The Quick Read: Both options are DSCR loans, which means the property’s rent, not your paycheck, carries the file, subject to lender guidelines. The real difference is which rent number the lender uses: nightly booking income for a short-term rental (STR), or a lease or market rent for a long-term rental (LTR). Each option has a leverage ceiling and its own paperwork.
- STR cash-out refinance: leverage up to 70% LTV on short-term-rental collateral, a 640 minimum score, and about 12 months of hosting history.
- LTR cash-out refinance: leverage tops out around 75% LTV on a standard rental across most of the network, with about 6 months of seasoning common.
- Both are sized by two tests at once: enough equity and enough rental coverage.
- Clearing 1.00 coverage does not mean positive cash flow. Repairs, vacancy, management, and utilities sit outside the ratio. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
You own a property with plenty of equity. Your tax returns show little income, or your pay is irregular. That profile is exactly why investors look at rent-based loans. The honest answer: the STR route suits an investor with a real booking record who is willing to accept a lower leverage cap and more paperwork. The LTR route suits an investor who wants the higher cap, steadier income, and simpler documentation. Neither one asks you to prove a salary.
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.
This page refers to Lendmire’s complete DSCR loans guide for the basics. Here the focus is the choice between the two paths.
Key Terms Defined
DSCR (debt service coverage ratio): The property’s monthly rent divided by its monthly housing payment. Rent above the payment pushes the ratio over 1.00.
PITIA: Principal, interest, taxes, insurance, and association dues. This is the payment figure the rent is measured against.
LTV (loan-to-value): The loan balance as a percentage of the appraised value.
Cash-out refinance: A new loan that pays off the old one and hands you the extra equity as cash.
Seasoning: The waiting period a lender wants after you buy a property or after a prior refinance before it will lend against the value.
Hosting history: The record of actual short-term rental income, such as platform payouts and bank deposits.
Side-by-Side
The STR column reflects Lendmire’s network guidelines. The LTR column reflects the same network’s standard-rental figures, and some rows describe published industry norms. Every file is underwritten individually, subject to lender guidelines.
| Factor | STR Cash-Out | LTR Cash-Out |
|---|---|---|
| Income basis | Booking history or projection | Lease or market-rent appraisal |
| Max LTV, cash-out | Up to 70% | Around 75% |
| Minimum credit score | 640 | 620 floor in parts, most want ~660 |
| Coverage floor | 1.00 on refinance | 1.00 where select programs start |
| Track record | About 12 months hosting | Lease or rent schedule |
| Appraisal support | Income analysis beyond Form 1007 | Form 1007 or 1025 rent schedule |
A few notes on the table. Entity vesting, such as an LLC, is commonly allowed subject to program terms. Reserves are commonly around six months of PITIA, but they move with lender, leverage, loan size, and transaction type. Loans above $1,500,000 typically step up to about nine months. Loan amounts 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.
How Each Path Builds the Income Number
The two loans use the same ratio but different numerators. On a long-term rental, the income comes from an in-place lease or the appraiser’s market rent. Appraisers document it on Form 1007 for single-family homes and Form 1025 for two-to-four unit properties.
On a short-term rental, the income comes from platform payouts, bank deposits, or management statements. Where no history exists, an AirDNA-style projection can serve as a fallback on some files, mostly purchases. On a refinance, actual history is the norm.
That distinction matters because appraisal forms do not translate. One appraisal-industry publication, Class Valuation, argues that Form 1007 measures long-term rent and cannot support nightly income. So STR files need their own income analysis, and that adds paperwork.
When the STR Cash-Out Is the Better Fit
Choose the STR route when the bookings are real and the long-term rent understates the property. A lakeside cabin, a beach condo, or a ski-area house can earn far more per month on nightly stays than on a 12-month lease. If the booking history is there, the coverage ratio can be much stronger on the STR basis, and a stronger ratio opens better terms.
This path fits you when:
- You have about 12 months of hosting records and clean platform or bank statements.
- Your credit sits at 640 or above.
- You can live with a lower leverage ceiling, up to 70% LTV on short-term-rental collateral.
- The property’s long-term rent would leave the coverage ratio thin. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Be honest about the downsides. STR income swings with season, nightly rates, and occupancy. Fixed costs do not swing with it. A file sized on a strong trailing year can shrink if the income figure drops before the loan is underwritten. 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.
When the Long-Term Rental Loan Is the Better Fit
Choose the LTR route when you want simplicity and the higher leverage cap. With about 75% LTV available on a standard cash-out across most of the network, a high-equity owner can usually pull more out than on the STR side. The paperwork is a lease or an appraiser’s rent schedule, not a year of platform statements.
This path fits you when:
- The property is leased, or leasable, on an annual basis.
- You have no hosting history, or the history is under 12 months.
