Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The Quick Read: A 75% maximum LTV is the ceiling on a cash-out refinance across most of the wholesale network, but the loan you actually receive is the lowest result of three tests: appraised value, rental coverage, and ownership seasoning, and on buildings with five or more units the appraisal and income review are commercial in style. The 75% figure is a ceiling, never an entitlement, and it applies to the new total loan, not to the cash you take home. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
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- On a cash-out refinance of an investment property, most programs in the network cap leverage at 75% LTV, and about 6 months of ownership seasoning is the common expectation.
- Cash back at closing turns any refinance into a cash-out, so the 75% ceiling applies the moment cash returns to you.
- On 5+ unit buildings, the lender builds from net operating income (NOI) and a commercial appraisal, not from gross rent against the payment.
- Rental coverage, credit, reserves, and LTV are tested together, so a strong number in one column does not erase a weak one in another.
- Net proceeds equal the new loan minus the payoff, closing costs, and any prepayment charge on the old loan.
What Does the 75% Maximum LTV Actually Mean?
The 75% figure is the most the new loan can be, measured against the appraised value of the building. It is a ceiling set by lender and investor appetite.
Two things sit between that ceiling and your check. The first is the other tests on the file. The second is everything that comes out of the new loan before cash reaches you: the payoff of the existing loan, closing costs, any prepayment charge, and any junior lien that has to be paid off or subordinated.
Brokers see this misread constantly. An investor hears 75% and assumes 75% of value arrives as cash. It does not. The 75% applies to the total new loan, and the existing balance comes out first.
Short-term-rental collateral runs lower. Cash-out on a short-term rental tops out at 70%, while a standard long-term rental tops out at 75%. Short-term-rental files also expect roughly 12 months of hosting history and a 640+ score. Most borrowers on the commercial side are working with standard long-term tenants, so 75% is the working number.
For the broader mechanics of how leverage works on rental refinances, Lendmire’s piece Maximum LTV on a DSCR Cash-Out Refinance by File Strength covers how file strength moves the ceiling.
Where Does the Unit-Count Line Sit?
The line sits between four and five units. A one-to-four unit building is underwritten in a residential style. A building with five or more units is underwritten in a commercial style. That change affects the appraisal form, the type of appraiser, the income calculation, and often the lending channel.
| Factor | 2-4 units | 5+ units |
|---|---|---|
| Appraisal | Residential, comparable sales | Commercial, income approach |
| Income test | Gross rent vs. full payment | NOI vs. debt service |
| Documents | Leases, rent schedule | Rent roll, operating statements, leases |
| Channel | Standard DSCR programs | Often routes to commercial lanes |
| Cash-out ceiling | About 75% LTV | About 75% LTV on most of the network |
Here is the honest caveat on the last two rows. The 75% cash-out ceiling is the network position for most programs. Many 5+ unit buildings, especially larger ones, are placed through commercial channels instead: agency, HUD-insured, or bank portfolio lending. Those lanes have their own leverage, recourse, and documentation rules. Whether a given building fits a DSCR program depends on size, occupancy, and the lender, so the file has to be matched to a program before any number is promised.
Scattered-site portfolios need a flag too. A group of owned duplexes and triplexes does not combine into one 5+ unit commercial loan. Each property is underwritten on its own.
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. The rest of this article stays on the mechanics. Lendmire’s complete DSCR loans guide covers the program basics.
How Underwriting Sizes the Loan, Step by Step
The loan is the smallest amount that clears every test. That is the core idea. Here is the order a file moves through.
1. Classify the property. Unit count sets the appraisal type and the income method. A fifth unit changes the file.
2. Check seasoning. About 6 months of ownership, measured from the recorded deed, is the common expectation. Inside that window, lenders usually size the loan off cost basis, not appraised value. That often defeats a value-add plan that depends on a fresh appraisal.
3. Order the appraisal. On a 5+ unit building, the appraiser builds value from income. Value is NOI divided by the cap rate. The loan ceiling is 75% of that value.
4. Build the income picture. The lender reads the rent roll, trailing operating statements, leases, concessions, and expenses. It works from NOI, which excludes debt service, capital expenditures, depreciation, income taxes, and owner draws.
