The Quick Read: It depends on the new appraised value times the leverage cap that applies, minus the payoff of your existing hard money loan and closing costs, and a non-warrantable building usually lowers that cap and shrinks the lender pool without changing the formula itself. The lender’s appraisal sets the value, not your after-repair estimate.
- A new hard money cash-out loan typically tops out at 65% of value, and the figure varies by lender, property, and experience.
- A DSCR loan that pays off hard money can reach up to 75% on standard rentals, though a non-warrantable condo often lands below that after project review.
- Rent coverage can cap the loan below the leverage ceiling.
- Seasoning, building problems, and a thin appraisal are the usual reasons cash comes in lower than expected.
How Is the Cash Number Built?
The cash you receive equals the new loan amount minus the old loan payoff minus closing costs, prepaid items, and any required reserves. The new loan amount is the lesser of two limits: the leverage cap times the appraised value, and the amount the rent can support.
Think of it as a waterfall. The new lender orders an appraisal. It applies a percentage cap to that value. Your hard money lender gets paid first, including principal, accrued interest, and fees. Closing costs come out next, and what remains is yours.
Closing costs vary from file to file, so budget for them as a real subtraction rather than a rounding error. They include origination, appraisal, and title charges, and they are netted from your proceeds. A deal that shows cash on paper can show very little after costs.
What Makes a Condo Non-Warrantable?
A non-warrantable condo is a unit in a project that fails the standard checklist for conventional, agency-backed loans. Lenders look at the building and the association, not just your unit. Common triggers include:
- one investor or entity owning a large share of the units
- hotel-style or rental-desk operations
- a large share of commercial space
- pending litigation involving the association
- deferred repairs or inadequate association reserves
- a high rate of delinquent dues
- a recent or planned special assessment
The label does not mean the building is a bad investment. It means the loan needs a lender that reviews projects on its own terms. Across the wholesale network Lendmire works with, a non-warrantable condo is treated as a condo with leverage adjusted to the project’s profile, not as a separate exception program. Lender-to-lender differences are large, so the same building can look very different on two term sheets.
Which “Hard Money Cash-Out” Do You Mean?
The phrase has two meanings, and choosing between them changes your cash more than anything else. In the first, a new hard money loan pulls cash out of the property. In the second, a DSCR loan, which qualifies primarily on property-level rental income covering the payment, pays off the hard money loan and returns what is left.
| Factor | New hard money cash-out | DSCR loan paying off hard money |
|---|---|---|
| Typical leverage ceiling | Up to 65% of value | Up to 75% on standard rentals |
| Term | 6-18 months, interest-only | 30-year fixed is the spine |
| Credit | 620 minimum, with added conditions below 660 | 620 floor in parts of the network; most want about 660 |
| Underwriting focus | Property, plan, and exit | Rent versus full monthly payment |
| Seasoning | Varies by lender | About 6 months from title recording |
Every figure above varies by lender, property, and experience, and none is a commitment to lend. A non-warrantable condo often sits below the top of each range, because the project review trims leverage.
The takeaway is simple. A new hard money cash-out gives you the least cash because its ceiling is lowest, and it also leaves you with another short term to exit. The longer-term route typically returns more, but it adds a rent test. Many investors refinance out of hard money into DSCR financing once the property is stable. Lendmire brokers that path through its hard money exit refinance program.
Three Worked Examples in Percent of Value
These examples are modeled assumptions, expressed as percentages of the new appraised value. They are not quotes and not market data.
Example one: a clean building with room to spare. Say your hard money payoff equals 55% of the new appraised value. A DSCR loan at a 75% cap returns about 20% of value before closing costs and reserves. After those, the number is smaller but still real. This assumes the rent clears the coverage test.
Example two: a payoff-heavy flip. Hard money often funds a large share of the after-repair value, and many flip loans reach up to 75% of that value. Say your payoff equals 70% of the appraised value. A 75% cap leaves about 5% of value before costs, and costs can consume most of it. A new hard money cash-out loan at a 65% ceiling would not even cover the payoff. You would need to bring cash to the table.
Example three: the appraisal comes in light. Take example one again, but the appraisal lands 10% below your estimate. Your payoff is unchanged, at 55% of your original value figure. The cap now applies to 90% of that figure, so the new loan is 67.5% of it. Cash falls from about 20% to about 12.5% of the original value, a drop of more than a third from a 10% fall in value.
That last example is the reason leverage matters. Cash falls faster than value does, because the payoff stays fixed while the cap shrinks.
Why the Building Moves Your Number
The building affects three things: the appraisal, the leverage cap, and the monthly obligation. Each one can cut your cash.
The appraisal. Condo values rest on comparable sales inside the building and nearby projects. A thin sales history, many investor-owned units, or a troubled association can pull value down. Your own after-repair estimate does not set the number, so a rehab that improved the unit may support a higher appraised value only depending on comps and underwriter review.
The leverage cap. A lender reviewing a non-warrantable project can step leverage down for investor concentration, litigation, weak association reserves, or hotel-style operation. Some lenders decline those projects entirely. The pool is smaller, which is why shopping the file across several lenders matters more here than on a standard rental.
The monthly obligation. A DSCR loan compares monthly rent with the full payment, which covers principal, interest, taxes, insurance, and association dues. That test counts HOA dues no matter who pays them. A bigger loan means a bigger payment, so coverage can cap your loan below the leverage ceiling.
Clearing the coverage number is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital reserves sit outside the calculation. A condo with high dues can pass the lender’s test and still leave little for you each month.
The DSCR loan program’s minimum coverage is 1.00, meaning qualifying rent against PITIA. Stronger ratios open better leverage.