- Your credit sits around 660 or higher, with 700+ opening the strongest leverage tiers.
- You value predictable income over a higher but more variable number.
The tradeoff is simple. Rent on an annual lease may produce a lower ratio than nightly income would. Select programs start at 1.00 coverage, and a lender may credit the lower of the lease and the market rent. Lenders review each file on its own facts.
Equity Versus Coverage: The Two Tests
A big equity cushion does not rescue a weak ratio, and a strong ratio does not lift the leverage cap. The lender checks both.
A larger down payment, or a smaller cash-out, lowers the payment and can lift the coverage number. It never erases leverage caps, credit floors, reserve rules, or property eligibility. Picture a property with a very large equity cushion. On the STR side the cash-out is limited by the 70% cap on short-term-rental collateral. On the LTR side the limit is the 75% cap on a standard rental. The coverage test then asks whether the rent supports the larger new payment that the cash-out creates.
That last point catches people. Pulling cash out raises the balance, so the new payment is bigger than the old one. A property that covered its old loan comfortably may cover the new one more thinly. Run the ratio on the new balance, not the old.
Low reported income does not remove the need for liquid cash either. Reserves are still reviewed, and the guarantor’s credit and entity documents are still part of the file. A severance check or an offer letter counts only as a cash cushion. It does not count toward the coverage test.
What About Tax-Return Income?
A self-employed investor with heavy write-offs often looks poor on paper. Conventional underwriting reviews personal income and a debt-to-income ratio, so that investor can get declined. A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The personal income calculation is not the test.
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. That is also why entity vesting is common. Per the CFPB’s TILA examination manual, credit to acquire or improve non-owner-occupied rental property is treated as business-purpose credit. A signed business-purpose statement does not decide the matter alone, so the proceeds should actually go toward the business. Tax treatment varies; consult a qualified professional.
Which Loan Matches Which Investor
| Your situation | Likely better fit |
|---|---|
| 12+ months of strong booking records | STR cash-out |
| No hosting history, annual lease in place | LTR cash-out |
| Want the highest leverage cap | LTR cash-out |
| Long-term rent leaves coverage thin | STR cash-out, if history supports it |
| Property type fits both uses | Run both, compare the ratios |
One more caution on property type. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered through the network’s DSCR programs, whichever path you choose.
Some investors run both numbers on the same address, because the 1007 rent schedule, trailing-12-month statements, and a projection can each produce a different loan size. The stronger play is often the one with documentation you can actually produce, not the one with the biggest theoretical number. Properties that sit right between the two uses are a genuine toss-up. Checking the ratio both ways before committing makes sense.
Also weigh prepayment terms. Structures vary by lender, and a prepayment penalty can make an early second refinance expensive. That applies to both paths, and it affects how often you can pull equity.
The Balanced Verdict
Pick the STR cash-out refinance if your booking history is documented, your credit is 640 or better, and the nightly income makes the coverage ratio clearly stronger than a lease would. Accept the 70% cap on short-term-rental collateral and the extra paperwork as the price of that stronger number.
Pick the long-term rental loan if you want the roughly 75% cap on a standard rental, simpler documents, and steadier income. It rewards the investor with a lease in place and no appetite for platform volatility.
Both paths clear the same two tests: equity and rental coverage. Both check credit, reserves, and property eligibility. Neither one treats a low paycheck as the problem. Lendmire arranges both through select lenders in its wholesale network, across 41 markets including Washington, D.C. 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. All terms are subject to lender guidelines, and none of this is a commitment to lend.
Frequently Asked Questions
Can I qualify if my tax returns show very little income?
Usually, yes, because a DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your credit, reserves, and entity documents are still reviewed. Low personal income is not the test on either path.
Does the STR path need a year of bookings?
Many programs in the network expect about 12 months of hosting history on STR files. Projections tend to serve purchases rather than refinances. If your history is shorter, the LTR path may fit better for now.
Which path lets me pull more equity?
The LTR path, in most cases. Cash-out on a standard rental tops out around 75% LTV across most of the network, while STR collateral caps at 70%. The coverage ratio must also support the larger new payment.
Does clearing 1.00 coverage mean the property cash flows?
No. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside it, so budget for them separately.
What if my coverage is below 1.00?
Select lenders in the network offer a separate path for coverage below 1.00, with leverage and terms adjusted. Eligibility depends on the file, the property, and lender guidelines.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
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 tax returns, 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 – TILA/Reg Z examination manual
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 Rules for a Seasonal Rental You Also Use · Short-Term Rental Cash-Out Refinance vs Long-Term Rental Loan Without an Escrow Account · How Much Cash Comes Out of a Short-Term Rental Cash-Out Refinance to Buy Out an Ex-Spouse?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.