The Quick Read: Both are DSCR cash-out refinances that qualify primarily on property-level rental income covering the payment, subject to lender guidelines, and the real difference is how that income gets proven and how much leverage the collateral earns. A short-term rental (STR) loan fits an owner with real hosting history and income that beats the local lease market. A long-term rental loan fits an owner with a lease in place, or a property where nightly income is thin or hard to document.
- The STR cash-out loan tops out around 70% LTV on STR collateral. The long-term loan reaches about 75% on a standard rental.
- STR files expect a 640+ score and about 12 months of hosting history. Long-term files commonly want around 660, with a 620 floor in parts of the network.
- The same house can clear coverage on one income basis and miss on the other.
- Neither loan works on a home you still live in.
The honest answer is that the choice follows your evidence, not your preference. If you can document strong nightly income, the STR loan can support a larger payment. If you cannot, a lease or market-rent schedule is cleaner and gets more leverage.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Nov 5, 2026
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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.
Side-by-Side
The table below shows how the two loans compare on the points that shape a file. Figures come from Lendmire’s wholesale network guidelines and are typical ranges, subject to lender guidelines and individual underwriting.
| Factor | STR cash-out loan | Long-term rental loan |
|---|---|---|
| Review basis | Property income from nightly stays | Property income from a lease or market rent |
| Income evidence | Host history, projections, STR income analysis | Active lease or appraiser rent schedule |
| Hosting history | About 12 months expected | Not required |
| Coverage floor | 1.00 on refinances | 1.00 is where select programs start |
| Cash-out LTV | Up to 70% on STR collateral | Around 75% on standard rentals |
| Credit score | 640+ | Around 660 typical; 620 in parts of network |
Loan sizes run up to $3,000,000 on standard programs. Above $2,500,000 the network generally holds to 30-year fixed structures. Reserves commonly sit around six months of PITIA, and larger balances typically step up to about nine. Those are patterns, not promises.
How Each Loan Proves Its Income
Both loans run the same coverage test: monthly rental income divided by the full PITIA payment (principal, interest, taxes, insurance, and any HOA dues). The test is identical. The evidence feeding it is not.
On a long-term rental loan, the evidence is a signed lease or the appraiser’s market-rent opinion. The appraiser reports that opinion on a rent schedule. For a one-unit property that is Form 1007. For two to four units it is typically Form 1025, which covers income properties. McKissock, an appraiser-education provider, explains how those two forms differ.
On an STR loan, there is no standard form. Fannie Mae’s appraiser guidance says Form 1007 relies on comparables leased by the month and cannot estimate a nightly fee. That guidance covers conventional loans, so treat it as contrast only. DSCR loans are not agency products. The appraisal firm Class Valuation notes that appraisers handle STR income in a separately labeled narrative analysis instead.
- An appraiser’s STR income analysis.
- Twelve months of property-management statements.
- Twelve months of bank statements showing platform deposits.
- A third-party projection, which is most useful when there is no history.
Multiplying a nightly rate by 30 is not an acceptable shortcut. Lenders want documented income, not arithmetic on a listing page.
Lendmire’s complete DSCR loans guide walks through this long-term versus short-term split in more detail.
When the STR Cash-Out Loan Is the Better Fit
The STR loan is the better fit when your documented nightly income clearly exceeds what a long-term tenant would pay. Coverage is the lever here. A higher income number can carry a bigger payment, which means a bigger cash-out loan can still clear the floor.
It also fits when you already have the history. Programs expect about 12 months of hosting experience. A home with a full year of platform deposits or management statements gives the lender something concrete. That is a much cleaner file than a projection.
Run the numbers on a modeled house. Assume lease-based coverage sits near 1.15x before any cash-out. Pulling equity raises the payment, so coverage might slide to roughly 0.95x on the same lease. Now assume the home documents STR income well above market rent. The same larger payment might sit near 1.2x. These are modeled assumptions, not market data. The point is that the income basis, not the house, decided the result.
Three cautions apply to the STR route:
1. Leverage is lower. STR cash-out tops out around 70% LTV on STR collateral, versus about 75% on a standard rental. You may leave more equity untouched.
2. Income is more variable. Seasonality and bad months sit inside the number. Some conservative programs apply stricter eligibility for that reason.
3. Legality is part of the file. 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. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
When the STR is licensed, documented, and backed by a full year of history, it is worth pricing alongside the long-term option.
When the Long-Term Rental Loan Is the Better Fit
The long-term loan is the better fit when you have a lease, or when nightly income is thin, new, or hard to document. A signed lease is simple evidence. So is a market-rent schedule. Neither needs a year of platform history.
It also gives more room on leverage. Cash-out on a standard rental runs around 75% LTV, five points above the STR ceiling. On a home with substantial equity, that gap can matter more than a modest income advantage. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Say you converted a former residence into a rental and have never hosted. You have no STR history, and a projection is the only support available. A lease-based file avoids that gap entirely. Long-term files commonly want a credit score around 660, with a 620 floor in parts of the network.
The trade-off is the income ceiling. A lease may cap rent below what a strong STR can document. If your coverage lands under 1.00x, only select programs will consider the file, and they start from a 1.00 floor. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Qualification is subject to lender guidelines, credit approval, and property review.
Which Limit Binds First?
