The Quick Read: A conventional cash-out refinance can replace a private money loan and return equity as new debt, but it only works when the owner clears the seasoning period, the lender’s value basis, and a personal income review that many investors cannot pass.
- Private money and hard money mean the same thing here: a non-bank, asset-based loan with a short term.
- A hard money cash-out or rate-and-term refinance typically runs up to 65% of value on a non-owner-occupied property. Terms are usually 6-18 months, interest-only. All of this varies by lender, property, and experience.
- A conventional take-out depends on seasoning, the value basis, and personal income and credit documentation.
- A DSCR cash-out refinance on an investment property tops out around 75% LTV across most of the wholesale network, with about 6 months of seasoning as the common expectation.
- The short private term sets the deadline. Plan the exit before you sign the private note.
What a Conventional Cash-Out Refinance Actually Does
A cash-out refinance pays off your existing loan and gives you the difference in cash. If you take no proceeds beyond the payoff, it is a rate-and-term refinance. Take any extra, and it is cash-out. The label drives seasoning rules, leverage caps, and pricing.
For an owner sitting in a private money loan, the new conventional loan retires the private note. Title work confirms the payoff. Whatever is left after payoff and costs becomes your proceeds.
Conventional means the loan is underwritten on you: your credit, your income, your debt-to-income ratio. The property matters, but the borrower file carries the weight. A private lender flips that. It looks hard at the asset, the plan, and the exit.
Conventional, Private Money, or DSCR: Side by Side
Owners comparing private money lenders often assume the choice is private versus bank. There is a third lane. The table shows how the three structures differ on the points that decide a file.
| Factor | Conventional cash-out | Private money | DSCR cash-out |
|---|---|---|---|
| Underwriting basis | Personal income and DTI | Asset, plan, exit | Property rent vs. payment |
| Term shape | Long-term amortizing | 6-18 months, interest-only | Long-term, 30-year fixed spine |
| Cash-out leverage | Lender-set, varies | Up to 65% of value | Around 75% LTV (investment) |
| Seasoning | Lender-set, varies | Asset review at entry | About 6 months common |
| Main risk | Personal docs fall short | Maturity before exit | Coverage or reserves fall short |
The conventional column is described in general terms only. Specific caps differ by lender and by whether you hold the property in your own name. Confirm them with the lender you actually plan to use.
How Underwriting Treats the File, Step by Step
Here is the order in which a conventional take-out file gets worked.
1. Classify the transaction. The lender decides whether you are taking proceeds beyond the payoff. That choice sets the seasoning and leverage rules for the whole file.
2. Check ownership seasoning. Cash-out files usually want a minimum ownership period before the lender relies on a new value. The length varies by lender type, and portfolio lenders may treat it differently from large retail lenders. Confirm the clock with the lender you plan to use.
3. Pick the value basis. Inside the seasoning window, many lenders cap the new loan against what you paid. After it, they may use the appraised value. If you bought at a discount and rehabbed, that gap can decide how much capital comes back.
4. Order the appraisal. Investment one-unit properties are typically valued on the standard single-family form with a rent schedule. Two-to-four unit properties use the small-income-property form. Condition and comps drive the number.
5. Review the borrower. The lender reads credit, income, and debts. Self-employed investors with heavy write-offs often find their traditional personal-income documentation understates what they earn. That is a common reason a conventional file stalls.
6. Pay off the private loan. Title confirms the lien payoff. The new loan retires the private note, and any surplus is your proceeds.
Five things decide the outcome: seasoning, the value basis, the leverage cap, your personal documentation, and when the private loan matures.
Where the Rule Breaks: Named Edge Cases
Delayed financing. Agency-style conventional guidelines allow an exception for buyers who paid all cash. It removes the title-seasoning wait but not the underwriting. Proceeds are still tied to documented cost, not current value. Here is the catch: a purchase funded with private or hard money was financed, so this route is generally off the table. Owners who think of a private-money purchase as a cash purchase get tripped up here.
Maturity before seasoning ends. A private loan with a 6-18 month term can mature before a conventional lender is willing to refinance. You then need an extension, a second private loan, or a different take-out. A 12-month seasoning wait against a 9-month note is a real problem.
Proceeds are not ARV. Investors often plan around the after-repair value and then find the lender capped the loan near cost. Run the plan on the conservative basis first.
Vesting. Conventional cash-out files often require individual vesting. If the property sits in an LLC, expect to move title or look at a different program. DSCR loans to LLC-titled borrowers are available subject to lender program eligibility, but confirm the specifics before assuming either way.
Personal use of proceeds. If the owner plans to spend the cash on personal expenses, the loan is no longer a clean business-purpose file. That changes the documents and the disclosures. Say what the money is for before you apply.
The Business-Purpose Paragraph
DSCR loans and private money 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 federal rule for that treatment, 12 CFR 1026.3, looks at the purpose of the credit. Owner-occupied properties get separate tests, so a rental you plan to live in does not follow the investor path automatically.
Cash-Out Refinance Is Not a HELOC
A cash-out refinance replaces the first mortgage. A home equity loan or line leaves the original mortgage in place. The CFPB’s research blog on cash-out refinances draws that line. It matters for investors because replacing the loan means a new term, new reserves, and a new qualification, not a quiet add-on.
