DSCR Cash-Out Refinance Loans

Real estate investors face a common challenge: accessing the equity they’ve built in their rental properties. DSCR cash-out refinance loans let you tap into your rental property’s value based on its rental income rather than your personal finances.

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Purchase
A purchase loan can be used to buy a home.


Refinance
A 'rate and term' refinance allows you to improve the terms of your existing mortgage by lowering the monthly payment. A 'cashout refinance' allows you to convert equity into cash.


Home Equity
A home equity loan or line of credit is a 2nd mortgage that allows you to convert equity to cash without having to touch your existing 1st mortgage.

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    What Is a DSCR Cash-Out Refinance Loan?

    A DSCR cash-out refinance is a specific type of loan designed for investment property owners. Unlike traditional mortgages, this loan uses your property’s rental income rather than your personal income to qualify. The DSCR (debt service coverage ratio) measures how well your property’s rental income covers its mortgage payments.

    How Does a DSCR Cash-Out Refi Work?

    A DSCR refinance works differently than traditional refinancing. Here’s what happens when you pursue a rental property cash-out refinance:

    1. Your lender evaluates your property’s current value and existing mortgage balance
    2. You can borrow up to 75% of the property’s appraised value
    3. The new loan pays off your existing investment property mortgage
    4. You receive the difference between your new loan amount and current mortgage as cash

    For example, if your property appraises for $400,000 and you owe $200,000, you might qualify for a new loan of $300,000 (75% of value). After paying off the existing $200,000 mortgage, you’d receive $100,000 in cash, minus closing costs.

    Our DSCR loans make it easier to qualify compared to conventional refinancing options.

    Think you qualify for a loan? Contact us today to find out!

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    Pros and Cons of a DSCR Cash-Out Refinance

    Understanding the advantages and drawbacks helps you make an informed decision about whether to refinance DSCR loan terms.

    The benefits of a DSCR cash-out refinance are:

    • No income verification needed: Skip the hassle of providing tax returns, W-2s, and pay stubs since qualification is based on property income alone.
    • Streamlined approval process: Experience faster closings than conventional loans since there’s less documentation to review and verify.
    • Portfolio-friendly qualification: Get approved even with multiple investment properties under your belt.
    • Unrestricted fund usage: Use the cash for any purpose, from property improvements to personal investments, without restrictions.
    • Tax planning opportunities: Potentially deduct interest payments and other costs, though consultation with a tax professional is recommended.

    While DSCR cash-out refinancing offers significant advantages, it’s crucial to understand the potential challenges before moving forward. Here are the key considerations that might impact your decision:

    • Higher interest rates: You’ll typically pay more in interest compared to owner-occupied loans due to the increased risk to lenders.
    • Increased property scrutiny: You’ll need to meet stricter requirements for property condition, location, and rental income history.
    • Higher closing expenses: Due to the cash-out feature, you may pay more in closing costs compared to simple rate-and-term refinancing.
    • Lower equity position: Refinancing your loan reduces your equity cushion, which could impact your options during market downturns.
    • Future financing limitations: You may face potential restrictions on subsequent refinancing due to reduced equity and seasoning requirements.

    Begin the application online or request a free quote today!

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    DSCR Cash-Out Refinance Requirements

    Before applying for a DSCR loan cash-out refinance, make sure you meet these general requirements:

    • Minimum credit score of 620
    • At least 25% remaining equity after cash-out
    • Property must be an investment property (not owner-occupied)
    • Clean title history
    • Property must generate sufficient rental income
    • DSCR ratio typically above .75 for cashout
    • Seasoning period may apply (usually 6-12 months of ownership)

    When you’re ready to explore a cash-out DSCR loan, you can use our DSCR calculator to determine if your property qualifies based on its income and expenses.

    You can also manage your loan application process through the Griffin Gold app, which streamlines document submission and tracking.

    Get a Cash-Out Refinance Loan for Your Rental Property

    Real estate investors looking for easier ways to tap their property’s equity should consider DSCR cash-out refinancing. As long as you meet the requirements and understand the costs involved, you can use these funds for any business purpose from property upgrades to adding more properties to your portfolio..

    Ready to invest in real estate or expand your portfolio? Our team specializes in investment property loans and can help you navigate the process for a cash-out refi on rental property. We also offer DSCR home equity loans as an alternative financing option. Contact Griffin Funding to talk to a loan expert and learn more about your options.

    Frequently Asked Questions

    The funds from your cash-out refinance can be used for various business purposes, such as:

    • Invest in real estate opportunities outside of the property
    • Renovate existing properties already in your portfolio
    • Consolidate high-interest debt
    • Create an emergency fund
    • Fund business opportunities

    Typical costs for a cash-out refinance on an investment property include:

    • Origination fees: These cover the lender’s processing costs.
    • Appraisal costs: Expect to pay for a professional property valuation required by the lender.
    • Recording fees: These are county-specific charges for documenting your new mortgage.
    • Prepaid expenses: These costs include property taxes and insurance that must be paid in advance, often requiring several months’ worth.

    Securing competitive cash-out refinance investment property rates comes down to several key factors. Here’s what successful investors focus on to get the best terms:

    • Keep your credit score above 700: A higher score means better rates and could save you thousands over the loan term.
    • Maintain a DSCR ratio at least 25% above your monthly obligations: Lenders offer better rates when your rental income comfortably covers payments.
    • Hold onto 25-30% equity after cash-out: More equity means less risk for lenders, translating to better rates.
    • Document every rent payment and tenant history: Stable, long-term tenants and perfect payment records show lenders you’re a safe bet.
    • Time your refinance with market trends: Even small rate changes can mean big savings over time.
    • Get quotes from multiple lenders: DSCR loan rates vary widely between lenders, and shopping around pays off.

    Remember, the lowest rate isn’t always the best deal. Consider the total cost of the loan, including points, fees, and other charges, when comparing offers. Some lenders may advertise attractive rates but make up for it with higher fees elsewhere in the transaction.