Expense Factor Change On A Bank Statement Cash-out — The Quick Read: No. The expense factor is set by how your income gets documented — business bank statements versus personal statements, and whether an accountant certifies a lower ratio — not by why you’re refinancing. A cash-out refinance layers its own separate rules for loan-to-value and title seasoning on top of that math. But the expense-factor calculation itself runs the same on a purchase, a rate-and-term refinance, or a cash-out refinance.
That’s the short version. Here’s why it works that way, and where investors get confused.
Key Terms Defined
Expense factor — the percentage of your business bank deposits a lender assumes went to running costs, subtracted before the rest counts as qualifying income.
Bank statement loan — a mortgage that documents income from deposit history instead of traditional personal-income documentation, common for self-employed borrowers whose returns understate real cash flow.
Cash-out refinance — a new loan larger than what you owe, with the difference paid to you at closing.
Loan-to-value (LTV) — the loan amount as a percentage of the property’s value; lower LTV means more equity left in the deal.
DSCR (debt service coverage ratio) — on an investment property loan, the property’s rent divided by its full monthly housing cost; a ratio at or above 1.0 means rent covers the payment.
Seasoning — the amount of time you must own or have held title to a property before certain loan features, like cash-out, become available.
How the Expense Factor Actually Gets Calculated
The expense factor is a function of your documentation type, full stop. It has nothing to do with your reason for borrowing.
Here’s the sequence most lenders in the wholesale bank-statement space run: they pull either 12 or 24 consecutive months of statements, strip out transfers and one-time deposits like asset sales or loan proceeds, and average what’s left. Then they apply a percentage haircut to account for the cost of running your business.
Across the wholesale network Lendmire places files with, that haircut typically lands on a fixed schedule tied to your business type: around 20% for a service business with no employees, 40% for a business with one to five employees, and 50% for six or more employees or any product-based business. Some files skip the fixed schedule entirely — a borrower can bring an accountant-provided ratio instead, or qualify under a profit-and-loss method, which is generally capped at 80% of stated income. None of those paths check whether the loan is a purchase, a rate-and-term refinance, or a cash-out refinance before applying. It’s the documentation method that drives the number, every time.
Market surveys of the broader Non-QM space describe a similar mechanic with a different default — a flat 50% haircut on business deposits unless a CPA letter overrides it, per one industry writeup from mbanc. Lendmire’s wholesale network runs its own schedule, described above, rather than a single flat number — but the underlying logic is identical across the industry: documentation type sets the ratio, not loan purpose.
So Does Cash-Out Actually Change the Factor?
No — and this is worth stating plainly because it’s the exact question that trips people up. Whether you’re pulling cash out or simply lowering your rate on a straight refinance, the lender reads the same bank statements the same way. The expense ratio schedule doesn’t have a cash-out column and a purchase column. It has one column: your business type and your documentation method.
What changes on a cash-out file are the gates layered on top of the income math, not the math itself.
What Cash-Out Actually Changes: LTV and Seasoning
Two things genuinely shift when you go from a rate-and-term refinance to a cash-out refinance, and both sit downstream of the income calculation.
Leverage drops. On a primary residence in Lendmire’s network, a $300,000 to $1,000,000 loan can run to 80% LTV on a purchase or rate-and-term refinance, but cash-out on that same size band tops out lower still, with a 680 credit floor. Move up to $1,500,000 to $2,000,000 and cash-out drops further, to 75%, with credit generally needing to clear 720. On investment property specifically, the same $300,000 to $1,000,000 band runs 85% on purchase or rate-and-term but caps cash-out at 75%, requiring 700 credit. Move that investment property loan into the $2,500,000 to $3,000,000 tier and cash-out compresses to 60%, even though purchase and rate-and-term still reach 75% at that size. Every leverage figure above $4,000,000 gets reviewed case by case before submission — never a flat “up to” number at that scale.
Reserve and proceeds rules tighten. Cash-out proceeds run unlimited at or below 60% LTV through the portfolio program, but above 60% LTV, cash-in-hand caps at $1,500,000 on that same program. Reserve requirements — generally 3 months of housing payment for loan amounts up to $500,000, 6 months up to $1,500,000, and 9 months above that — apply regardless of loan purpose, but cash-out proceeds can’t be used to satisfy those reserves. You need the liquidity sitting separately.
Neither of these controls touches the expense factor. They’re separate checkboxes the file has to clear.
The Accountant Letter: The Real Lever on Any File
If there’s one thing that actually moves the needle on qualifying income — cash-out or otherwise — it’s an accountant-certified expense ratio. A borrower whose default schedule would land at 40% or 50% can sometimes bring a CPA-prepared letter showing the business’s real operating costs run lower, which raises qualifying income directly. This lever is available identically whether you’re refinancing to lower your payment or refinancing specifically to pull equity out. It doesn’t expand or shrink because the transaction is a cash-out.
