The Quick Read: A lender sizes your new loan from the appraised value and the leverage cap, then subtracts the old payoff and every closing charge before it counts any cash as yours. Closing costs shrink your net cash. They never raise the loan ceiling.
- Across most of Lendmire’s wholesale network, a cash-out refinance on a standard rental tops out around 75% LTV (loan-to-value, the loan as a percentage of appraised value).
- You can pay costs at closing, have them deducted from your proceeds, or roll them into the loan. Each route changes a different number.
- Rolled-in costs use up room under the LTV cap and raise the balance. A bigger balance thins your rental coverage.
- Net cash is gross equity minus the payoff, the fees, the prepaid items, and any funded reserves.
- A short break-even test tells you whether the cash is worth what it costs. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
What Counts as a Closing Cost on a Rental Refinance?
Most of what a lender counts falls into six buckets: lender and broker charges, third-party services, title and government fees, old-loan charges, prepaid items, and reserves. The first four are true costs. Prepaids and reserves are money you still own, just parked somewhere else.
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 Oct 22, 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 Oct 22, 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.
That distinction matters because investors lump everything into one scary number. Sorting it first makes the math clearer.
| Bucket | Typical items | True cost? |
|---|---|---|
| Lender and broker charges | Origination, underwriting, processing | Yes |
| Third-party services | Appraisal, rent schedule, credit report | Yes |
| Title and government | Title work, recording, transfer items | Yes |
| Old-loan charges | Payoff fees, any prepayment charge | Yes |
| Prepaids | Interest to month-end, escrow deposits | No, timing only |
| Reserves | Months of payment held back | No, still yours |
Prepaids are bills paid in advance, like the first stretch of interest and deposits into a tax-and-insurance account. You would owe them eventually. They just come due on day one.
Nothing from your original purchase carries over. The refinance is a new loan with a new set of charges.
How the Loan Gets Sized Before Costs Are Subtracted
The order of operations is the whole story. The lender builds a ceiling first, then works downward.
1. The appraisal sets value. For a rental, the appraiser typically also reports market rent, which feeds the coverage test.
2. The LTV cap sets the gross loan. Appraised value times the cap is the most the new loan can be. On a standard rental cash-out, most programs we place files with sit around 75%.
3. The old payoff comes out. On a property you own free and clear, the payoff is zero. The gross loan is the starting pool of cash.
4. Costs come out by bucket. The costs deducted from the gross loan fall into these groups: lender and broker charges, appraisal, title, old-loan charges, prepaids, and any funded reserves.
5. Coverage gets re-tested. The new, larger balance means a larger monthly obligation, so the lender checks that rent still covers it.
6. What remains is your net cash.
Lenders also want the property to have had about 6 months of seasoning (the waiting period between buying and refinancing, measured from title recording) before a cash-out. Value during that window matters too. A low appraisal shrinks the ceiling directly, so the same dollar fees take a bigger bite of the cash.
Three Ways to Handle the Costs
You have three routes. Each one moves the cost to a different place.
| Route | Cash you bring | Loan balance | Cash you receive |
|---|---|---|---|
| Pay at closing | Yes | Unchanged | Full amount |
| Deduct from proceeds | No | Unchanged | Reduced |
| Roll into the loan | No | Higher | Full amount |
Here’s the catch with the third route. Rolling in is not unlimited, because the loan must still sit under the program’s LTV cap. Every financed dollar uses up room.
Run the logic when your loan is already sized at the ceiling. There is no room to add anything. Deducting and rolling in become the same thing, because costs have to come out of the proceeds either way. Rolling in only does something different when the loan is sized below the cap and you want the full amount of cash.
Cash to close on a cash-out is often zero for this reason. The new loan covers the payoff, and the costs come out of the proceeds.
Lendmire’s piece Rolled-in Costs vs. Cash vs. Lender Credit on a Rental Cash-Out Refinance goes deeper on choosing between them. A lender credit, for the record, is money the lender gives back against your costs, usually in exchange for different loan terms.
A Worked Example in Percentages of Value
Say a rental has no tidy dollar story, only proportions. These are modeled assumptions, not market data, and every figure is a share of the appraised value.
- Modeled appraised value: 100%.
- Cash-out LTV cap on a standard rental: 75%.
- Modeled existing payoff: 50%.
- Modeled total closing costs: 3%.
Pay at closing. The gross loan is 75%. After the 50% payoff, you receive 25% of value, and you bring the 3% in costs yourself.
Deduct from proceeds. The gross loan is still 75%. After the payoff and the costs, you receive 22% of value, and you bring nothing.
Roll in, loan sized under the cap. Suppose you want 22% in cash and the loan is sized at 72% before costs. Add the 3% and the balance becomes 75%. You hit the cap exactly, with room for nothing else.
Roll in, wanting the full 25%. The balance would need to be 78%. That is over the cap, so it does not work.
Now the coverage side. Going from a 72% balance to a 75% balance is about a 4% jump. Coverage falls by somewhat less than that, because taxes and insurance don’t change with the balance. A file sitting at 1.04x on the smaller loan could land right around 1.00x on the bigger one. Same rent, same property, thinner cushion.
When Rent Coverage Limits Cash Before Equity Does
Most investors assume equity is the only limit. It often isn’t.
DSCR, the debt service coverage ratio, is monthly rent divided by the full monthly obligation: principal, interest, taxes, insurance, and any association dues. That obligation is called PITIA. A coverage number of 1.00 means rent equals PITIA exactly.
1.00 is where many select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Stronger ratios generally open better pricing and more leverage. If the rent can’t support the new payment, the lender sizes the loan down, and the cap on cash becomes rent rather than equity.
