The Quick Read: Often less than your equity suggests, because the cash is what remains of the smaller of two loan sizes, the equity-based cap of about 70% of appraised value on short-term-rental collateral and the loan your documented rental income can carry, after the payoff of every existing lien, closing costs, and any reserves funded from proceeds.
- Equity cap: Short-term-rental cash-out generally tops out around 70% LTV, while a standard long-term rental cash-out tops out around 75%.
- Eligibility: Expect about 6 months of ownership, about 12 months of hosting history, and a 640+ credit score on most short-term-rental files.
- Coverage test: A 1.00 DSCR is where select programs start. The loan must also fit what the accepted rental income can carry.
- Net cash: Payoff and costs come out of the new loan first, so the wire is always smaller than the headline number. Everything here is subject to lender guidelines.
The Cash-Out Formula in Plain Terms
The cash you receive equals the new loan, minus everything that must be paid out of that loan first. The new loan is capped by value and by income. Whatever remains after liens, costs, and reserves is your wire.
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.
Run it in this order:
| Step | What happens |
|---|---|
| 1. Value | Appraisal sets the number the cap applies to |
| 2. Equity cap | Value times about 70% on short-term-rental collateral |
| 3. Coverage cap | Loan size the accepted rental income can carry |
| 4. Smaller wins | The lower of steps 2 and 3 is your new loan |
| 5. Payoffs | Old first lien, junior liens, private notes |
| 6. Costs and reserves | Closing costs, prepaids, penalties, reserves |
| 7. Net wire | What is left |
Notice what the 70% applies to. It applies to the new loan, not to your equity. Borrowers often hear 70% and assume they can pull 70% of their equity. They can’t.
The cap also differs by collateral. Short-term-rental cash-out sits at about 70% LTV, while a standard long-term rental sits at about 75% LTV. Across the wholesale network, the lower figure reflects how lenders treat vacation-rental income. It is less predictable than a signed lease. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Key Terms Defined
Cash-out refinance: a new, larger loan that pays off the old one and returns the difference to you as cash.
Rate-and-term refinance: a new loan that replaces the old one and covers payoff plus costs, with no meaningful cash back.
LTV (loan-to-value): the loan amount divided by the appraised value.
DSCR (debt service coverage ratio): the rent used for lender review divided by the monthly PITIA.
PITIA: principal, interest, taxes, insurance, and association dues. This is the full monthly obligation on the property.
Seasoning: the waiting period between buying a property and refinancing it. Most programs count from the date the deed records.
Junior lien: any loan recorded behind the first mortgage. A private or hard-money note secured by the property is one example.
Reserves: liquid funds a lender wants you to hold after closing, usually counted in months of PITIA.
Which Limit Binds First: Equity or Rental Coverage?
Either test can stop the cash. Most investors only think about equity. The coverage test is the one that surprises them. A property can have plenty of equity and still support a smaller loan, because the rent you can document cannot carry a bigger payment at the program’s 1.00 floor.
A bigger loan means a bigger payment. A bigger payment means a thinner coverage ratio. Past a certain point, the ratio drops below the floor and the loan size gets cut back. The strongest files clear both tests: enough equity and enough rental coverage. A larger cash-out is not a bigger favor from the lender. It is a bigger payment your income has to support.
How lenders count short-term-rental income
Programs count the income their own way. It can be documented platform history, or a market-based projection that is often discounted from gross receipts. That is why about 12 months of hosting history matters. It gives the lender something real to underwrite.
Appraisers can help here, but not with the usual rent form. Form 1007 is the appraisal’s long-term market rent schedule. McKissock, an appraiser-education publisher, explains that the form cannot determine or document short-term-rental rates, and that business income is outside its scope. Fannie Mae’s appraiser guidance makes a related point about that form: multiplying a nightly rate by 30 to get monthly rent is incorrect. DSCR loans are not agency products. The point here is only that nightly-rate math is not a rent figure.
Revenue estimates from data tools need the same caution. AirDNA defines its revenue as nightly rates plus cleaning fees, minus service fees and discounts. That is an estimate of listing revenue. It is not net income, and it is not your verified results. VaultSTR calls the AirDNA Rentalizer a shortlisting tool rather than an underwriting tool, and advises haircutting its estimate for the first year.
