The Quick Read: It depends on the smaller of two limits: the new loan can reach up to 70% of the appraised value on short-term-rental collateral, but the property’s income must also cover the larger payment, and your cash is that loan minus your old payoff and closing costs. Equity sets the first ceiling. Rent coverage sets the second. Whichever is lower decides your check.
- Cash-out on short-term-rental collateral tops out at 70% LTV, versus 75% on standard long-term rentals.
- Gross cash is the new loan minus your existing payoff. Net cash is gross cash minus closing costs.
- The coverage ratio must clear 1.00 on the new, bigger payment, so more cash out means thinner coverage.
- A paid-off property has no payoff to subtract, but coverage can still cap the loan.
- A low appraisal shrinks the loan ceiling and the check in one move. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
What Does a Cash-Out Refinance Actually Do on a Short-Term Rental?
A cash-out refinance replaces your current loan with a new, larger one. The new loan pays off the old one, and the leftover money comes to you. On a short-term rental, the lender sizes that new loan against the property’s appraised value and its rental income.
DSCR Cash-Out Calculator
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Most investors know the idea from long-term rentals. The short-term version works the same way, with two differences. Leverage is lower, and the income has to be documented differently, since nightly bookings don’t look like a twelve-month lease.
A DSCR loan, short for debt service coverage ratio, qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. That is why short-term-rental owners use it. If you want the full picture of how these loans work, Lendmire’s complete DSCR loans guide covers the basics before you size a cash-out.
How Much Cash Comes Out: The Waterfall From Value to Net Deposit
Start with the appraised value and walk down. Across the wholesale network of DSCR lenders Lendmire works with, cash-out on short-term-rental collateral generally tops out at 70% LTV. That means loan-to-value: the new loan divided by the appraised value. Standard long-term rentals reach about 75%.
To avoid dollar guesses, the example below uses percentages of appraised value. Call the appraised value 100%.
| Step | What happens | Example (% of value) |
|---|---|---|
| 1. Leverage ceiling | Apply the STR cash-out cap | 70% |
| 2. Payoff | Subtract your existing loan | 45% |
| 3. Gross cash | Ceiling minus payoff | 25% |
| 4. Closing costs | Fees come off the top | Deducted from gross cash |
| 5. Net cash | What reaches your account | Gross cash minus costs |
Two more items can trim the check. Your old loan may carry a prepayment charge, and interest accrues daily until payoff. Both come out of the money before it reaches you.
Now the coverage test. Coverage means monthly rental income divided by PITIA: principal, interest, taxes, insurance, and any HOA dues. Taking cash out raises the loan, which raises the payment, which lowers the ratio. If the ratio falls below the program’s floor, the lender sizes the loan down below 70%, and your cash shrinks with it.
On short-term-rental refinances, the coverage floor is 1.00. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted, so a thin file may have another route, just with less leverage.
Which Limit Binds First: Equity or Coverage?
Either one can. The table shows three owner profiles and which test tends to set the cash, based on how the math is built rather than on any file statistics.
| Owner profile | Equity test | Coverage test |
|---|---|---|
| Low balance on the old loan | Leaves a large gap to 70% | Can bind, since a big new loan means a big payment |
| High balance on the old loan | Often binds first | Rarely the issue, since less cash comes out |
| Paid off | Nothing to subtract | Often decides how much of the 70% you can use |
Picture an owner whose old loan equals 65% of value. The ceiling leaves only 5% of value in gross cash, so the equity test is the story. Now picture an owner with no loan at all. The equity room is huge, but a loan near 70% of value carries a payment that rent has to cover. The coverage ratio becomes the limiter.
A paid-off home is still a cash-out refinance. You take the loan against it, and the full loan, less closing costs, becomes your cash.
How Is Short-Term-Rental Income Counted?
Income documentation is where short-term rentals differ most. For a property with a real hosting record, lenders can look at actual booking and platform history rather than projections. Lenders may discount that income, and the details vary by program. Most programs in the network expect about 12 months of hosting history on short-term-rental files.
Seasonality matters. Lenders size on income averaged over a full year, not on peak months. A beach house that books solid in summer and sits empty in winter is judged on the whole twelve months.
Projected-only income is a narrow case. It applies to a recent purchase or a long-term rental just converted to a short-term rental. Only some lenders accept it, and the figure is discounted.
Why the Appraiser’s Rent Opinion Matters
The appraisal sets your value, which drives the LTV test. It also often comes with a rent opinion, and that can complicate short-term-rental files.
For a one-unit home, the standard appraiser rent form is the Single-Family Comparable Rent Schedule, known as Form 1007. Fannie Mae’s appraiser update says the 1007 was not designed for short-term rentals. It also says an appraiser should not take nightly-rate comparables and multiply the fee by 30.
McKissock, an appraiser-education publisher, makes the same point from the appraiser’s side: the 1007 captures monthly rent and cannot document short-term rental rates. HousingWire reports that forcing short-term-rental income into the 1007 can distort DSCR calculations and produce artificially low ratios.
The practical lesson is simple. A low long-term rent opinion can understate what your property earns. When your booking history is stronger than the appraiser’s monthly figure, make sure your platform records are in the file.
What Shrinks Your Cash?
Run through this list before you count on a number.
