What Is a Cash-Out Refinance?
A cash-out refinance replaces your existing mortgage with a new, larger loan — giving you the difference in cash. For investment property owners, it's one of the most effective ways to access trapped equity without selling.
Why Investors Use Cash-Out Refinancing
- Fund new acquisitions using existing portfolio equity
- BRRRR exit strategy — refinance after stabilizing a renovated property
- Consolidate debt from higher-rate loans
- Capital improvements to increase property value or rents
How It Works
- 1Your property is appraised at current market value
- 2The new loan is sized at a percentage of that value (typically 70–80% LTV)
- 3Your existing mortgage is paid off from the new loan proceeds
- 4You receive the remaining balance as cash
Example
| Item | Amount |
|---|---|
| Current Appraised Value | $300,000 |
| New Loan at 75% LTV | $225,000 |
| Existing Mortgage Payoff | $160,000 |
| Cash Out to You | $65,000 |
DSCR Cash-Out Refinance
Many investors pair the cash-out refinance with DSCR qualification — meaning you qualify based on the property's rental income, not your personal income. This is especially useful for:
- Self-employed investors
- Borrowers with multiple financed properties
- LLC-owned properties
Key Considerations
- Seasoning requirements: Some programs require 3–12 months of ownership before allowing a cash-out at the new appraised value
- LTV limits: Investment property cash-out is typically capped at 70–80% LTV
- Rates: Cash-out refinance rates may be slightly higher than rate-and-term refinance
- Prepayment penalties: Check for any existing prepayment terms on your current loan
When to Cash-Out Refi
- You've built significant equity through appreciation or forced value
- You have a specific use for the capital (next acquisition, rehab, etc.)
- Current rates improve your overall position
- You want to pull equity without selling and triggering capital gains
Ready to Explore a Cash-Out Refi?
schedule with a Prime Advisor to discuss your portfolio and see how much equity you can unlock, or explore our Long Term Rental Calculator to model the new loan's debt service.