What if your hosting history is short or the income is documented conservatively? Some programs fall back on market rent or the appraiser’s long-term rent. If long-term rent sits well below what nightly-rate projections suggest, the coverage-based loan shrinks. So does your cash.
What Gets Paid Before You Do
Everything attached to the property gets paid out of the new loan before you see a dollar. The new first lien pays off the old first mortgage. It also pays off any junior liens, including private or hard-money notes. Then costs come out. What remains is yours.
Here is what sits between gross and net:
- Old first mortgage payoff. This is usually the biggest deduction. It also means you give up the existing loan. If your current first mortgage is a good one, that trade is the main cost of the whole move.
- Junior liens and private notes. These are paid in full, which can erase most of your cash.
- Closing costs and prepaids. These are charged on the whole new loan, not just the cash portion. Treat them as a real line item in your math, not a rounding error.
- Prepayment penalty on the old loan. Some loans carry a prepayment penalty, and if yours does, it reduces your net. Penalties are typically a first-few-years feature. Check your note before you plan the refinance.
- Reserves funded from proceeds. Reserves vary by lender, leverage, loan size, and transaction type. Around 6 months of PITIA is common, and larger loans may step up to about 9 months. Ask early whether cash-out proceeds can count toward the requirement, since programs treat that differently.
Costs and cash to close are not the same thing. The CFPB’s guide to the Loan Estimate and Closing Disclosure shows total closing costs and cash to close as separate lines, because some costs can be financed into the loan. Those forms are built for consumer-purpose loans. DSCR loans are business-purpose investor loans and are exempt from TRID, so your settlement statement may look different. The principle holds anyway: ask for the net-to-you figure, not just the loan amount.
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. The file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
Three Worked Scenarios (Percent of Value)
These examples use modeled assumptions, expressed as a share of appraised value. They are not quotes. Read them as arithmetic, not as a forecast of your file.
Scenario one: low balance. Say the old first mortgage equals 40% of value. The cap is 70% on short-term-rental collateral. Gross cash is the 70% loan minus the 40% payoff, so about 30% of value before costs and reserves. Costs then shave that figure.
Scenario two: a junior note in the way. Picture an investor with a first lien at 45% of value and a private note secured by the property at 15%. That is 60% of value in payoffs. Against a 70% cap, gross cash is only about 10% of value. After costs, the wire can be slim. This is the scenario where a rate-and-term structure sometimes makes more sense than chasing cash.
Scenario three: coverage binds before equity. Assume a first lien at 40% of value. The equity cap would allow a loan at 70%. But the accepted rental income supports a loan of only about 55% of value at the 1.00 floor. The smaller loan governs. Gross cash is 55% minus 40%, or about 15% of value, not 30%. Equity was plentiful. Income was the limit.
What a low appraisal does
A lower appraisal moves every number. Take scenario one with the property appraising 10% below your expectation. The cap becomes 70% of the lower value, which is 63% of your original estimate. With the same 40% payoff, gross cash falls from 30% to 23% of that original estimate. You lose cash faster than you lose value, because the payoff stays fixed.
Which Debts Belong in the Payoff?
Include debts that are already secured by this property. Think hard before adding unsecured debt, such as credit cards or personal loans. Rolling it in converts a debt with no collateral into a debt secured by your rental. The payment on the bigger loan will also feed back into the coverage test, which can shrink the cash even when equity looks fine.
Before consolidating, compare the whole picture, not only the payment:
- What you gain: one payment instead of several, and often a lower cost on the debt being replaced.
- What you give up: the old first mortgage, plus the flexibility of unsecured debt. If the new loan goes unpaid, the property is at risk.
- What to watch: a larger loan balance lowers your DSCR, and a DSCR of 1.00 does not mean the property cash-flows. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
Use this as a rule of thumb. Roll in debt tied to the property or to the investing. Think twice about debt tied to spending habits. If the cards fill back up after the payoff, the refinance only moved the problem onto the collateral.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Cash-Out, Rate-and-Term, or Neither?