5. Test coverage on the new payment. Coverage is measured against the new, larger obligation, not the old one. Many select programs start at 1.00x coverage. A separate select-lender path takes coverage below 1.00x, with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
6. Apply credit and reserves. A 620 floor exists in parts of the network. Most programs want around 660. A 700+ score unlocks the strongest leverage tiers. Reserves commonly run about 6 months of PITIA, and loans above $1,500,000 typically step up to about 9 months.
7. Take the lowest result. Value, coverage, and seasoning each produce a maximum. The lowest one sets the loan.
8. Subtract the drains. Payoff, closing costs, prepayment charges, and junior liens come out of the new loan. What remains is your net cash.
One more point on the income test. Clearing 1.00x is not the same as positive cash flow. The ratio compares rent, or NOI on a commercial file, to the debt obligation only. Repairs, vacancy, management, utilities, and capital spending sit outside it.
Why Does the Appraiser’s Cap Rate Move Your Proceeds?
On a 5+ unit building, a small change in the cap rate moves value sharply, and the 75% ceiling moves with it. Value equals NOI divided by the cap rate, so the same income produces a lower value when the appraiser uses a higher cap rate. An investor walkthrough on multifamily valuation shows the same NOI producing very different values at different cap rates.
Run the proportions. Say the appraiser uses a 6.0% cap rate and your underwriting expected the same. Now say the appraisal comes back at 6.5% on the same NOI. Value falls by about 7.7%. The 75% ceiling falls by the same 7.7%. That drop comes straight out of your available proceeds, before any payoff or closing cost.
Two lessons follow. First, rent increases and expense cuts only count when documented, because the appraiser starts from the operating statement. Second, a low appraisal is a real risk on this property type, not a rare event. Plan the cash you need from the building at a value below your own estimate.
Two Scenarios: Where LTV Binds and Where Coverage Binds
Scenario one: value sets the loan. Picture an investor who has held a 12-unit building well past the seasoning window. Rents are documented, the rent roll is clean, and the income supports a strong coverage ratio on the new payment. Here the 75% LTV ceiling is the binding number. The loan sizes at the ceiling, the old balance is paid off, and the investor nets what remains after costs. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Scenario two: coverage sets the loan. Now picture a building with large equity but modest NOI. At the full 75% LTV, the new debt service pushes coverage below 1.00x. Equity is not the problem. Income is. The loan sizes down until coverage clears the program floor. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
What can the investor do in the second case?
- Take a smaller loan and accept less cash.
- Raise documented NOI through lease-up or expense reduction, then refinance after those gains show on the statements.
- Ask about select-lender paths that accept coverage below 1.00x, understanding that leverage and terms adjust.
- Ask about interest-only periods or extended terms, which select lenders in the network offer. They can change the debt service the coverage test uses.
- Look at a different channel if the building and the borrower fit a commercial lane better.
A larger down payment on a purchase lowers the payment and can lift coverage, but it never erases leverage caps, credit floors, reserve rules, or property eligibility. Cash-out files work the same way. Strong equity and strong coverage both have to be present.
Where the 75% Rule Breaks
Several situations move the number. Each is worth checking before a file goes in.
Rate-and-term versus cash-out. A rate-and-term refinance reaches a higher ceiling because no cash comes back. Any cash at closing makes it a cash-out, and the 75% ceiling applies. A balloon payoff that returns cash can be reclassified as cash-out too.
Seasoning shortfall. Inside the seasoning window, the loan is sized off cost basis. A buyer who rehabbed a building quickly and expected to refinance on the new value will find the cash smaller than planned.
Short-term-rental collateral. The cash-out ceiling is 70% on short-term-rental collateral, against 75% on standard rentals, and the hosting history requirement is longer. 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.
Small balances. On a low-priced building, minimum loan size can bind before LTV does. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Larger loans. Standard programs run up to $3,000,000. Above $2,500,000, the network generally holds to 30-year fixed structures, and the higher reserve requirement applies above $1,500,000.
Property types outside the programs. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs.
State overlays. The network carries no state-specific LTV overlay in its standard guidelines, so every state starts from the same cash-out ceiling. Individual lenders may add their own conditions, so each file is underwritten individually.
Junior liens. A second mortgage or line on the building has to be paid off or subordinated, which cuts net cash.
Why Do Banks Use Different Limits?
