The Quick Read: Usually, yes, but at a discount. Vested 401(k) and IRA balances can generally count toward post-closing reserves on a DSCR cash-out refinance, though a lender typically credits only part of the balance, and the plan must let you reach the money. Reserves are cash you keep after closing, so cash you bring to the table cannot double as reserves.
- Only the vested balance counts. Unvested employer match does not.
- Expect a haircut: lenders credit a percentage of the balance, not all of it.
- You document access. You generally do not have to withdraw the money.
- Cash-out proceeds from the same loan are a program-dependent question, so confirm before you plan around them.
- The reserve requirement is sized to the new monthly housing payment, and lender guidelines set the exact amount.
What Are Reserves, and Why Does a Cash-Out Refinance Need Them?
Reserves are the money you still hold after the loan closes. Lenders want to see that you can keep paying the mortgage if a tenant leaves or a roof fails.
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.
On the files we place across a wholesale network of DSCR lenders, the cash-out refinance requirement commonly sits around 6 months of PITIA. PITIA is principal, interest, taxes, insurance, and any HOA dues. It steps up to about 9 months on loans above $1,500,000. These are typical ranges that vary by lender, leverage, and loan size, not a promise on any single file.
Cash-out refinances top out at 75% LTV on standard rentals across most of the network. They also usually want about 6 months of seasoning, meaning ownership measured from title recording. Reserves sit on top of those tests. A property that rents well still needs them, because the DSCR formula compares rent to PITIA only. Clearing 1.00 coverage is not the same as positive cash flow. Repairs, vacancy, management, and utilities sit outside the calculation.
Do Retirement Accounts Count as Reserves?
Yes, in most programs, when the account is vested and you can actually withdraw from it. Traditional IRAs, Roth IRAs, 401(k)s, and similar accounts are the usual candidates.
| Usually counts | Usually does not count |
|---|---|
| Vested 401(k) balance | Unvested employer match |
| Traditional or Roth IRA | Funds locked until retirement, job loss, or death |
| Self-employed plans you can draw from | The portion of a 401(k) you have borrowed against |
| Balances shown on a recent statement | Cash you used to close |
Notice that nothing in that table requires you to cash out. Retirement funds generally stay where they are. You show the statement and the plan’s access terms.
Why Lenders Discount the Balance
A retirement dollar is not worth a full dollar once you actually spend it. The IRS says an IRA distribution while you are still working is includible in taxable income. It may also carry a 10% additional tax if you are under 59½, and the same page says there is no hardship exception to that tax.
So lenders credit a share of the balance rather than all of it. The size of that share differs by program, and select lenders in the network each set their own. Ask for the percentage before you count on a specific number. Some programs treat Roth balances, balances held in stocks and bonds, or balances at retirement age differently.
For contrast only, market surveys of agency-style underwriting have described crediting about 60% of a vested balance. DSCR loans are not agency products, so treat that as an illustration of the idea, not a rule that applies here.
What Is the Access Test?
The plan has to let you take the money. Some employer plans lock funds while you are still employed, and a balance you can only reach at retirement, termination, or death may earn little or no credit.
Run this short check:
1. Ask the plan administrator whether in-service withdrawals are allowed.
2. Request written confirmation of the terms if the plan documents are unclear.
3. Pull the most recent statement showing the vested amount.
4. Subtract any outstanding plan loan. It reduces the vested balance that counts.
5. Confirm the account is in your name or an entity the program accepts, subject to lender program eligibility.
An IRA is usually easier to document than an employer plan because you control access directly.
Can Cash-Out Proceeds Count Instead?
Sometimes, but it is program-dependent, and this is where borrowers plan wrong. A few programs let proceeds from the refinance itself count toward reserves. Many do not, especially on larger balances. Others want to see reserves already sitting in an account before you close.
If you are planning a BRRRR exit that recycles equity, confirm the rule per program before you build the plan around it. If proceeds do not count, retirement funds may be the cushion that makes the file work. Lendmire’s piece Retirement Funds vs Cash-Out Refinance Proceeds for Airbnb Reserves goes deeper on that tradeoff.
