As property values rise and rental income stabilizes, many real estate investors look to unlock equity through refinancing. Whether you’re looking to fund your next acquisition, renovate existing properties, or pay off high-interest debt, cash-out refinancing can be a powerful tool—especially when paired with a DSCR loan.
DSCR loans offer a simplified path to accessing capital by focusing on property income rather than personal income. In this guide, we’ll explore how cash-out refinancing works with DSCR loans, who it’s best for, lender requirements, and how to leverage this strategy to scale your investment portfolio.
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A DSCR loan (Debt Service Coverage Ratio loan) is a type of real estate financing designed specifically for investment properties. Unlike conventional loans, DSCR loans use the property’s net operating income (NOI) to determine eligibility—not the borrower’s personal income or tax returns.
DSCR = Net Operating Income / Annual Debt Service
If your rental property generates $90,000 in NOI and the new loan’s annual debt payments will be $72,000:
DSCR = $90,000 ÷ $72,000 = 1.25
Most lenders require a minimum DSCR of 1.20 to 1.25 for approval.
A cash-out refinance replaces your existing mortgage with a new loan for a higher amount. The difference between the new loan and the current loan balance is paid out to you in cash.
For example:
You can then use this equity to reinvest in new properties, improve current holdings, or consolidate higher-interest debt.
Cash-out refinancing through DSCR loans is ideal for real estate investors who want to unlock property equity without proving personal income. This is especially helpful for:
| Loan Feature | Typical Range |
|---|---|
| Maximum LTV (cash-out) | 70% – 75% (varies by lender) |
| Minimum DSCR | 1.20 – 1.25 |
| Credit Score Requirement | 660+ (700+ for best rates) |
| Loan Amount Range | $100,000 – $5,000,000+ |
| Ownership Types | Individual, LLC, LP, Corporation |
| Loan Term Options | 30-year fixed, 5/6 ARM, interest-only options |
| Prepayment Penalty | Typically 3–5 years (step-down or flat) |
| Reserve Requirements | 6–12 months of PITIA |
DSCR lenders typically allow cash-out refinancing on a wide range of income-producing assets:
Note: Properties must be non-owner-occupied and stabilized with consistent rental income.
Lenders will evaluate your property’s income, your credit profile, and your equity position. Here’s what you’ll typically need:
Some lenders may also accept short-term rental income using platforms like Airbnb and Vrbo if you can provide historical earnings or third-party reports (e.g., AirDNA, AllTheRooms).
Once you complete your cash-out refinance, the equity pulled from your property can be used for:
Pro Tip: Many investors use BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategies with DSCR cash-out loans to continually reinvest capital.
An investor owns a single-family rental worth $500,000, with a $275,000 mortgage balance and $36,000 in annual NOI. They apply for a DSCR cash-out refinance:
The investor now has capital to acquire another rental property or renovate their portfolio—without relying on personal income documents.
| Challenge | Solution |
|---|---|
| Low DSCR due to vacancy or high expenses | Delay refinance until stabilized or reduce loan amount to improve ratio |
| Property appraises lower than expected | Prepare comps in advance or consider renovation before reappraisal |
| STR income not accepted | Choose a lender that accepts Airbnb income or use rental market comps |
| Prepayment penalties | Understand penalty structure and plan to hold the property accordingly |
Cash-out refinancing with a DSCR loan is one of the most powerful tools in a real estate investor’s toolbox. It allows you to unlock trapped equity in income-producing properties and recycle capital into new deals—all without the burden of tax returns or personal income verification.
Whether you’re self-employed, scaling a portfolio through an LLC, or executing BRRRR strategies, DSCR loans provide the flexibility and simplicity needed to accelerate growth.
Sponsored Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
