The Quick Read: It depends on two limits, and the lower one wins: the cash equals the new loan minus the old payoff, closing costs, prepaids and any prepayment charge, and the new loan is capped by about 75% LTV on a cash-out refinance of a standard rental and by how much debt the rent can cover. The leftover cash goes to the departing co-owner, not to you. A buyout counts as a cash-out because the partner’s payout is cash returned at closing. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
- Value limit: appraised value times the cash-out LTV cap, minus the current payoff and costs.
- Rent limit: the largest loan whose full payment the rent can cover at the required coverage ratio.
- Typical leverage: most programs in Lendmire’s wholesale network cap cash-out at about 75% LTV on standard rentals and about 70% on short-term-rental collateral, subject to lender guidelines.
- Ownership clock: about 6 months of ownership is the common expectation, counted from the recorded deed.
- Your cash: in a pure buyout, you usually receive little or nothing. The partner takes the proceeds.
Key Terms Defined
Cash-out refinance: a new loan that pays off the old mortgage and returns the difference as cash at closing.
LTV (loan-to-value): the loan amount divided by the appraised value of the property.
DSCR (debt service coverage ratio): the monthly rent divided by the full monthly payment, so a ratio of 1.00 means rent equals the payment.
PITIA: principal, interest, taxes, insurance and any HOA dues. This is the payment the rent has to cover.
Seasoning: the waiting period between buying a property and refinancing it.
Keeper: the co-owner who stays on the deed after the buyout.
DSCR Cash-Out Calculator
Run the cash-out numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Nov 5, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Nov 5, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
What Decides How Much Cash Comes Out?
Two tests size the loan, and the smaller answer controls. The first test looks at equity. The second looks at rent.
For the equity test, take the appraised value and multiply it by the cash-out LTV cap. Across most of the network, that cap is about 75% LTV on a cash-out refinance of a standard rental. For short-term-rental collateral, the cash-out ceiling is about 70%. Subtract the payoff on the existing mortgage. Then subtract closing costs, prepaids and any prepayment penalty on the old loan. What remains is the most cash the refinance can release. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
For the rent test, the lender divides the property’s rent used for lender review by the full new payment. Many select programs start at 1.00, and stronger ratios open better pricing and leverage. A separate select-lender path accepts coverage below 1.00, with leverage and terms adjusted. A bigger loan means a bigger payment and a thinner ratio. If rent is modest compared with the property’s value, the rent test can shrink the loan below the LTV cap, so qualifying for a loan that size is never assured.
Your cash is the loan after everything ahead of it gets paid.
A Worked Example in Percentages
Say you and a partner each own 50% of a rental. The numbers below are modeled assumptions, expressed as shares of the appraised value, not a quote.
| Step | Share of appraised value |
|---|---|
| Appraised value | 100% |
| Maximum loan (cash-out, standard rental) | 75% |
| Existing mortgage payoff | 50% |
| Left before costs | 25% |
| Partner’s half of the equity (value minus payoff) | 25% |
Look at the last two rows. The partner’s half of the equity is exactly as large as the maximum proceeds. Closing costs, prepaids and reserves then come out of that 25%. The partner ends up short, even though the property had enough equity on paper.
Here is one way out. Many buyout agreements net out assumed sale costs before splitting the equity. A sample agreement an investor posted on BiggerPockets prices the buyout off the refinance appraisal. It subtracts costs, such as a 6% agent commission, before each partner takes a percentage. The post is older, so treat it as an illustration of structure rather than current guidance.
Apply a 6% assumed cost to our example. The value drops to 94%, the payoff takes 50%, and 44% remains. The partner’s half is 22% of appraised value. That fits inside the 25% of maximum proceeds and leaves about 3% for closing costs, prepaids and reserves. It is tight, but it works.
What If the Appraisal Comes in Low?
A low appraisal hurts twice. It shrinks the loan, and it can leave the partner short if the agreement promises a fixed amount.