- A low appraisal. The ceiling is a percentage of value, so a lower value cuts the loan directly. If the appraisal comes in 10% under what you expected, the ceiling falls by 7 points of the value you expected (70% of that 10%). On a 45% payoff, your gross cash drops from 25% to 18% of expected value.
- The payoff itself. Every dollar of existing debt comes off the loan before you see anything.
- Closing costs. These come out of the proceeds.
- Prepayment charges and daily interest on the old loan.
- Reserves. Lenders want liquid reserves after closing, commonly around 6 months of PITIA, though this varies by lender, leverage, loan size, and transaction type. Loans above $1,500,000 typically step up to about 9 months. Some lenders may count part of the cash-out toward reserves, but that is lender-specific.
- Coverage. If the ratio falls short of the floor, the loan is cut below the leverage cap.
Seasoning and Timing: When Can You Cash Out?
Seasoning is the waiting period a lender wants between buying a property and refinancing it. Across the network, about 6 months of seasoning is the common expectation for a cash-out. Seasoning varies by program, so a DSCR loan does not mean there is no waiting period.
There is one exception. Delayed financing applies to a documented all-cash purchase and waives only the seasoning clock. Appraisal, coverage, and leverage rules still apply. Short-term-rental files add the hosting-history expectation described above. The minimum credit score for short-term-rental loans is 640. Loan sizes run up to $3,000,000 on standard programs.
Does the Cash-Out Beat the Alternatives?
The right product depends on your goal.
| Option | What you get | Main tradeoff |
|---|---|---|
| Cash-out refinance | Cash now, one new loan | Higher balance, thinner coverage |
| Rate-and-term refinance | New terms, no cash | Nothing in hand |
| Selling | All equity, less costs | You lose the asset |
Selling is a real option when the new payment would sit close to the rent. Passing the coverage test is not the same as positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
How Much Should You Take?
The maximum you can take is rarely the amount you should take. A loan sized right at the ceiling leaves little cushion if bookings dip or the property needs a roof.
Ask what the cash will earn. If it funds the down payment on another property, the new deal has to carry both its own debt and the added debt on this one. Sequencing matters, too. Cashing out a short-term rental at its cap and then buying a second one leaves less room on both files.
Taking less cash keeps the coverage ratio higher and can support stronger terms. Tax treatment varies; consult a qualified professional.
Edge Cases Worth Knowing
- Second home turning into a rental. The refinance must change occupancy from second home to non-owner-occupied investment property.
- Owner-occupied or house-hack. This is not a pure DSCR file, and occupancy rules apply.
- Several financed rentals. DSCR files are reviewed property by property, so having multiple loans is not an automatic barrier. A short-term rental uses its booking history, and a long-term rental uses its lease.
- LLC ownership. Many investors hold the property in an LLC, subject to lender program eligibility, and vesting papers will be part of the file. For ownership questions, see Lendmire’s piece Short-Term Rental Cash-Out Refinance Rules When You Own Only 25% of the Entity.
- Property type. Manufactured homes, log homes, and barndominiums are not offered in these programs.
- Local rules. 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.
Key Terms Defined
Cash-out refinance: A new, larger loan that pays off the old loan and returns the difference to you.
LTV (loan-to-value): The loan amount divided by the appraised value.
DSCR (debt service coverage ratio): Monthly rental income divided by the full monthly payment, PITIA.
PITIA: Principal, interest, taxes, insurance, and any association dues.
Seasoning: The waiting period a lender wants before you refinance a property you recently bought.
Hosting history: The record of bookings and income on a short-term rental, often from platform statements.
Frequently Asked Questions
Can I cash out a short-term rental I own free and clear?
Yes, subject to lender guidelines. With no payoff to subtract, the new loan becomes your gross cash, sized at the 70% short-term-rental ceiling. Coverage often decides how much of that room you can use, because a larger loan carries a larger payment.
What happens if the appraisal comes in low?
The loan ceiling drops because it is a percentage of value. A 10% shortfall cuts the ceiling by 7 points of expected value, and your cash falls by the same amount. You have three options: take less cash, wait and reappraise, or bring stronger income documentation.
Do I need booking history to cash out?
Most programs expect about 12 months of hosting history. Seasoned properties can use actual platform records. Projected-only income is a narrow path through select lenders, and the income is discounted.
Why can a conventional bank loan be a poor fit for these loans?
Conventional underwriting centers on personal income and debt load, and nightly-rate income does not fit that template well. DSCR programs look primarily at the property’s income covering the payment instead.
Should I take the maximum available?
Usually not. Leaving room keeps coverage stronger and gives you a cushion for slow seasons and repairs. Take what the plan needs, and remember a passing ratio does not equal positive cash flow.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker arranging DSCR investor financing through select lenders in its wholesale network, across 41 markets, including Washington, D.C. Programs vary by lender, every file is reviewed individually, and nothing here is a commitment to lend. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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 right amount of cash is usually the number that leaves your coverage and your cushion intact, not the biggest one the equity allows.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
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References
1. Fannie Mae Appraiser Update
2. McKissock
3. HousingWire: Short-Term Rentals Are Breaking the Appraisal Playbook
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 Qualify and Apply for a Short-Term Rental Cash-Out Refinance on a Home You Own · How to Get a Rental Ready for a Cash-Out Refinance Appraisal · DSCR Cash-Out Refinance vs Selling a Rental to Fund a Sabbatical
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.