A decision table helps. Most investors are really choosing between three paths.
| Path | Cash back | Best when |
|---|---|---|
| Cash-out refinance | Yes, after payoff and costs | You need capital and equity is deep |
| Rate-and-term refinance | Little or none | You want better terms, not cash |
| Sell the property | Whole net equity | You want out, not a loan |
A payoff-only refinance that covers just the old loan plus costs is generally treated as rate-and-term. A refinance that returns cash above payoff and costs is cash-out. How much cash-back a program tolerates before it reclassifies the file varies by program, so do not assume any amount is safe.
Taking less cash is often the smarter play. A smaller loan keeps coverage healthier, leaves room for a soft booking season, and avoids borrowing more than the debt payoff needs. Borrow for the purpose, not for the cap.
Edge Cases That Change the Number
A paid-off short-term rental still counts as cash-out. If you take cash at closing, the cash-out cap applies. Owning free and clear earns no extra leverage.
Pools of properties follow the lowest cap. Cash-out on a pool is held to the lower collateral cap. A pool that includes short-term rentals lands at the 70% short-term-rental figure, not 75%.
Seasoning matters. About 6 months from the deed recording date is the common expectation. If you bought recently, the clock decides when this option opens.
Ownership versus hosting history. An investor with about 6 months of ownership but only a few months of hosting can run into a gap. Many lenders want about 12 months of hosting income. A few programs relax that, usually with leverage or terms adjusted.
Sub-1.00 coverage. The standard floor for most short-term-rental files is 1.00. A separate select-lender path goes below 1.00, with leverage and terms adjusted. Cash-out proceeds on that path tend to shrink.
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.
Ineligible properties. Manufactured homes, log homes, and barndominiums are not offered through these programs.
Misconceptions Worth Dropping
- I can pull 70% of my equity. No. The cap applies to the new loan, and payoff and costs come out first.
- Nightly rate times 30 is my rent. No. That is not a valid rent figure.
- The AirDNA number is my qualifying income. No. It is an estimate, and lenders often discount it or lean on documented history.
- Zero cash to close means zero costs. No. Costs and cash to close are separate lines.
- A DSCR of 1.00 means the property cash-flows. No. Coverage compares rent to PITIA only.
The complete DSCR loans guide walks through how these programs fit together if you want the wider picture.
Frequently Asked Questions
How much cash can I actually expect from a short-term rental cash-out refinance?
Expect the new loan, up to about 70% of appraised value on short-term-rental collateral, minus your payoffs, costs, and any funded reserves. If your existing debt is already near that cap, little cash is left. The income test can lower the loan further.
Does paying off debt come out of the cash or out of the loan?
It comes out of the new loan before you receive anything. The lender pays off the old first lien and any junior liens directly at closing. Your wire is what remains after those payoffs and the costs.
Can I use the proceeds to pay off credit cards?
Often yes, subject to lender guidelines, because the cash is yours once it is delivered. The tradeoff is that unsecured debt becomes debt secured by the rental. A larger loan also raises the payment, which can reduce coverage and the cash available.
What if my short-term rental has less than a year of hosting history?
Some programs underwrite on market rent or the appraiser’s long-term rent instead. That can shrink the loan if long-term rent is far below nightly-rate projections. Most short-term-rental files across the network expect about 12 months of hosting history.
Will a small cash-back amount still count as rate-and-term?
It depends on the program. Some tolerate a small amount of cash back and some do not. Do not plan around a specific threshold without confirming it for your file.
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. As a mortgage broker, Lendmire arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. You can reach the team at 828-256-2183. Loans are subject to lender guidelines and credit approval, and nothing here is a commitment to lend.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 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. McKissock, an appraiser-education publisher,
2. Fannie Mae Appraiser Update
3. AirDNA: how revenue is calculated
4. VaultSTR: AirDNA Rentalizer guide
5. CFPB: guide to the Loan Estimate and Closing Disclosure forms
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: Short-Term Rental Cash-Out Refinance vs Long-Term Rental Loan Without an Escrow Account · How Much Cash Comes Out of a DSCR Cash-Out Refinance for Repairs Without a Contractor? · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance on a Home They Own?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.