Cash Out Refi rental

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Cash Out Refi rental

Abe Appan
Houston, TX · Member since 2016 · 3 posts · 2 votes

When we moved to our new house, we rented our old house. We have 350 K to 400 K in equity in that house which has a 2.75% interest rate rent right now is 3200 a month against the 950 a month mortgage payment.

Welcome any suggestions on how I should approach Refi in today’s market. It is super important that my debt to income ratio is still preserved as my new loans on future rental purchases maybe impacted.

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Carrie Matuga
Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes
1y

You’re sitting on a great asset here — that 2.75% rate and strong cash flow are gold. Instead of touching the first mortgage, you could do a second position loan or HELOC to access your equity. Some lenders will go up to 80% combined LTV, and if you structure it as a DSCR-based second, it won't hit your DTI the same way a conventional cash-out would.

As for your future rental purchases, consider not using conventional financing at all. Instead:

  • Buy in an LLC and use DSCR loans (which don't affect personal DTI),

  • Or do a hybrid strategy: some conventional, some DSCR, so you can balance cash flow, rates, and how much room you're leaving in your personal debt profile.

That approach gives you access to capital now and preserves your borrowing power as you scale.

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  • Carrie Matuga
    Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes
    1y

    You’re sitting on a great asset here — that 2.75% rate and strong cash flow are gold. Instead of touching the first mortgage, you could do a second position loan or HELOC to access your equity. Some lenders will go up to 80% combined LTV, and if you structure it as a DSCR-based second, it won't hit your DTI the same way a conventional cash-out would.

    As for your future rental purchases, consider not using conventional financing at all. Instead:

    • Buy in an LLC and use DSCR loans (which don't affect personal DTI),

    • Or do a hybrid strategy: some conventional, some DSCR, so you can balance cash flow, rates, and how much room you're leaving in your personal debt profile.

    That approach gives you access to capital now and preserves your borrowing power as you scale.

    3Reply
  • Erik Quinson
    Lender · New York City, NY · Member since 2016 · 26 posts · 9 votes
    1y

    Abe,

    A DSCR Loan is a solid option in your position. It does not rely upon your DTI, but measures the rental income of the property. I would weigh your interest in the cashflow of the property vs what you would do with the cash in the event of a cashout refi.

    1Reply
  • Drago Stanimirovic
    New to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 473 votes
    1y

    Hey Abe,

    With that kind of equity and a 2.75% mortgage, you're in a great position, but also facing a tough trade-off. A full cash-out refi would mean giving up that low rate and likely taking on a much higher payment, which could hurt your DTI and future buying power.

    Instead, consider a HELOC or home equity loan on the rental. That way, you keep your original mortgage and still tap into equity. It's more DTI-friendly and flexible, especially if you're planning to scale with more rentals. Just make sure the rental income is reported properly to help offset future loan calculations.

    1Reply
    • Greg Kasmer
      Rental Property Investor · Philadelphia, PA · Member since 2021 · 780 posts · 504 votes
      1y
      Quote from @Drago Stanimirovic:

      Hey Abe,

      With that kind of equity and a 2.75% mortgage, you're in a great position, but also facing a tough trade-off. A full cash-out refi would mean giving up that low rate and likely taking on a much higher payment, which could hurt your DTI and future buying power.

      Instead, consider a HELOC or home equity loan on the rental. That way, you keep your original mortgage and still tap into equity. It's more DTI-friendly and flexible, especially if you're planning to scale with more rentals. Just make sure the rental income is reported properly to help offset future loan calculations.


      Drago - I've found it fairly difficult to secure a HELOC on investment properties.... Do you know anyone that offers that type of product? I've recently found a regional bank near me willing to do that, but would be nice to have a few more options!

      0Reply
  • Chance House
    Lender · Member since 2025 · 15 posts · 6 votes
    1y

    With where rates are at the moment, and the cash-flow you're getting as a result of your existing leverage, I'd have a hard time cashing-out unless you need a lump-sum for a specific purpose- like a down-payment. 

    This post has some great feedback on the topic:
    Sacrificing my pandemic era mortgage rate for a crazy cash out refinance offer

    0Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    1y

    @Abe Appan You could consider leaving that 2.75% in place and just getting a 2nd position loan to pull cash out.  The rate will be worse than what you could get if you were doing a regular 1st position cash out refi but with such a low rate in 1st currently I believe your blended rate would still be superior this way.  

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  • Deven Ziertman
    Member since 2025 · 77 posts · 15 votes
    1y

    With that equity and a 2.75% rate, you're in a strong spot. A full cash-out refi could hurt your DTI and slow your next deal. Consider a short-term interest-only or bridge loan to tap capital without killing your future scalability.

    0Reply
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