How Do You Refinance a Rental Property?
Decide first whether you want a lower rate or term, or cash out of the equity, because the rules differ. On a conventional loan, Freddie Mac allows up to 85% loan-to-value on a one-unit rental for a no-cash-out refinance and up to 75% for a cash-out refinance. A DSCR loan is the other route, qualifying on the rent rather than your income.
Last updated October 21, 2026Rate-and-term refinance
This replaces the loan to change its rate or term, with little or no cash back. Fannie Mae calls it a limited cash-out refinance and caps the cash back at the greater of 1% of the new loan amount or $2,000. Freddie Mac's limit for a no-cash-out refinance on a rental is 85% loan-to-value on one unit and 75% on 2 to 4 units, for loans with an automated Accept.
Cash-out refinance
This takes a larger loan and pays you the difference. Freddie Mac's cash-out limit on a rental is 75% loan-to-value on one unit and 70% on 2 to 4 units. Fannie Mae requires at least one borrower to have been on title for at least six months before the new loan closes, and a property listed for sale must come off the market by closing.
Reserves and debt-to-income
Fannie Mae's automated underwriting requires six months of reserves on an investment property transaction, and on a cash-out refinance with a debt-to-income ratio above 45%. See investment property loan requirements.
Refinancing with a DSCR loan
A DSCR loan qualifies on the property's rent rather than your income. One lender allows a cash-out refinance after 90 days of ownership or on a property owned free and clear, and another publishes cash-out up to 80% loan-to-value. If your current loan is a DSCR loan, check its prepayment penalty first. See can you refinance a DSCR loan.
Steps
1. Pick the goal: lower payment or term, or cash for another purchase or repairs. 2. Check your equity against the limits above. 3. Gather what the lender will review: income and leases for a conventional loan, the property's rent and value for a DSCR loan. 4. Compare offers from more than one lender, including any prepayment penalty on the loan you're leaving. 5. Ask whether the lender needs a new appraisal; on a DSCR loan the appraisal can set the rent as well as the value.
| No-cash-out limit | 85% on one unit, 75% on 2 to 4 units (Freddie Mac) |
|---|---|
| Cash-out limit | 75% on one unit, 70% on 2 to 4 units (Freddie Mac) |
| Cash back on a rate-and-term | Up to the greater of 1% of the loan or $2,000 (Fannie Mae) |
| Time on title for cash-out | At least six months (Fannie Mae) |
| DSCR route | Cash-out after 90 days at one lender; up to 80% loan-to-value at another |
Related questions
Sources
- https://sf.freddiemac.com/general/maximum-ltv-tltv-htltv-ratio-requirements-for-conforming-and-super-conforming-mortgages
- https://selling-guide.fanniemae.com/sel/b2-1.3-02/limited-cash-out-refinance-transactions
- https://selling-guide.fanniemae.com/sel/b2-1.3-03/cash-out-refinance-transactions
- https://selling-guide.fanniemae.com/sel/b3-4.1-01/minimum-reserve-requirements
- https://www.kiavi.com/loans/dscr
- https://www.griffinfunding.com/non-qm-mortgages/dscr-loans/
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.