Suppose the same property appraises 10% below expectations. Value is 90% of what you assumed, so the 75% cap yields a loan of 67.5% of the original number. After the 50% payoff, 17.5% remains before costs.
| Scenario | Max loan | After 50% payoff |
|---|---|---|
| Appraisal as expected | 75% | 25% |
| Appraisal 10% lower | 67.5% | 17.5% |
If the agreement ties the partner’s price to the appraisal, both numbers shrink together, so the buyout can still be sized to what the loan releases. If the agreement fixes a dollar amount, the gap lands on you. That gap needs cash, a smaller buyout or a different structure. The sample agreement above lets either side dispute the value and order a second appraisal at their own cost. That is a sensible clause to copy.
How Do You Set the Partner’s Number?
Put it in writing before you apply. Lenders want a signed buyout or partner agreement in the file, and the partner needs a number they can check.
The formula is simple. Take the appraised value, subtract any agreed sale-cost assumption, subtract the payoff, and multiply what remains by the partner’s ownership percentage. The sample agreement also states that none of the cash-out proceeds go to the remaining owner. That keeps the roles clear. The refinance funds the partner’s exit, and you keep the asset.
One more distinction matters. Returning a money partner’s capital does not always end their ownership stake. The documents must say whether the payout ends the ownership, or the partner could still hold a piece of the property after the check clears.
The Closing Waterfall
Cash leaves the new loan in a fixed order:
1. The existing mortgage payoff.
2. Closing costs and prepaids.
3. Any prepayment penalty on the old loan, plus reserves where required.
4. The partner’s payout.
5. Whatever remains, if anything, to the keeper.
Reserves are the liquid funds a lender wants you to hold after closing. They vary by lender, leverage, loan size and transaction type. They are commonly around 6 months of PITIA, and loans above $1,500,000 typically step up to about 9 months. Reserves can come from your own funds rather than the loan proceeds, so confirm the source with the lender early.
Documents in a typical file include the signed buyout agreement, title and vesting documents, the operating agreement if an LLC owns the property, the payoff statement, the lease and the appraisal.
Does the Rent Limit Your Buyout?
Yes, it can, and this is easy to miss when you focus only on equity. A rental with large equity but modest rent can have a loan ceiling well below 75% LTV.
The coverage test looks at the whole new payment. A buyout adds debt to a property that did not need new debt for any other reason. The ratio therefore gets thinner while the property’s income stays the same. Because DSCR underwriting qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, your personal income does not rescue a thin ratio. A co-owner’s paycheck does not help either. A co-owner adds credit and liability, not property income.
Clearing 1.00 is also not the same as positive cash flow. The calculation compares rent with PITIA only. Repairs, vacancy, management, utilities and capital expenses sit outside it. Before you take on a larger loan, check what you would keep each month after those costs. Lendmire’s complete DSCR loans guide walks through how the ratio is built.
A larger down payment on a purchase would lift coverage. Here the equivalent lever is a smaller buyout or cash in from you. It cannot erase leverage caps, credit floors, reserve rules or property eligibility. The strongest files clear both tests: enough equity and enough rent coverage.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Sequencing, Seasoning and Signers
Close the refinance first, and vest title at closing. If you deed the partner out beforehand, you may restart the ownership clock, since seasoning is typically counted from the recorded deed. You may also hand the existing lender a due-on-sale argument.
A quitclaim deed changes who holds title. It does not change who owes the debt. UpCounsel’s explainer on due-on-sale exceptions notes that a transfer can trigger the clause and that federal protections limit enforcement without releasing anyone from the note. Only a payoff releases the departing partner. That is the main reason a refinance, rather than a deed, is the usual route.
Every titled owner has to sign the new lien, because a lender generally will not lien only part of a property. If an LLC holds title, subject to lender program eligibility, the signers depend on the operating agreement. The majority owner usually signs, and an equal 50/50 split typically puts both owners on the guaranty.
Does the Agency Limited Cash-Out Rule Apply?
No, and this is where the buyout advice for conventional loans misleads people. Fannie Mae’s Selling Guide treats a co-owner buyout as a limited cash-out refinance when the property was jointly owned for at least 12 months. That is an agency rule for agency loans.
