The Quick Read: It depends on the appraised value, and usually the cash is smaller than investors expect: the new loan is capped at a percentage of value, and the hard money payoff, closing costs and any funded reserves come out of that loan before you see a dollar. If the payoff plus costs exceeds the cap, you bring cash to closing instead of receiving any. The sections below show the math as percentages of value, because the dollar result is different on every file.
- Cash to you = new loan, minus the hard money payoff, minus closing costs, minus any reserves funded from proceeds.
- The payoff is larger than the original loan. It includes drawn principal, unpaid rehab draws, accrued interest and any exit or extension fee.
- On a DSCR cash-out refinance, the ceiling is 75% of value on standard rentals and 70% on short-term-rental collateral, subject to lender guidelines.
- The next lender decides whether your cash counts as a usable down payment, so plan for it to be traceable and seasoned in your account.
How the Cash Amount Is Calculated
The released cash is the lower of two limits, minus everything that gets paid off the top. One limit is the lender’s appraisal times the cash-out leverage cap. The other is what the rent can carry at the coverage floor. Whichever limit is lower sets the new loan.
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.
A cash-out refinance, in general terms, pays off the old loan with a new, larger one and hands you the difference as cash. Corporate Finance Institute describes the same structure and how it differs from a rate-and-term refinance. The hard money version has one wrinkle. The payoff is the number on the hard money lender’s payoff statement, not the number on the original note.
That statement usually carries more than the amount you first borrowed:
1. Drawn principal on the purchase and any rehab draws already funded.
2. Accrued interest through the payoff date.
3. Any exit, extension or servicing fee in the loan documents.
4. Per-diem interest if closing slips past the date on the statement.
Title requests the payoff statement, confirms its valid-through date, and wires the payoff to the hard money lender. The lien is released. Whatever remains after costs goes to you or to your titled entity.
A Worked Waterfall (Modeled, in Percent of Appraised Value)
These inputs are modeled assumptions, not market data. Call the appraised value 100 units. Assume the payoff is 62 units and closing costs are 3 units. The exit is a DSCR cash-out refinance at a 75% ceiling on a standard rental, subject to lender guidelines.
| Step | Modeled amount |
|---|---|
| Appraised value | 100 |
| New loan at the 75% ceiling | 75 |
| Hard money payoff | -62 |
| Closing costs | -3 |
| Cash to the investor | 10 |
Ten units is 10% of the property’s value. A rental purchase on a standard DSCR program typically asks for 20%-25% down, and a select high-leverage program reaches 85% LTV (15% down) with roughly a 700+ score. Add closing costs and reserves on the new property. So if the next rental costs about what the first one is worth, this refinance covers part of the equity requirement, not all of it. Equity pulled from one property usually has to be combined with other savings or a second property’s equity to fund a full purchase.
The waterfall also shows why investors size backward. Start with the down payment, closing costs and reserves the next purchase needs. Then check whether the first property can produce that much after payoff.
What a Low Appraisal Does to the Number
The cash line moves faster than the value does, because the payoff stays fixed while the cap moves with the appraisal. Using the same modeled inputs:
| Appraisal vs. expected | New loan at 75% | Payoff plus costs | Cash result |
|---|---|---|---|
| 100 (as expected) | 75.00 | 65 | +10.00 |
| 95 (5% lower) | 71.25 | 65 | +6.25 |
| 90 (10% lower) | 67.50 | 65 | +2.50 |
| 85 (15% lower) | 63.75 | 65 | -1.25 (cash to close) |
A 10% miss on value removes three-quarters of the cash in this model. A 15% miss turns the refinance into a cash-in transaction. The DSCR lender orders its own appraisal, so the after-repair value you used to size the bridge is not the value that controls the exit.
Payoff growth hits the same line. Raise the modeled payoff and costs from 65 to 68 units at full value, and cash falls from 10 to 7. Every extra month on a bridge adds interest to the payoff.
Why the Number Is Smaller Than the Purchase Math
Leverage on a refinance that returns cash is lower than leverage on a purchase. On a DSCR cash-out refinance, the ceiling is 75% of value, a hard cap, and it is a ceiling rather than a target. Hard money cash-out and refinance leverage is lower still, at up to 65% of value. The hard money lender may have funded most of your cost, so the payoff, which includes interest, fees and unpaid draws, can sit close to or above what the new loan allows, and that gap decides your cash. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Compare the two loans side by side. Figures vary by lender, property and experience, and none of this is a commitment to lend.
| Factor | Hard money loan | DSCR cash-out refinance |
|---|---|---|
| Cash-out or refinance leverage | Up to 65% of value | Up to 75% of value (70% on short-term rentals) |
| Term | 6-18 months, interest-only | 30-year fixed spine, with longer terms through select lenders |
| Qualifying basis | Property, plan and exit | Rent covering PITIA, commonly 1.00 coverage on select programs |
| Credit floor | 620, with conditions below 660 | 620 floor in parts of the network; most programs want around 660 |
| Seasoning | None on the bridge itself | About 6 months from the recorded deed |
The 65% hard money figure applies to the bridge loan, while the 75% ceiling on the DSCR cash-out refinance is a standard-rental figure. The 70% ceiling applies only to short-term-rental collateral. Short-term rental programs also expect a 640+ score and 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.
Seasoning, and Why the Bridge Can Expire First
On a DSCR cash-out refinance, the network’s usual expectation is about 6 months of ownership, measured from the date the deed was recorded. It is not measured from the end of the rehab. Seasoning is lender policy, not law, and programs differ.
