Cash-Out Refinance Calculator

How an investment-property cash-out refinance works

A cash-out refinance on a rental property replaces your existing mortgage with a larger one, and you pocket the difference (minus closing costs). For investors, it's the engine that turns built-up equity back into deployable capital — either to scale into the next property, fund a rehab, or shore up reserves.

Cash to you = New loan amount − payoff balance on existing loan − closing costs
New loan amount = current appraised value × max LTV (typically 75% for investment properties in 2026)

The trade-off: you're extracting equity in exchange for a higher mortgage balance, which usually means a higher monthly payment (especially in a higher-rate environment than your original loan). The refi only makes sense if the after-tax return on the redeployed capital exceeds the cost of the higher payment.

Investment-property cash-out terms in 2026

• Maximum LTV: 75% is the standard cap for investment-property cash-out refis (vs 80%+ for primary residences). Some lenders cap at 70% for 2–4 unit properties.
• Interest rates: 0.5–1.0% above primary-residence rates. In 2026, expect 7.5–8.5% on a 30-year conventional investment refi, 7.75–9% on a DSCR refi.
• Seasoning: Conventional Fannie/Freddie loans require 6 months from the original purchase before cash-out refi (the "delayed financing" exception lets you refi sooner up to your original purchase price, but not above). DSCR loans often allow 3–6 month seasoning.
• Closing costs: Typically 2–3% of the new loan amount, plus $1,500–3,500 in third-party fees (appraisal, title, escrow). The appraisal is the biggest single risk — the deal only works if your value comes in.
• Required reserves: 6–12 months of PITI in liquid reserves is standard. DSCR lenders are stricter; conventional Fannie/Freddie is more forgiving.
• DSCR check: If using a DSCR product (most non-QM cash-outs), the new PITI has to clear the lender's DSCR threshold — typically 1.0 minimum, 1.25 for best rates. A successful BRRRR refi often fails here when investors over-leverage.

The BRRRR refinance step in practice

BRRRR — Buy, Rehab, Rent, Refinance, Repeat — relies on cash-out refi to recover the capital invested in purchase and rehab. The math goal: total project cost (purchase + rehab + holding + closing) ≤ 75% of after-repair value (ARV). When you hit that ratio:

• Refi proceeds at 75% LTV equal or exceed your all-in basis.
• Cash extracted = original capital + sometimes additional cash.
• Net cash in deal post-refi = $0 (or even negative — you got paid to buy it).
• The recovered capital seeds the next BRRRR. Repeat.

The catch: post-refi cash flow has to support the new, larger loan. A refi that returns all your capital but turns cash flow negative is a deal that's about to eat you. Always model the post-refi PITI and DSCR before committing to a BRRRR strategy.

When a cash-out refi is the right move

• BRRRR refinance step: the textbook use case. Capital recycling is the whole point.
• Down payment for next property: the equity in property A funds property B. Net portfolio return improves if property B's cap rate exceeds the after-tax cost of the new debt service on A.
• Major rehab on the same property: a $40K rehab funded by cash-out refi at 7.75% costs ~$2,500/yr in additional interest. If the rehab adds $400/mo rent ($4,800/yr), it pays for itself with margin.
• Debt consolidation when rolling expensive short-term debt (HELOC, hard money) into a 30-year amortized fixed-rate.
• Liquidity insurance ahead of a market downturn — pulling equity into cash reserves while you still can.

When a cash-out refi is the wrong move

• No specific plan for the cash. Cash sitting idle at 7.75% interest is a guaranteed loss. Don't refi to "have some cash around" — refi to deploy.
• The new payment turns cash flow negative. If the rent doesn't cover the new PITI, you're subsidizing the property out of personal income. Check the DSCR before committing.
• Closing costs eat the benefit. Below ~$25–30K in cash extracted, the 2–3% closing costs plus rate-environment premium usually wipe out the benefit. HELOC is typically better for smaller extractions.
• Reinvestment ROI doesn't clear the cost of capital. If you're refinancing at 8% to invest the proceeds at 5%, you're destroying value. The reinvestment opportunity has to clearly exceed the all-in cost of the new debt.

