DSCR Refinance for Rental Properties

Rate/term or cash-out? Here's how a DSCR refinance actually works for rental property owners.

Refinancing a rental property with a DSCR loan works the same way a DSCR purchase does; qualification is based on the property's rental income, not your personal income or tax returns. Here's how a DSCR refinance actually works, including the difference between a rate/term refinance and a cash-out refinance.

Can You Refinance a Rental Property with a DSCR Loan?

Yes. Whether you originally purchased the property with a DSCR loan, a conventional loan, or paid cash, you can refinance an existing rental property using a DSCR loan; qualification is still based on the property's rental income rather than personal income or employment documentation.

Rate/Term Refinance vs. Cash-Out Refinance

Lenders in our network generally distinguish between two types of DSCR refinance:

Rate/Term Refinance — changes your interest rate and/or loan term without pulling additional cash out. Closing costs and prepaid items (like taxes and insurance) can typically be rolled into the new loan amount. A small amount of "incidental" cash back is usually allowed, generally limited to the greater of 1% of the new loan amount or $2,000.

Cash-Out Refinance — any refinance where you receive cash proceeds beyond that incidental limit. This also applies if the property is currently owned free and clear, since pulling a new mortgage on a paid-off property is treated as cash-out. Cash-out refinances generally require at least 90 days of title seasoning (measured from your note date to the new note date), though exceptions exist for properties acquired through inheritance or a legal award such as divorce.

What If You Bought the Property with Cash?

If you purchased a rental property with cash within the last 90 days, a standard cash-out refinance generally isn't available yet, since that requires 90 days of title seasoning first.

Instead, you may be eligible for delayed financing, a refinance option designed specifically for this window, letting you access financing sooner than you'd otherwise be able to.

A few things to know:

• The original purchase must have been an arm's-length transaction — non-arm's-length purchases (such as buying from a relative or a related business entity) don't qualify for delayed financing, and the source of funds needs to be documented.

• Your new loan amount is generally based on the lesser of the current appraised value or your original purchase price plus any documented improvements — this is a key difference from a standard cash-out refinance, which can use the full current appraised value once the 90-day seasoning period has passed.

• Gift funds used for the original purchase generally can't be reimbursed through the new loan's proceeds.

Once 90 days have passed since your cash purchase, a standard cash-out refinance becomes available instead, using your property's full current appraised value rather than being capped at your original purchase price.

What About Taxes or Existing Liens?

If your property has delinquent property taxes (60 or more days past due), those generally can't be paid off through a rate/term refinance; that type of payoff is treated as cash-out instead. Any existing liens typically need to be addressed as part of the title process before closing.

How Long Does a DSCR Refinance Take?

Refinance timing works similarly to a purchase: once you receive your quote and proceed with the application, your file undergoes underwriting, appraisal, and title review before reaching a 'clear to close' status. The average time from quote to closing is 24 days, although appraisal scheduling (typically 7-14 days from order to report) and title work can impact your specific timeline. For a full walkthrough of the process, see how to apply for a DSCR loan online.

Getting Started

If you're considering refinancing a rental property, start your DSCR review with your property details, and whether you're looking for a rate/term refinance or to pull cash out, we'll match you with lenders in our network suited to your situation.

DSCR Investor Loanz is a brand of Sure Trust Mortgage, LLC (NMLS 2072908), a licensed mortgage brokerage doing business as Motto Mortgage Secure, working with lenders in 39 states. This article is for informational purposes and does not constitute a loan commitment. Rates, terms, and qualification requirements vary by lender and are subject to change.