What Shrinks Your Cash
| Factor | Effect on proceeds |
|---|---|
| Thin building comps | Lower appraised value |
| Investor concentration or litigation | Lower cap or fewer lenders |
| High association dues | Lower coverage, smaller loan |
| Special assessment | Cash and reserve hit |
| Payoff near 75% of value | Little left after costs |
| Reserve requirement | Cash held back |
Reserves deserve a separate note. They vary by lender, leverage, loan size, and transaction type, and a common expectation is about 6 months of the full monthly payment. Loans above $1,500,000 typically step up to about 9 months. Reserves are not always cash you receive, because some of what you pull out can be required to stay in the account.
A special assessment is not automatically added to the coverage test. It counts when it becomes a recurring cost. It can still hurt your cash and reserves right away, so ask the association about planned assessments before you order the appraisal.
The Seasoning Trap
About 6 months of ownership, measured from title recording, is the usual expectation before a DSCR loan will size on appraised value. That clock matters most for a BRRRR investor (buy, rehab, rent, refinance, repeat), because value you created through rehab does not count until seasoning is met.
Inside that window, many lenders size on cost basis instead, meaning the purchase price plus documented rehab. Some will not do cash-out at all. If your hard money term is short, check the calendar before you check the appraisal.
There is also a cost trap. If you refinance now with payoff only and cash out later, you pay closing costs twice. Where the numbers are tight, waiting once is usually cheaper than refinancing twice.
Where the Agency Rulebook Fits
The term non-warrantable comes from agency project rules. Fannie Mae’s ineligible project guidelines bar projects with characteristics such as a commercial or mixed-use share above 35%, and they treat an Unavailable status in its Condo Project Manager as ineligible. Law-firm commentary on those rules notes that projects failing mandatory structural inspections or certifications are also out.
That is contrast only. DSCR loans are not agency products, and each lender in the network runs its own project review. An Unavailable status does not decide your file, though it is a useful early signal about what a reviewer will question.
Special Cases: Condotels and Short-Term Rentals
If the building runs hotel-style, expect tighter treatment than a standard condo: lower leverage and a smaller group of willing lenders. Hospitality collateral is not on the hard money program sheet at all, so a true hotel property is a different conversation.
If you run your unit as a short-term rental, the cash-out ceiling on that collateral is typically 70%, and lenders expect about 12 months of hosting history. 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. Many condo associations restrict short stays outright, which can end the plan before the loan does.
Smaller balances can carry extra layers too. Condos with low loan amounts often route through select lenders, and non-warrantable status adds more review on top.
Not every property type is available. Manufactured homes, log homes, and barndominiums are not offered through the network’s DSCR programs, and condos are a different category with different treatment.
Documents to Gather Before You Ask
- the association’s budget and most recent financial statements
- the reserve study or reserve statement
- the governing documents
- a unit-ownership breakdown showing investor concentration
- any litigation disclosure
- a list of past and planned special assessments
- current dues and the delinquency rate
- your hard money payoff statement with per-diem interest
- the lease and a rent schedule
Request the association items early. They tend to arrive slowly, and the lender cannot size the loan without them. Ask the management office what your project’s status is before you commit to a lender.
Key Terms Defined
Non-warrantable condo: a unit in a project that fails the standard checklist for conventional loans, so it needs a lender with its own project review.
Hard money loan: a short-term, interest-only business-purpose loan secured by the property, underwritten mostly on the asset, the plan, and the exit.
Cash-out refinance: a new loan larger than the old payoff, where the difference comes to you after costs.
DSCR (debt service coverage ratio): monthly rent divided by the full monthly payment, including principal, interest, taxes, insurance, and association dues.
Seasoning: the waiting period a lender wants between buying a property and refinancing it.
ARV (after-repair value): your estimate of what the property will be worth after rehab; the lender’s appraisal, not your ARV, decides the loan.
Frequently Asked Questions
Can I get a cash-out refinance on a non-warrantable condo at all?
Yes, through lenders that review the project on its own terms. Leverage is usually lower than on a standard rental, and the pool of willing lenders is smaller. Eligibility depends on the building, your credit, reserves, and rent coverage, subject to lender guidelines.
Does a hard money payoff count as rate-and-term or cash-out?
Lenders in the network generally treat a hard money payoff as cash-out. A payoff-only refinance returns no cash at closing, so the label matters for the leverage cap, the seasoning rule, and the reserve requirement. Confirm the classification with the lender before you order the appraisal.
What leverage should I plan around?
For a new hard money cash-out loan, plan on up to 65% of value, which varies by lender, property, and experience. For a DSCR loan paying off hard money, the ceiling on standard rentals is 75%, and a non-warrantable condo can land below it. Never plan on the top of either range.
Can high association dues block the loan?
They can shrink it. Dues count in the monthly obligation whoever pays them, so higher dues lower coverage and can cap the loan below the leverage limit. Coverage of 1.00 is where many select programs start, and a select-lender path takes coverage below 1.00 with leverage and terms adjusted.
Is a loan that clears 1.00 coverage a cash-flowing property?
No. The test compares rent only to the monthly obligation. Repairs, vacancy, management, utilities, and capital reserves are outside it, so model those separately before you rely on the property to carry itself.
Next Step
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. The complete DSCR loans guide covers the full program picture, and any illustrative calculator on the site gives estimates only, not a quote.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae Selling Guide: Ineligible Projects
2. Fannie Mae Condo Project Manager
3. ksnlaw.com
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Do a DSCR Cash-Out Refinance After a Co-Borrower Passes Away? · How Soon Can a Hard Money Cash-Out Refinance Close Before Your Balloon Date? · Can You Do a DSCR Cash-Out Refinance When an Heir Can’t Be Found?
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.