Does the Same Money Get Counted Twice?
No. An asset used to cover the equity gap, closing costs, or cash to close is subtracted before reserves are measured. Reserves are calculated on the new loan and verified after closing costs come out. Count each dollar once.
A Worked Walk-Through
Picture an investor with a rental that clears roughly 1.2x coverage at 75% LTV on a cash-out. The loan is well under $1,500,000, so the file looks for about 6 months of PITIA in reserves. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
1. The lender sets the reserve requirement from the new PITIA.
2. The investor shows a vested IRA statement and no outstanding loans against it.
3. The lender applies its discount percentage to the balance.
4. If the credited amount meets the requirement, the retirement account covers reserves on its own.
5. If it falls short, the investor adds liquid assets or looks at a different program. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The coverage ratio and the reserves are separate tests. A strong DSCR does not shrink the reserve requirement, and big reserves do not rescue a weak ratio. The strongest files clear both: enough equity and enough rental coverage. Our complete DSCR loans guide lays out how those tests fit together. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Should You Actually Withdraw the Money?
Usually no. Counting the balance leaves it tax-deferred and invested. Withdrawing it can trigger income tax and, under 59½, the 10% additional tax.
Exceptions exist but are narrow. Kiplinger notes there is no general hardship exception, with limited relief for emergency withdrawals of up to $1,000. Groom Law Group describes SECURE 2.0 exceptions for emergency personal expenses and domestic-abuse distributions. None of these change how a lender discounts your balance.
Two traps are worth knowing. A 401(k) loan lowers the vested balance that counts, so borrowing against the plan to fund a down payment can shrink your reserve credit. And rolling money between accounts can change how a lender treats it.
If Your Retirement Funds Fall Short
You have options. Add liquid assets such as bank or brokerage balances. Lower the loan amount, which lowers PITIA and the reserve requirement. Wait for seasoning if you are under the roughly 6-month mark. Or look at a different program structure through select lenders in the network, where leverage and terms adjust. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Select lenders in the network also offer coverage below 1.00, with leverage and terms adjusted. That option addresses the rent test, not the reserve test, so it will not fix a reserve shortfall.
Key Terms Defined
- Reserves: Funds you hold after closing to cover the mortgage if income stops.
- PITIA: Principal, interest, taxes, insurance, and any HOA dues on the new loan.
- Vested balance: The part of a retirement account that is legally yours to take.
- Haircut: The share of a balance a lender does not credit toward reserves.
- Seasoning: The ownership period required before a cash-out, measured from title recording.
Frequently Asked Questions
Do I have to withdraw my 401(k) to show reserves?
Generally no. You document the vested balance and the plan’s access terms. Withdrawing triggers tax consequences, and a withdrawal would also change the balance the lender counts.
Does a Roth IRA count the same as a traditional IRA?
Not always. Roth contributions can generally be withdrawn without income tax, while earnings can be taxed and penalized, so some programs treat the two differently. Ask the lender how it values each, per Bright Tax.
Does a loan against my 401(k) help?
No. An outstanding plan loan comes off the vested balance, so it reduces your reserve credit rather than adding to it.
Do I still need reserves if the rent covers the payment?
Yes. DSCR measures rent against PITIA, while reserves are a separate test of what you hold after closing.
Can I use retirement funds if I am self-employed?
Often, if the account is vested and you can withdraw from it. Self-directed and solo plans need documentation of access and ownership, subject to program terms.
What to Do Next
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 financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Request a quote at Lendmire or call 828-256-2183.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. IRS – IRA distribution FAQs
2. Kiplinger – Early retirement withdrawals
3. Groom Law Group – SECURE 2.0 exceptions
4. Bright Tax – IRA early withdrawal penalty
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: When a DSCR Cash-Out Refinance Makes Sense If FHA Is Not an Option for a Rental · Where to Get a Short-Term Rental Cash-Out Refinance to BRRRR an Airbnb · DSCR Cash-Out Refinance With the Documents and Reserves Lenders Require: The 2026 Guide
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- 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.