That creates a timing problem. Hard money terms run 6-18 months, interest-only. A bridge near the short end can mature before the cash-out window opens. Investors then have two practical options:
- Take a longer bridge term at the start, within the 6-18 month range.
- Refinance into a payoff-only loan first, and accept that cash-out later means a second set of closing costs.
The first option costs more interest at the payoff. The second costs more in fees. Neither is free. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The hard money exit refinance page covers the exit program in more detail.
The BRRRR method (buy, rehab, rent, refinance, repeat) depends on this refinance step to recycle capital. The method works best when the refinance releases most of the capital. In practice, the released share depends on the cost basis, the appraisal and the payoff.
The Rent Test Runs Alongside the Equity Test
Equity alone does not size the loan. The DSCR loan also has to pass a coverage test. On Lendmire’s programs, the lender compares market rent with PITIA: principal, interest, taxes, insurance and any HOA dues. The appraiser supplies that market rent. Form 1007 is the rent schedule for a single-family property. Form 1025 is the small-income-property appraisal for 2-4 units.
A bigger cash-out means a bigger loan and a bigger monthly obligation. Rent has to carry it. On select programs, 1.00 is where coverage starts, and stronger ratios open better pricing and higher leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Neither path overrides the leverage cap, so the usable loan is the lower of the two tests.
Clearing 1.00 does not mean the property cash flows. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities and capital expenses sit outside it. A deal can return all your capital and still run negative each month.
Reserves also matter. They vary by lender, leverage, loan size and transaction type, and commonly sit around 6 months of PITIA. Loans above $1,500,000 typically step up to about 9 months. If a lender requires reserves to be funded from proceeds, they reduce your cash line. If you hold them elsewhere, they have to be documented.
When Proceeds Can Fund the Next Rental
The refinance only creates cash. The next lender decides whether that cash is acceptable. Expect the next purchase file to ask for the cash to be sourced and traceable: a settlement statement showing the proceeds, a deposit into the account, and a paper trail to the new down payment. Seasoning in the account helps. Reserves and coverage on the new property are tested on that property alone.
Plan the purchase documentation before the refinance closes, since source-of-funds paperwork is easiest to assemble while the refinance statement is fresh. The related Lendmire piece on hard money cash-out refinance options to buy a rental without selling investments covers the sourcing side in more depth.
The complete DSCR loans guide explains how qualification works across the wholesale network. DSCR loans are designed for non-owner-occupied investment properties, and because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
Delayed Financing Will Not Rescue a Hard Money Purchase
Some investors assume a rule built for cash buyers will let them refinance right away. Agency delayed financing, described in the Fannie Mae Selling Guide, requires an arm’s-length purchase and a settlement statement confirming that no mortgage financing was used. A hard money lien at purchase fails that test. It also does not govern DSCR loans, which are not agency products. DSCR seasoning is set program by program, so do not treat any agency rule as a substitute.
Is the Cash-Out Worth Doing?
It fits when the appraisal is solid, the payoff is modest relative to value, and rent clears the coverage floor with room to spare. It is thin when the bridge was sized near the cap, when the rehab ran long, or when the next purchase needs more equity than one property can release.
On tight files the choice is a real trade-off. A payoff-only refinance avoids the cash-out classification and its lower cap, but it leaves equity in the property. A cash-out frees equity, but at a larger payment and a smaller margin. Run the sensitivity table above with your own payoff before committing to a purchase contract that depends on the proceeds.
Key Terms Defined
Cash-out refinance: A new loan that pays off the old one and returns the leftover balance to you as cash.
Payoff statement: The hard money lender’s written figure for principal, interest and fees through a stated date.
Seasoning: The ownership period a lender expects before it will return cash, here about 6 months from the recorded deed.
LTV: The loan amount divided by appraised value.
PITIA: Principal, interest, taxes, insurance and any association dues, the monthly obligation used in the coverage test.
DSCR: Rent divided by PITIA. It measures coverage, not profit.
Frequently Asked Questions
Is paying off a hard money loan automatically a cash-out refinance?
No. A refinance becomes cash-out only when proceeds exceed the payoff and closing costs. If the new loan covers just those items, it is generally a payoff-only refinance. That distinction matters because cash-out carries the lower leverage cap and the seasoning expectation. On the DSCR side, the cash-out ceiling is 75% of value on standard rentals, subject to lender guidelines.
Can the proceeds go straight into the down payment on the next rental?
Usually, but the next lender decides. Expect to show where the cash came from and that it sits in your account or entity account. Reserves and coverage are tested on the new property separately. The purchase side typically asks for 20%-25% down, with select high-leverage programs reaching 85% LTV on a purchase with a strong score.
What happens if the appraisal comes in below what I expected?
The new loan shrinks while the payoff stays the same, so cash falls faster than value does. In the modeled table above, a 10% miss cuts cash by three-quarters, and a 15% miss means bringing cash to closing. Ask for an appraisal reconsideration with recent comparable sales if the value looks light.
Does clearing 1.00 coverage mean the property will cash flow?
No. Coverage compares rent to PITIA only. Repairs, vacancy, management, utilities and capital expenses are outside the ratio, so a property can pass the test and still lose money after those costs.
Can I cash out sooner if I only pay off the bridge now?
Yes, with a trade-off. A payoff-only refinance can come first, and a cash-out can follow once seasoning is met. That means two sets of closing costs. It is also the fallback when a 6-18 month bridge would mature before the cash-out window opens.
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. Reach the team at 828-256-2183 or request a quote. Programs vary by lender, property, and experience, and nothing here is a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Corporate Finance Institute: Cash Out Refinance
2. University of San Diego: BRRRR Method
3. Fannie Mae Selling Guide B2-1.3-03
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.