Resources · 5 min read
Cash-Out Refinance Explained
How investors recycle equity into their next deal — and what to watch for.
A cash-out refinance replaces your existing loan with a new, larger one and puts the difference in your pocket — using equity you've already built, through appreciation, paydown, or a rehab, without selling the property.
The most common use is finishing the BRRRR cycle: buy a property, rehab it, rent it, then refinance out of the short-term acquisition loan into a long-term DSCR rental loan — pulling your renovation capital back out to put toward the next deal. The same move works on a property you've simply held long enough to build equity through appreciation.
How the cash-out amount is determined
- Loan-to-value limits — the new loan is capped at a percentage of the property's current appraised value, not what you originally paid; agency guidelines (Fannie Mae, Freddie Mac) typically cap investment-property cash-out around 70–75% LTV, with investor programs varying from there
- DSCR, for investment property — the new payment still needs to make sense against the property's rental income
- Seasoning — in line with Fannie Mae's and Freddie Mac's cash-out rules, most programs require you've owned the property for a minimum period (commonly around 6 months) before a cash-out refi, though this varies by program
What to watch for
- Closing costs reduce your net proceeds — factor them in before counting on a specific cash-out number
- You're resetting your rate and term on the full balance, not just the cash-out portion — make sure the new payment still pencils against rent
- Check for a prepayment penalty on the loan you're paying off, and ask whether the new loan carries one too
Tell us the property and current loan balance, and we'll tell you what's realistic to pull out.
Sources & references
Educational references only. Program terms are set by the lender and vary by deal — not a commitment to lend.
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