Regulated banks follow a different framework. The OCC’s Comptroller’s Handbook on commercial real estate lending describes how banks set internal LTV limits that should not exceed supervisory limits, and how they set minimum coverage standards. It defines debt service coverage as NOI divided by annual debt service, and it stresses actual collections, management cost, and replacement reserves in the income picture.
Those supervisory limits bind regulated banks. They do not set the 75% figure on a non-bank DSCR program. The 75% ceiling is a lender and investor-appetite convention, and it differs from channel to channel. That is why the same building can get different leverage from a bank, an agency lender, and a network program.
How Do Credit and Reserves Fit In?
Credit, coverage, LTV, and reserves are underwritten as one combined test. Strong credit does not rescue weak rent, and extra reserves do not lift a leverage cap. A lower coverage ratio usually comes with reduced leverage, stronger credit, or added reserves, never a free pass.
Across the network, a 700+ score opens the strongest leverage tiers. A borrower near the floor should expect tighter terms. Reserves are documented from liquid accounts, and the amount varies by lender, leverage, loan size, and transaction type. The ranges above are typical guidance from select lenders, not commitments. Programs change, and every file is underwritten individually.
Key Terms Defined
Cash-out refinance: A refinance that pays off the existing loan and returns cash at closing.
LTV (loan-to-value): The new loan amount divided by the appraised value of the property.
NOI (net operating income): Rental income minus operating expenses, before debt service, capital expenditures, depreciation, and taxes on income.
DSCR (debt service coverage ratio): The property’s income divided by its debt obligation. On 1-4 unit files that is rent against PITIA. On 5+ unit files it is NOI against debt service.
Cap rate: NOI divided by property value, used by appraisers to convert income into value.
Seasoning: The ownership period a lender expects before sizing a cash-out loan off appraised value instead of cost basis.
PITIA: Principal, interest, taxes, insurance, and any association dues.
What Does the Decision Look Like in Practice?
Run the tests before you apply. A short self-check keeps the file clean.
- Confirm unit count and whether the building fits a DSCR program or a commercial lane.
- Confirm the recorded deed date and the seasoning clock.
- Estimate value on income, then assume the appraisal could land below your number.
- Pull the rent roll, trailing operating statements, leases, and expense records.
- Test coverage on the new payment at the full 75% LTV, then at lower leverage.
- Add up the drains: payoff, costs, prepayment charge, junior liens, reserves.
- Compare net proceeds, not headline LTV. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Sequencing matters if the cash funds the next purchase. Each property carries its own seasoning clock and coverage test, so a cash-out on one building does not shorten the clock on another. Lendmire’s piece What Is The Maximum LTV For A Cash Out Refinance gives the general framework for that planning.
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.
Frequently Asked Questions
Is 75% the most I can borrow on a multifamily cash-out refinance?
Other channels can differ, and the actual loan is often lower because coverage, seasoning, credit, or reserves bind first. Treat 75% as the top of the range, not the expected result.
Can a 5+ unit building use a DSCR program?
Sometimes. The network’s cash-out ceiling of about 75% LTV applies, but the underwriting turns commercial, with an income-approach appraisal and an NOI-based coverage test. Larger buildings often route to agency, HUD-insured, or bank portfolio lanes. The match depends on the building, the borrower, and the lender.
How long do I have to own the building before cash-out?
About 6 months from the recorded deed is the common expectation. Before that point, lenders usually size the loan off cost basis, which can cut proceeds sharply on a renovated building. The clock runs from title recording.
What happens if the appraisal comes in low?
The 75% ceiling drops with the value, and the cash drops with it. On a 5+ unit building, a higher cap rate or lower NOI can cut value even when your rents are unchanged. Appraisal reconsideration is possible when you have documented recent comparable data, though results are never assured.
Does a bigger loan hurt my coverage ratio?
Yes. Coverage is tested on the new payment, so more cash out means more debt service. A building with strong equity can still be sized down because coverage falls short. Select lenders in the network offer sub-1.00x paths, with leverage and terms adjusted.
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.
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 (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. How to Analyze and Value Multifamily
2. OCC Comptroller’s Handbook, Commercial Real Estate Lending
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: Multifamily Cash Out Refinance Lenders · Is a Cash-Out Refinance Harder on a 2–4 Unit Rental? · Cash Out Refinance Commercial Investment Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.