THE AMERICA ONE NEWS
Jun 3, 2025  |  
0
 | Remer,MN
Sponsor:  QWIKET 
Sponsor:  QWIKET 
Sponsor:  QWIKET: Elevate your fantasy game! Interactive Sports Knowledge.
Sponsor:  QWIKET: Elevate your fantasy game! Interactive Sports Knowledge and Reasoning Support for Fantasy Sports and Betting Enthusiasts.
back  
topic
NY Post
New York Post
3 May 2023


NextImg:Cash-out refinance on an investment property: what to know

A cash-out refinance is a way to take advantage of your investment property’s equity without having to sell. You can use the proceeds however you see fit, whether it’s for buying another property to expand your rental portfolio or using it for personal expenses.

Find out how a cash-out refinance for an investment property works, eligibility requirements, and pros and cons to consider. 

A cash-out refinance allows you to access equity in a property you own, including primary residences and investment properties. You take out a new loan for a larger amount than your current mortgage balance. The new loan pays off the existing mortgage and you get the remaining cash to use for other purposes. 

Getting a new loan for your property can also help you lock in a lower interest rate or adjust the length of your loan term. But just like any other mortgage, a refinance does require you to pay some closing costs.

A cash-out refinance typically takes at least a month to complete, from application to closing. But this timeline can vary depending on where you live. For instance, more active real estate markets may require more time for the cash-out refinance ender and appraiser to complete the transaction. 

Related: Learn more about refinancing your mortgage on Credible.com

You’ll likely notice stricter lender requirements when doing a cash-out refinance on a rental property than a refinance on a primary residence. This is because the property is “non-owner occupied,” which lenders consider more of a risk.

Here are the eligibility requirements to expect from most lenders: 

RequirementDetails
Loan-to-value (LTV) ratioUp to 75%
Min. credit score580 to 620 (varies by lender and loan type)
Cash reservesUp to 12 months of mortgage payments
Waiting period after initial purchase6 months

Lenders won’t allow you to take out all the equity in the property because they want you to retain a financial stake in the home. The LTV ratio refers to the amount of equity you can extract during a cash-out refinance. 

The maximum allowed LTV depends on the type of investment property:

The LTV will likely be lower if you opt for an adjustable rate mortgage. An adjustable rate mortgage is a loan with an interest rate that fluctuates depending on the market. This means your interest payments can change over time and affect the cost of your monthly loan payments.

Here are the LTV requirements for a cash-out refinance with an adjustable rate mortgage:

You’ll likely need decent credit in order to qualify for a cash-out refinance on your investment property. Credit requirements for a cash-out refinance vary depending on the lender and the type of loan you’re refinancing.

Here are the minimum credit requirements you can expect for conventional, FHA, and VA cash-out refinances:

Lenders want to know that you’ll be able to pay for your housing expenses after the mortgage closes — this is where cash reserves come in handy. Cash reserves are savings measured by the number of months of costs you’d be able to cover.

Expect to need as much as 12 months of mortgage payments in cash reserves. For example, if your new mortgage is $250,000 at a 6.00% APR, your monthly loan payment would be $1,499. This means you’d need about $18,000 in cash reserves.

In some cases, you may be able to qualify to keep up to 6% of your unpaid loan balance as a cash reserve instead. 

New investors may not qualify for a cash-out refinance right away. Typically, you need to wait 60 days after purchasing the property to refinance. However, there is an exception if you paid for the property in an all-cash deal, as long as the source of cash is documented. 

There are several benefits of using a cash-out refinance for your investment property, including:

Before you apply for a cash-out refinance, here are some drawbacks to keep in mind: 

Related: Learn more about refinancing your mortgage on Credible.com

It depends on the size of the rental unit. Typically, the maximum is 75% LTV for single family homes and 70% LTV for multi-family properties with up to four units. 

No, the proceeds from a cash-out refinance are considered a home loan, even on an investment property. That means you don’t have to count the money as taxable income or capital gains. And if you use the money for home improvements or to buy a new property, you may even qualify for a tax deduction. Consult a tax expert for details on your specific situation. 

This largely depends on your goals and the new mortgage terms. For example, if you want to use the equity to purchase another investment property, it could be a good idea to use funds from an existing rental’s equity. But if you want to lower your payments with a cash-out refinance, you’ll need to review all the financial implications to make sure the numbers make sense.