on the loan being paid off but not on title. The limited cash-out section includes properties owned by a borrower-controlled LLC, and ownership still has to transfer to the individual. It does not fit a paid-off property, since there is no loan to be on.
Deeding back after closing. Fannie Mae and Freddie Mac both allow a borrower to move title into an LLC after closing without triggering the due-on-sale clause, if the loan was securitized by Fannie on or after June 1, 2016 and you control the LLC. Whether it goes smoothly can depend on your servicer’s process. Confirm with your servicer first.
Entity types. Corporations, general partnerships, and syndications are not agency borrowers. Only a natural person signs.
What It Costs You to Leave the LLC
The liability trade-off is the real price. Once title is in your name, the LLC’s separation from that property is gone for as long as the loan sits there. You are personally liable on the new mortgage.
There are practical costs too. Two recorded transfers (out, then possibly back in) mean added title and attorney work. Your insurance policy, lease paperwork, and rent deposit accounts may all carry the LLC’s name and need updating. These costs vary, so price them with your attorney before you commit.
Capacity matters as well. A conventional cash-out needs personal debt-to-income room. And the financed-property count caps how far a portfolio can grow on this route.
What a Broker Sees on Files Like This
Across the wholesale network Lendmire places files with, the LLC question is where most agency-versus-DSCR decisions get made. Investors often start with the agency idea because it feels familiar. They then hit the deed-out step, the personal income review, or the property cap, and rethink.
A DSCR loan is a different product. It is a loan underwritten primarily on the property’s rent versus its monthly housing payment, not your paycheck. 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. Many programs let the LLC stay on title and act as borrower, with a personal guaranty, subject to program eligibility.
Here is how the typical network ranges line up for a paid-off rental, on most files and subject to lender guidelines:
| Factor | Agency cash-out | DSCR cash-out (network) |
|---|---|---|
| Borrower | Individual only | LLC often allowed, per program |
| Reviewed on | Personal income and debts | Rent versus payment |
| Max LTV, investment cash-out | 75% (one unit) | About 75% on standard rentals |
| Seasoning | 6 months, LLC time counts | About 6 months from title recording |
| Credit | Per agency matrix | 620 floor in parts of the network; most want about 660 |
| Reserves | Added for multiple financed properties | Commonly about 6 months of PITIA |
PITIA means principal, interest, taxes, insurance, and any association dues. Coverage of 1.00 is where select programs start, not a universal floor. Stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Short-term rental collateral works differently, with cash-out topping out around 70% LTV rather than 75%. Loan size runs up to $3,000,000 on standard programs, and reserves step up to about 9 months above $1,500,000. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
One thing to keep straight. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, and utilities all sit outside the calculation. Our complete DSCR loans guide walks through how the ratio is built.
Which Route Fits? A Decision Frame
Ask these in order:
- Do you want the LLC to stay on title? If yes, the agency route is out. Look at DSCR.
- Is your personal debt load heavy, or are you near the financed-property limit? The agency route may stall. DSCR looks at the property.
- Is the rental income strong relative to the payment, and is your personal income thin or irregular? DSCR fits better.
- Do you want the lowest-friction personal-name loan and have clean income? The agency route can work, if you accept the deed-out and personal liability.
- Is the property in an eligible type? Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs.
If you are buying the next rental with the proceeds, the planning looks different again. See Lendmire’s piece How Much a DSCR Cash-Out Releases on a Paid-Off Short-Term Rental for how equity, rent, and reserves interact. Equity available is never a guaranteed figure.
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
Cash-out refinance: A new mortgage larger than what is owed, with the difference paid to you. On a paid-off property, the whole amount is cash-out.
Seasoning: The waiting period between acquiring a property and refinancing it. Here, it is the six-month ownership test.
Delayed financing: An exception that waives the wait when you bought with cash in an arms-length purchase and the paperwork shows no mortgage financing.
Vesting: The name in which title is held, such as an individual or an LLC.
Due-on-sale clause: A mortgage term that lets the lender demand payoff if the property is transferred.
DSCR: Debt service coverage ratio, the monthly rent divided by the monthly PITIA.
This article is general education, not legal or tax advice. Agency guidelines change and every file is reviewed individually, so consult a qualified attorney or CPA about your own situation.
Frequently Asked Questions
Can my LLC be the borrower on a Fannie Mae cash-out?
No. The loan goes to an individual. The LLC may only have been the prior owner, and title must move into your name before closing.
Does the time my LLC owned the property count toward the six-month wait?
Yes, if you majority-own or control the LLC. The current guide counts that time. A paid-off property is still a cash-out refinance, so the ownership test applies unless delayed financing fits.
Does a paid-off property skip the cash-out wait?
No. The 12-month rule applies to an existing first mortgage, which you do not have. The six-month ownership test still applies, unless you bought with cash and meet the delayed financing conditions.
Can I put the property back in the LLC after closing?
Often, yes. Fannie Mae and Freddie Mac both permit a post-closing transfer to a controlled LLC without triggering due-on-sale, under stated conditions. Servicers handle this differently, so confirm with yours before you record anything.
Will moving the property into an LLC keep the debt off my personal file?
Generally not. Guaranteed debts are typically disclosed on later applications, so the LLC does not erase the obligation from your credit picture.
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. For a deeper look at the seasoning side, see Lendmire’s piece Fannie Mae LLC Seasoning Rules for BRRRR Cash-Out Refinance.
Whichever way you go, the LLC question usually decides the route before the numbers do.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
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: Investment Property HELOC Requirements for a Five-Rental Airbnb Portfolio · How to Handle a Low Rental HELOC Appraisal in a Five-Plus Portfolio · Can an Airbnb Cash Out When the Lender Discounts Its Income?
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.