Worked example: a $350K rental, $180K current loan, 75% LTV refi

The defaults model a typical scenario: a $350,000 rental with $180,000 remaining on a 4.5% original loan ($1,450/mo PITI), $2,400/mo rent. Refinancing at 75% LTV, 7.75% new rate, 30-year term, 2% closing costs:

• New loan amount: $262,500 (75% × $350K).
• Closing costs: $5,250 (2%) + $1,500 other fees = $6,750.
• Cash to you: $262,500 − $180,000 − $6,750 = $75,750.
• New P&I: $1,881/mo. New PITI (with $292 tax + $150 ins): $2,323/mo.
• Cash flow swings from +$950/mo to +$77/mo — a $873/mo hit (~$10,500/yr).
• New DSCR: 2400 / 2323 = 1.03 — passes 1.0 minimum but fails 1.25 target. Best rates not available.
• If the $75,750 is redeployed at 15% (next deal's cash-on-cash), it returns $11,360/yr.
• Net annual benefit: +$11,360 − $10,500 = +$860/yr. Net ROI on the equity pulled out: 1.1%.

This is a marginal refi — the cash flow hit nearly eats the reinvestment return. To make this work, either the reinvestment ROI needs to be higher (20%+ ideally) or the cash flow hit needs to be smaller (lower LTV, lower rate, or longer original-loan amortization advantage). This is why the calculator surfaces net annual benefit — it's the figure that tells you if the refi is worth doing.

Cash-out refi vs HELOC: when to use each

Both let you tap home equity but they have very different trade-offs:

• HELOC: revolving credit line on the property, only pay interest on what you draw, variable rate, low closing costs (often $0–500), but rates are typically prime + 0.5–2% (currently ~9–10%). Best for short-term capital needs you'll pay back fast.
• Cash-out refi: single lump sum, fixed rate, 30-year amortization, but 2–3% closing costs and a permanent payment increase. Best for large extractions you'll deploy long-term (next property, large rehab).

Rule of thumb: under ~$50K of capital need and short hold (under 3 years) → HELOC. Above $50K and long deployment (next property) → cash-out refi. Read the deeper comparison in our HELOC investment strategy guide.

Frequently asked questions

What is the maximum cash-out LTV on an investment property in 2026?

75% LTV is the standard ceiling for single-family investment-property cash-out refis. 2–4 unit properties typically cap at 70%. Some specialty DSCR lenders go to 80% with strong credit and DSCR ≥ 1.25, but those are exceptions.

How much equity do I need before a cash-out refi makes sense?

You need enough equity that 75% of the value materially exceeds your current loan balance plus closing costs. Under $25–30K of cash extracted, the closing costs (2–3% of the new loan plus third-party fees) usually wipe out the benefit. A HELOC is generally cheaper for smaller extractions.

How long do I have to wait after buying before I can cash-out refi?

Conventional Fannie/Freddie investment-property cash-out refis require 6 months of ownership. The "delayed financing" exception lets you refinance sooner up to your original cash purchase price. DSCR lenders typically allow 3–6 month seasoning. BRRRR investors planning fast capital recycling should plan around the 6-month conventional rule.

Is cash-out refi income taxable?

No. Cash-out refi proceeds are loan proceeds, not income — you're borrowing against your equity, not realizing a gain. The IRS treats it as debt. Mortgage interest on the new loan is potentially deductible against the rental property's rental income (subject to passive-activity rules). This is a key tax advantage vs selling the property and realizing capital gains.

Should I cash-out refi if rates are higher than my current loan?

Only if the after-tax return on the redeployed capital materially exceeds the rate spread. For example, refinancing $250K from 4.5% to 7.75% costs ~$8,100/yr in extra interest. If you're pulling $75K and redeploying at 15% (cash-on-cash on next deal), that's $11,250/yr — net benefit ~$3,150/yr. Below ~10% reinvestment ROI, the spread usually eats the benefit in a 2026 rate environment.

What credit score do I need for a cash-out refi on a rental?

Conventional Fannie/Freddie cash-out refis on investment property typically require 700+ FICO. DSCR products go to 620–660 minimum, with best rates at 720+. Below 620, a handful of specialty lenders accept down to 580 with higher rates (often 1–2% above standard) and lower LTV (60–70%).

Sources

• Fannie Mae Selling Guide B2-1.3-03 (Cash-Out Refinance Transactions) and B2-1.5-02 (Loan Eligibility)
• Freddie Mac Single-Family Seller/Servicer Guide section 4301 (cash-out refinances)
• Fannie Mae delayed-financing exception — B2-1.3-03(c)
• SFA (Structured Finance Association) Non-QM Standards — DSCR refinance documentation framework
• IRS Publication 936 (Home Mortgage Interest Deduction) — cash-out refi tax treatment

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