Cash-out volume also moves with the market. Consumer Finance Monitor’s summary of the same study notes that cash-out refinances made up a larger share of all refinances when interest rates were rising. When owners pull equity, they are converting it into debt. Plan the payback.
What the Private Money Side Looks Like
On the private side, the wholesale network commonly sees these ranges. Every figure varies by lender, property, and experience, and none is a commitment to lend.
- Refinance leverage: up to 65% of value on a cash-out or rate-and-term refinance of a non-owner-occupied property.
- Term: 6-18 months, interest-only, with no prepayment penalty on the current program.
- Credit: a 620 minimum score, with added conditions below 660. Underwriting stays asset-based.
- Loan size: up to $5,000,000, larger by exception.
- Collateral: non-owner-occupied residential, 1-4 units.
Compare offers on structure, not just the headline. Ask each lender about extension terms, prepayment terms, draw handling on rehab, and what happens if the exit is late. Total cost matters more than any single line. Normalize every quote to the same hold period before you compare.
Private money is the right call in specific cases. It fits when the property needs work a bank will not lend against, when the title wait has not run, or when the borrower file is not conventional-ready. It is a bridge. The mistake is borrowing without a take-out.
Where DSCR Fits as the Take-Out
Many owners find the conventional route blocked by documentation, not by the property. For them, the exit from private money is often a DSCR cash-out refinance. The property qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide covers the basics.
Here is what the network typically shows on an investment-property DSCR cash-out:
- Leverage: tops out around 75% LTV on a cash-out refinance of a standard investment rental. Short-term-rental collateral is lower, around 70%.
- Seasoning: about 6 months is the common expectation.
- Credit: a 620 floor exists in parts of the network. Most programs want around 660. A 700+ score unlocks the strongest leverage tiers.
- Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- Reserves: commonly around 6 months of PITIA, but they vary by lender, leverage, loan size, and transaction type.
- Structure: the spine is the 30-year fixed. Interest-only periods and extended terms are available through select lenders.
One warning. DSCR compares rent to PITIA only. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capex all sit outside the ratio. Run those separately.
Picture an owner who rehabbed a duplex with a private loan. Rents now cover the full housing payment with room to spare, around 1.2x. The owner’s traditional personal-income documentation shows thin income because of depreciation and write-offs. A conventional lender would read that file and hesitate. A DSCR lender would read the rent roll and the lease. Same property, different test.
A larger down payment, or a lower leverage request, lowers the payment and can lift coverage. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. Where this fits naturally, many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path.
Lendmire’s piece Conventional Cash-Out Refinance for Owners Picking a Loan Type covers the choice between structures in more depth.
The Investor Decision in Practice
Work the decision in this order.
1. Name the exit before the entry. Write down the take-out, the date the private loan matures, and the date seasoning ends. If the second falls after the first, you need a plan for the gap.
2. Test the borrower file. Pull two years of returns and see what a conventional lender will count. If the number is thin, look at DSCR.
3. Test the property file. Gather leases, rent roll, and insurance. A DSCR file lives on lease evidence and clean entity documents.
4. Confirm the value basis. Ask what the lender will use: cost or appraised value. Size your plan on the lower one.
5. Check eligibility. The network does not offer DSCR on manufactured homes, log homes, or barndominiums.
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
Seasoning: the minimum time you must own a property before a lender will refinance it at a new value.
Value basis: the number the lender uses to size the loan, either what you paid or what an appraiser says it is worth.
Delayed financing: an exception for all-cash buyers that allows a cash-out refinance soon after purchase, with proceeds tied to documented cost.
Rate-and-term refinance: a refinance that pays off the existing loan and takes no extra proceeds.
DSCR: debt service coverage ratio, the property’s rent divided by its full housing payment (PITIA).
PITIA: principal, interest, taxes, insurance, and any association dues.
Loan-to-value (LTV): the loan amount as a share of the property’s value.
Frequently Asked Questions
Can I refinance out of a private money loan into a conventional loan?
Often, yes, and it is frequently the plan. The lender confirms the payoff with title, then checks seasoning, the value basis, and your personal income and credit. It is not guaranteed. Eligibility depends on lender guidelines, credit approval, and property review.
Is private money always the more expensive path?
Private money usually costs more per year than long-term financing, because it is short-term and asset-based. But the right comparison is total cost over your actual hold. A short, well-planned bridge can cost less than a long loan you cannot qualify for.
Does delayed financing work if I bought with a private loan?
Generally not. Delayed financing is built for cash purchases. A purchase funded with private or hard money was financed, so that exception usually does not apply. Plan around standard seasoning instead.
What if my private loan matures before I can refinance?
You need an extension, a second private loan, or a different take-out. Ask about extension terms before you sign, since they differ by lender. Matching the term to your seasoning clock is the safest fix.
When does a DSCR cash-out beat a conventional one?
When the property’s rent is strong and your personal income documents are thin. DSCR qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Across most of the network, it tops out around 75% LTV on standard investment-property cash-outs, and about 6 months of seasoning is common.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s traditional personal-income documentation, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. CFPB Office of Research blog on cash-out refinances
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money vs Investment Property Cash-Out Refinance in an LLC · Investment Property HELOC vs Cash-Out Refinance to Pull Cash Out · Fix-and-Flip Loan vs Cash-Out Refinance for a First Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.