A practitioner’s note. On DSCR files where the borrower is pulling close to the maximum, the surprise is rarely the LTV. It is the coverage re-test after fees get added. Files that pencil at the cap on the first estimate often need a smaller loan once the costs are rolled in. Asking for the coverage check on both the paid-in and rolled-in versions before choosing is a cheap way to avoid it.
One more honest point. Clearing 1.00 is not the same as positive cash flow. DSCR counts rent against PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside it. For how the rent figure itself gets counted, see Lendmire’s explainer How a Lender Counts Rental Income on a Cash-Out Refinance.
Where the General Rule Breaks
The waterfall above holds on most files. These edge cases bend it.
Short-term rentals. Cash-out leverage on a short-term rental tops out at 70% LTV, versus around 75% on a standard long-term rental. Expect a 640+ score and about 12 months of hosting history. A lower cap means the same fees take a larger share of what’s left. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Free-and-clear properties. They still count as a cash-out. With no payoff to subtract, the loan cap and the coverage test still limit what you can take.
Paying off a bridge or hard-money note. A refinance that only pays off the old note is usually classed as rate-and-term, which can allow higher leverage. Costs can often be financed more easily there. If you pull extra cash on top, it becomes a cash-out again.
Prepayment charges on the old loan. If the existing note carries one, it comes out of the proceeds as a real cost. Check the old note before you model the new one.
Credit and reserves. Most programs want around a 660 score, a 620 floor exists in parts of the network, and 700+ opens the strongest leverage tiers. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. They vary by lender, leverage, and loan size. Funded reserves reduce what reaches you, so count them.
Property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered through these programs. No cost structure fixes that.
No-closing-cost offers. The cost usually moves into the pricing. You still pay it, just somewhere you’re less likely to look.
Paperwork. 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. Federal rules exempt credit extended primarily for a business purpose, and the CFPB’s text of Regulation Z section 1026.3 says the creditor decides the primary purpose for each loan. The OCC’s Comptroller’s Handbook on the Truth in Lending Act lists the same exemption. In practice, DSCR files typically close on a lender fee sheet and a settlement statement, not consumer-mortgage disclosure forms. Some lenders still issue those forms by habit.
The exemption turns on purpose, not just collateral. A compliance-training newsletter on Regulation Z and investment properties makes that point. If you plan to spend cash-out proceeds on personal needs, the loan may not qualify as business-purpose even though the collateral is a rental. Tell your broker the intended use up front.
What the Decision Looks Like in Practice
Treat the cash-out as a purchase of capital and ask what it costs. Three steps do the job.
1. Get the net figure. Ask for the estimate as paid, deducted, and rolled in, side by side. Compare them on the same basis.
2. Compare costs to what the cash will earn. If the fees equal a year of what the cash will earn, the break-even is far off. If they are a small fraction of it, the pull is easier to justify.
3. Check coverage on the larger balance. If the rolled-in version drops you near 1.00x, the paid-in version may be the safer play.
Honestly, this is a toss-up on many files. Paying costs from cash keeps the balance lean but ties up capital. Rolling in preserves cash but costs you coverage and total interest over time. Neither is wrong. The right one depends on how thin your coverage already is.
The full picture of how these loans fit together is in Lendmire’s complete DSCR loans guide. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures. Extended terms, interest-only periods, and ARM structures exist through select lenders, and every file is underwritten individually.
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.
Key Terms Defined
Escrow deposit: Money paid into an account that later covers property taxes and insurance.
Settlement statement: The final itemized sheet showing the payoff, each cost, and the net funds to you.
Lender credit: A credit toward your costs, usually offered in exchange for different loan terms.
Prepayment charge: A fee some loans carry if you pay them off early.
Free-and-clear: A property with no mortgage balance against it.
Rate-and-term refinance: A refinance that changes the loan’s terms without returning extra cash to you.
Frequently Asked Questions
Do closing costs count against the 75% LTV cap?
Only if you finance them. A rolled-in cost raises the loan balance, so it uses up room under the cap. If you pay costs in cash or have them deducted from proceeds, the loan stays the same size and your net cash shrinks instead. At the ceiling, there is no room to roll anything in. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Can I do a rental cash-out refinance with nothing out of pocket?
Often, yes. Cash to close is frequently zero because the loan covers the old payoff and the costs come out of your proceeds. The tradeoff is less cash in your hands. Subject to lender guidelines, credit approval, and property review.
Does a DSCR cash-out come with a Loan Estimate and Closing Disclosure?
Typically not. These are business-purpose loans and are exempt from those consumer disclosure forms. Most close on a lender fee sheet and a settlement statement. Some lenders issue the consumer forms anyway, so ask which paperwork you’ll receive.
Do costs from my original purchase carry over?
No. Nothing from the purchase carries into the refinance. The new loan has its own appraisal, title work, lender charges, and prepaids.
What if the appraisal comes in low?
A low appraisal cuts the loan ceiling directly. Fixed fees then take a larger share of a smaller pool of cash. Ask for a revised estimate at the new value before deciding whether to proceed.
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. Lendmire is a broker arranging DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Not a commitment to lend.
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. That makes them 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.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
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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. CFPB, Regulation Z § 1026.3
2. OCC, Comptroller’s Handbook: Truth in Lending Act
3. Compliance Alliance, Regulation Z and Investment Properties
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 a DSCR Lender Qualifies a Refinance on a Leased Rental · How to Time a Rental Cash-Out Refinance Around a Purchase Closing · How a Lender Weighs Credit Score on an Investor Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.