The lowest of three limits wins on every file. They are seasoning and value basis, rental coverage against full PITIA, and the LTV tier.
Seasoning is set by program, not by a federal rule. About six months is a common expectation for cash-out. Before seasoning ends, loans are commonly sized on cost basis, meaning purchase price plus documented rehab. After it ends, appraised value takes over. Delayed financing is an exception for documented cash buyers, and it returns documented cost, not appraised value.
A bigger loan means a bigger payment. So coverage shrinks as you pull more cash. On an STR, you hit the 70% ceiling sooner, but a high income number can keep coverage intact. On a long-term loan, you may reach 75% LTV and then find the lease cannot carry the payment. Equity and coverage are separate tests. The strongest files clear both. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Taking less cash out lowers the payment and can lift coverage. It does not erase credit floors, reserve rules, leverage caps, or property eligibility.
One more distinction. Clearing 1.00x is not positive cash flow. The coverage test compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it. An STR with heavy cleaning and platform costs can pass coverage and still leave thin real margins.
Key Terms Defined
Cash-out refinance: A new loan that pays off the old one and returns the extra equity to you as cash.
DSCR: Debt service coverage ratio, meaning monthly rental income divided by the full monthly PITIA payment.
PITIA: Principal, interest, taxes, insurance, and any HOA dues, which together make the payment the ratio tests.
Seasoning: The ownership period a program wants before it will size a cash-out on appraised value.
Form 1007: The appraiser’s single-family rent schedule, built for monthly long-term rent.
Form 1025: The appraiser’s income-property exhibit, typically used for two to four units.
STR income analysis: A separately labeled appraiser narrative estimating nightly-rental income.
Where the General Rule Breaks
Occupancy. 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 CFPB’s commentary on business-purpose credit shows that stated purpose is only one factor. A home you still live in does not qualify. If you moved out and rent it now, expect the lender to want that change documented. Programs differ on how.
Thin history. A recent STR conversion has no track record. Projections can fill the gap, but programs often apply haircuts to them. A lease may be the cleaner path until history builds.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs. That holds for both loans.
Prepayment terms. The new loan generally starts a new prepayment clock, and the old note may carry its own penalty on payoff. Run a break-even before you commit. A better structure can lose its edge to exit costs.
Entity vesting. Many programs allow LLC vesting, subject to program eligibility, with the LLC as borrower and a personal guarantee behind it. Moving a deed into an LLC before closing is a common request. Check how that affects insurance and local transfer rules first.
Use of proceeds. 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.
Documents to Gather Before You Apply
Clean paperwork removes preventable gaps. A short list for each path:
- STR file: twelve months of platform payouts or management statements, bank statements showing deposits, and proof the property is permitted to operate as a rental.
- Long-term file: the signed lease, or an appraiser rent schedule if the property is vacant.
- Both: the existing mortgage payoff statement, insurance declarations, entity documents if vesting in an LLC, and proof of reserves.
Insurance is a common friction point. A policy written for a primary residence may not fit an STR.
Frequently Asked Questions
Can I use a short-term rental cash-out refinance if I just started hosting?
It depends on the program. STR files typically expect about 12 months of hosting history. If you have less, a projection may support the income, but projections are commonly discounted. A lease-based loan avoids the issue.
Which loan lets me pull more equity?
The long-term rental loan, usually. Cash-out on a standard rental runs around 75% LTV, while STR collateral caps near 70%. A strong STR income number can still support a larger loan if coverage holds. Equity and coverage are separate tests.
Does passing the 1.00 coverage floor mean the rental cash flows?
No. Coverage compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex are outside the calculation. A property can clear the floor and still run thin after those costs.
Can I hold the property in an LLC?
Often yes, subject to program eligibility. The LLC is generally the borrower, with a personal guarantee behind it. Confirm the lender’s entity documents and your insurance before moving the deed.
What if my coverage lands below 1.00?
Select lenders in the network offer sub-1.00 programs, with leverage and terms adjusted. Eligibility depends on credit, reserves, and the property. Run both income bases before choosing a path.
The Verdict
Pick the STR cash-out loan if you have a full year of documented hosting income that clearly beats market rent, the property is legally operating, and you can live with a lower leverage ceiling. Pick the long-term rental loan if you have a lease, thin or new STR history, or want the higher leverage tier. If both bases clear coverage, compare the cash you can access against how stable the income is.
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 DSCR-focused mortgage broker, Lendmire arranges financing through select lenders in its wholesale network, covering 41 markets, including Washington, D.C. This is not a commitment to lend. Reach the team at 828-256-2183 or through the quote request page.
The deciding factor is rarely the loan label. It is whether your evidence can carry the payment you are asking for.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage brokerage specializing in DSCR investor loans, helping arrange financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. The model centers on property-level rental income reviewed by the lender rather than W-2 documentation, subject to lender guidelines, suiting entity-owned and multi-property investors. Lendmire holds Scotsman Guide Top Mortgage Workplace recognition for 2025 and 2026.
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References
1. McKissock, an appraiser-education provider
2. Fannie Mae – Appraiser Update
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: Can a Grandfathered Airbnb Still Get a Short-Term Rental Cash-Out? · Banks That Offer a Short-Term Rental Cash-Out Refinance to Consolidate Debt · Best Short-Term Rental Cash-Out Refinance Program in Retirement on a Fixed Income
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.