DSCR loans are non-agency, and no published DSCR rule gives the same exemption. Across the network, seasoning and any buyout exception are lender-specific. Unless a specific lender tells you otherwise in writing, plan around the cash-out terms: the 75% ceiling and about 6 months of ownership.
When the Buyout Is Bigger Than the Proceeds
If the payoff plus the partner’s share exceeds what the LTV cap allows, one refinance cannot fund the buyout. These are the usual fixes:
| Fix | What changes |
|---|---|
| Phased buyout | Partner is paid in stages |
| Cash from the keeper | Fills the gap at closing |
| Partner note | Partner is paid over time |
| Smaller refinance | Partial paydown first |
| Sale | Proceeds divided between owners |
A partner note has a catch. The partner may stay on the old loan, which leaves them exposed, and a second lien can create problems with first-lien rules. A home equity line is no substitute either. A second lien does not take the departing owner off the original note, so a refinance remains the route when the partner must be released.
If the loan you need runs into jumbo territory, Lendmire’s article Can a Jumbo Cash-Out Refinance Buy Out a Co-Owner’s Share? covers the larger-balance version of this problem. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders). Above $2,500,000, the network generally holds to 30-year fixed structures.
What the Keeper Actually Gets
The keeper gets the asset, a larger loan and a thinner ratio. Clearing the ratio does not equal positive cash flow, so run the monthly picture before you commit.
On the plus side, the loan is reviewed on the property, which helps a remaining partner with thin documented income. It also lets co-owners avoid blending their personal finances. The partner is released from the debt, which a deed alone cannot do.
Compare the refinance against selling and splitting the proceeds. A refinance keeps the asset, but it costs closing fees and puts more leverage on it. Selling ends the partnership cleanly, but it also ends your ownership.
What Else Can Limit the File?
Credit matters even though coverage is property-level. A 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers. Short-term rentals add conditions: a 640 or higher score, about 12 months of hosting history, and cash-out limited to about 70%. 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.
Property type matters too. Manufactured homes, log homes and barndominiums are not offered through these programs. A home someone lives in falls under owner-occupied programs, because 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. Program details change, and every file is underwritten individually, so nothing here is a commitment to lend.
Frequently Asked Questions
Can one refinance fund the buyout if the old mortgage is large?
Only if the cash-out loan is big enough to cover the payoff, costs, reserves and the partner’s share. Take the cap on a cash-out of a standard rental, about 75% LTV, and subtract the payoff. If the partner’s share exceeds what is left, you need cash in, a smaller buyout, a partner note or a phased payout. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Does my co-owner’s income help the coverage ratio?
No. Coverage compares the property’s rent with the full payment. A co-owner brings credit and liability to the file, which can affect pricing and leverage, but a salary does not raise the ratio.
Does a quitclaim deed take my partner off the loan?
No. A quitclaim moves title and leaves the debt where it was. It can also raise due-on-sale concerns with the existing lender. The partner is released when the old loan is paid off through the refinance.
Can I do this on a short-term rental?
Yes, subject to lender guidelines, but the cash-out ceiling is lower, about 70% on short-term-rental collateral. Expect a 640 or higher credit score and about 12 months of hosting history. Less loan means less cash for the partner.
What if the appraisal comes in low and my agreement fixes the price?
You cover the gap. A low value shrinks the loan but not the amount you owe the partner. Tie the price to the refinance appraisal, and include a dispute clause, so the risk is shared.
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. Lendmire is a broker arranging DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Thinking through the buyout math before a partner asks for a number is what keeps a good co-ownership from ending in a dispute.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 41 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
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References
1. BiggerPockets, Buyout Agreement thread
2. UpCounsel, Due-on-Sale Clause Exceptions
3. Fannie Mae Selling Guide, Limited 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: How to Use a DSCR Cash-Out Refinance to Buy Out an Unmarried Partner · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance Right After Rehab? · How Much Cash Comes Out of a DSCR Cash-Out Refinance on Rental Homes?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.