The short answer: on a DSCR cash out refinance, the money you can pull is the appraised value times the loan to value ceiling, minus what you currently owe, minus closing costs. With a program that goes up to 80% loan to value, a property that appraises at $300,000 with a $150,000 balance supports a loan around $240,000, which leaves roughly $90,000 before costs. Then a second test applies, and it is the one that actually decides most files: the property's rent has to cover the payment on the new, larger loan.
Both ceilings have to be satisfied. Investors who only run the first one are the ones surprised at the term sheet.
Ceiling one: loan to value
The LTV ceiling is straightforward arithmetic on the appraisal, not on what you paid and not on what you think it is worth. Our DSCR loan program publishes up to 80% LTV, so:
- Appraised value $300,000
- 80% of that is $240,000, the maximum new loan
- Existing payoff $150,000
- Gross cash out $90,000, before closing costs and any escrows
Two honest notes on that number. First, cash out is generally the tightest use of a DSCR loan, and many lenders cap cash out below their purchase and rate term maximum, so confirm the cash out specific LTV on your own term sheet rather than assuming the headline number applies. Second, the appraisal is the input, and on a rental it will often come with a rent schedule attached. You do not get to argue the value up after the fact, which is why the rehab you did needs to be documented and visible when the appraiser walks it.
Ceiling two: the debt service coverage ratio
This is the test that makes DSCR loans what they are. The lender divides the property's monthly rent by the monthly PITIA, which is principal, interest, taxes, insurance, and association dues. The result is the ratio. Above 1.25x is strong. At 1.0x the property exactly covers itself and still qualifies on most programs. Below 1.0x it does not.
The trap on a cash out is that you are increasing the loan, which increases the P and the I, which pushes the ratio down. The rent does not move. So there is a loan amount at which the LTV ceiling still allows more money but the coverage ratio says stop.
Work it in the order the underwriter will. Take the market rent supported by the appraisal's rent schedule or the executed lease, whichever the program uses. Subtract taxes, insurance, and dues. What is left is what can service the debt. Then work backward to the loan amount that produces that payment at the quoted rate and term. That number, not the LTV number, is frequently the real ceiling on a cash out. Our full walkthrough of how to calculate DSCR on a rental property runs the arithmetic end to end with a worked example.
What the two ceilings look like together
Take the same $300,000 property. Say taxes and insurance run $450 a month combined and there are no dues. Rent is $2,000.
LTV says $240,000 is available. Whether $240,000 actually clears depends on what the payment on $240,000 is at your rate over 30 years. If that principal and interest payment plus the $450 lands at or under $2,000, you are at or above 1.0x and the file works. If it lands above $2,000, the coverage test fails and the loan gets sized down until it passes.
That is the whole mechanic. Run your own numbers at the rate you are actually quoted, not a rate you saw in an ad, because a rate difference of half a point changes the maximum loan meaningfully on a cash out.
Levers that move the number
When the coverage test is what is binding, you have a small number of real options.
- Raise the rent to market. A unit renting $200 under market because a tenant has been there four years is costing you far more than $200 a month at refinance time. It is reducing how much capital you can access.
- Shop the insurance. Insurance sits directly in PITIA. A $600 a year premium difference is $50 a month of coverage capacity.
- Check the tax assessment. If the county has the property assessed incorrectly, fix it before you refinance rather than after.
- Take less cash. Obvious, and often correct. The loan that closes at $215,000 today beats the one that never funds at $240,000.
- Look at the term and structure. A 30 year fixed produces a lower payment than a shorter amortization, which is part of why DSCR loans are usually written that way.
What does not move the number: your personal income. DSCR loans do not verify it, which is the point of the product, and it also means you cannot lean on a W2 to rescue a file where the property does not cover itself.
The costs that come out of the proceeds
Your gross cash out is not what hits the account. Out of it come origination points, the appraisal, title and settlement fees, recording, and any escrows the lender sets up for taxes and insurance. On a refinance those escrows can be a real number, especially if a tax bill is coming due soon, and they feel like a cost even though you are funding your own future bills. We break the line items down in DSCR loan closing costs and fees so the net is not a surprise at the table.
Budget the difference between gross and net into your plan. If you are pulling capital to buy the next property, an $8,000 miss on the net is the difference between closing and not.
The rules around the cash out
A few structural items to plan for, because they are not negotiable at the last minute:
- The property is held in an entity. DSCR loans are business purpose loans and are generally written to an LLC rather than to you personally. If the deed is currently in your name, the transfer has to happen, and it should happen deliberately rather than in the last week. Moving title into an entity has its own considerations, including whether your existing financing has a due on sale clause, so handle it early and with advice rather than in the final week.
- Seasoning. Most cash out programs want the property owned for a period before they will lend against the new value instead of your purchase price. If you just bought or just finished a rehab, confirm the seasoning rule before you count on the appraised value.
- Prepayment structure. DSCR loans commonly carry a step down prepayment schedule, for example 5/3/1. If your plan is to sell the property in eighteen months, that penalty is part of the cost of pulling cash today.
- Credit and minimums. The program has a minimum FICO and a minimum loan amount. A small balance property can appraise well and still fall below the loan floor.
Should you pull the cash at all?
The refinance is not free money. It is converting equity into debt that the property now has to carry, permanently, at a fixed payment. The question worth answering before you start is what the capital does next.
Pulling $90,000 to buy a property that produces its own cash flow is a different decision from pulling $90,000 to fund a rehab on a flip, which is a different decision again from pulling it to sit in a savings account because rates might rise. The first grows the portfolio. The second is often better served by a rehab loan sized to that project, so you are not permanently encumbering a performing rental to fund a six month hold. Our piece on using hard money and DSCR together on a BRRRR lays out which product belongs at which stage.
The cleanest version of the question: after the refinance, does this property still cover itself comfortably if it sits vacant for a month and needs a water heater in the same quarter? If the answer is yes, the cash out is doing its job. If the answer is that everything has to go right, you have taken more than the property can carry, regardless of what the LTV table allowed.
What to send for a real number
To get an actual maximum instead of an estimate, a lender needs the property address, your current payoff, the lease or the market rent, the tax and insurance figures, the entity information, and a rough sense of credit. That is enough to run both ceilings and tell you which one binds. If you would rather know before you apply, run the arithmetic above yourself. Ten minutes with the two tests will tell you more about your file than any rate sheet will.