Lendmire arranges this kind of documentation review as part of file structuring — pairing a bank-statement borrower with a lender in its network whose fixed schedule, or willingness to accept third-party certification, fits that borrower’s actual business type. For a deeper walkthrough of how bank-statement income gets converted into loan size on a cash-out transaction specifically, see Lendmire’s guide to bank statement loan cash-out refinancing.
One pattern worth flagging from files across this space: borrowers who commingle personal and business deposits into a single account almost always get read as a business account, with the full expense factor applied to everything in it. Keeping a dedicated business account and moving funds to personal checking as a clean transfer — which counts at 100% value in Lendmire’s network — tends to produce a more favorable read than a blended account ever will.
Common Misconceptions
“Refinancing resets my expense factor.” It doesn’t. The factor tracks your documentation method and business type, and that doesn’t change because you switched from a rate-and-term refinance to a cash-out.
“My CPA letter from last year still applies.” Not automatically. Documentation gets filed fresh per transaction, and the accepting lender’s requirements can shift between loans.
“Owning 100% of my business gets me a better ratio.” Ownership percentage generally determines whether you’re treated as self-employed for documentation purposes at all — it doesn’t change the percentage haircut applied to your deposits.
“Personal statements always get a lower haircut than business statements.” Not necessarily. Some lenders apply a higher haircut to personal accounts on the theory that major business costs were already paid before the money hit your personal checking.
What This Means for an Investor Sizing a Deal
Picture an investor who owns a service business with no employees, pulling equity out of a rental to fund a second acquisition. Under a 20% expense ratio, more of the gross deposits count as qualifying income than under a flat 50% schedule — which can be the difference between a file that clears a lender’s debt-to-income ceiling of 50% and one that doesn’t. That math is identical whether the loan is a purchase or a cash-out. What actually caps the deal size at that point is the LTV ladder and the reserve requirement, not the income calculation.
DSCR loans are designed for non-owner-occupied investment properties. Because they’re business-purpose investor loans, they get reviewed differently from a standard owner-occupied mortgage — and for investors weighing whether a property-income loan or a bank-statement loan fits their file better, Lendmire’s complete DSCR loans guide breaks down how rental income alone, rather than personal deposits, can qualify a purchase or refinance.
Tax treatment can depend on how cash-out funds get used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Regulators have weighed in on income calculation more broadly, not on expense-factor mechanics specifically. The Consumer Financial Protection Bureau has clarified how debt-to-income gets calculated for self-employed and non-employment income sources, underscoring that documentation method — not loan purpose — drives how income gets counted across the mortgage industry generally.
Frequently Asked Questions
Does a rate-and-term refinance get a better expense factor than a cash-out refinance?
No. Both run through the identical documentation-based calculation. The rate-and-term refinance may face a higher LTV ceiling than the cash-out version at the same loan size, but the income math itself doesn’t shift between the two.
Can I lower my expense factor with an accountant letter on a cash-out deal specifically?
Yes, in the same way you could on any transaction type. An accountant-certified ratio can override a lender’s default schedule if it documents your business’s actual operating costs, regardless of whether the loan is a purchase, refinance, or cash-out.
Why does my cash-out amount feel more limited than I expected, even with a good expense factor? Because cash-out proceeds face their own LTV ceiling and reserve rules that sit separately from income qualification. A strong expense ratio raises your qualifying income, but it doesn’t raise the leverage cap or waive the reserve requirement. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Do I need 12 or 24 months of bank statements for a cash-out refinance?
It depends on the lender and program in Lendmire’s wholesale network — some accept 12 months, others require 24, and the bank portfolio program used for larger loan sizes generally works from 12 months of statements.
Does combining my personal and business accounts help or hurt my expense factor?
It generally hurts. A commingled account tends to get treated as a business account entirely, with the full expense ratio applied to the whole balance rather than to a cleanly separated business portion.
If you’re weighing a bank-statement cash-out against a straight refinance, or wondering whether your business type puts you closer to a 20% or 50% expense schedule, Lendmire can help you compare options across its wholesale network based on your documentation, credit profile, leverage needs, and how you plan to use the proceeds. Reach Lendmire at 828-256-2183 or request a quote through its mortgage quote form.
For how equity extraction works on an investment property, see cash-out refinance on an investment property.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
Self-employed borrowers can compare both super jumbo programs on Lendmire’s self-employed mortgages page.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 40 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the mechanics of pulling equity out of a rental property, see cash-out refinance on an investment property.
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References
1. mbanc — How to Get a CPA Letter for a Bank Statement Loan
2. Consumer Financial Protection Bureau — CFPB Finalizes April Clarifications to Mortgage Rules
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.
