Cash-Out Refinance
What is a cash-out refinance?
A refinance that pays off the existing loan AND returns additional equity as cash to the borrower. The standard tool for pulling capital out of an appreciated rental.
A cash-out refinance is a refinance loan whose proceeds are LARGER than the payoff of the existing mortgage. The difference (after closing costs and escrows) is delivered to the borrower as cash. Mechanically: a new first-lien mortgage is originated at a higher loan amount than the old one; the old loan is paid off; the remaining funds go to the borrower.
Cash-out is typically used to extract appreciation that has built up in a rental property — deploying that equity into a new investment, paying off higher-cost debt, or funding a business. Because the loan-to-value goes up after a cash-out (you’re replacing a smaller loan with a bigger one), pricing is generally tighter than a rate-and-term refinance at the same LTV tier.
Cash-out is regulated differently from a rate-and-term refinance and is treated as a higher-risk transaction by lenders. Expect stricter cash-in-hand caps, slightly lower max LTVs at the top tier, and a 6-12 month seasoning requirement on the property before cash-out is eligible.
How cash-out refinance applies at Total Quality Lending
TQL’s DSCR cash-out tier caps at 80% LTV at the top tier (740+ FICO + ≤$2.5M loan). Cash-in-hand limits: $500,000 at LTV above 65%, $1,000,000 at LTV at or below 65%. Cash-out is available across DSCR, Multi-Unit DSCR, Foreign National DSCR, and Prime Time programs — each with its own LTV ladder and FICO thresholds.