Cash-out refinance on an investment property: 2026 rules

The short answer

You can do a cash-out refinance on an investment property up to 75% of its value for a one-unit rental and 70% for two to four units under Fannie Mae's Aug. 5, 2026 Eligibility Matrix. FHA cash-out refinances are limited to primary residences (HUD Mortgagee Letter 2019-11). Investors who don't want to document personal income can use a DSCR cash-out loan, which qualifies on the property's rent. Example: a $400,000 rental with $200,000 owed can support a $300,000 loan, or $100,000 before costs.

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Key numbers

Conventional, 1 unit: 75% max LTV
Conventional, 2-4 units: 70% max LTV
FHA: Not allowed (primary homes only)
Alternative: DSCR cash-out (qualifies on rent)

Maximum cash-out by property type (2026)

Property	Max loan-to-value on cash-out	Source
Primary home, 1 unit	80%	Fannie Mae Eligibility Matrix (Aug. 5, 2026)
Second home, 1 unit	75%	Fannie Mae Eligibility Matrix
Investment property, 1 unit	75%	Fannie Mae Eligibility Matrix
Investment property, 2-4 units	70%	Fannie Mae Eligibility Matrix
FHA, any rental	Not eligible	HUD Mortgagee Letter 2019-11

Worked example

A one-unit rental appraises at $400,000 and you owe $200,000. At 75%, the maximum new loan is $300,000, which pays off the $200,000 and leaves $100,000 before closing costs. A duplex with the same numbers is capped at 70%, or $280,000, leaving $80,000. Run your own numbers in the cash-out refinance calculator (choose the investment property option).

Other conventional requirements

Seasoning: the mortgage being paid off must be at least 12 months old, and you must have been on title for at least six months, with limited exceptions (Fannie Mae Selling Guide B2-1.3-03).
Reserves: Desktop Underwriter cash-out loans need minimum reserves when the debt-to-income ratio is above 45%, and owners of several financed properties face additional reserve requirements (Fannie Mae Eligibility Matrix notes).
Income: conventional loans qualify you on your personal income and the property's documented rental income, so your tax returns matter.
Pricing: lenders usually charge more for investment-property cash-out loans than for primary-home refinances, so compare Loan Estimates.

DSCR cash-out: qualifying on rent instead

A DSCR loan qualifies the property, not you: the lender divides the rent by the monthly payment (principal, interest, taxes, insurance and HOA). Loans to buy or refinance rental property are business-purpose credit (Regulation Z 1026.3), which is why these lenders can skip tax returns. Defy Mortgage, for example, lists a 640 minimum score and says investment properties need 20% to 25% down or equity (75% to 80% LTV). Expect a higher rate and possibly a prepayment penalty. Test a property with the DSCR calculator and read DSCR loan requirements.

Frequently asked questions

Can you do a cash-out refinance on an investment property?

Yes. Fannie Mae allows cash-out refinances on investment properties up to 75% loan-to-value for one unit and 70% for two to four units. FHA doesn't allow it.

How much equity can I take out of a rental property?

Up to 75% of the appraised value minus your balance on a one-unit rental (70% for 2-4 units), before closing costs. A $400,000 rental with $200,000 owed can yield about $100,000.

Can I use a DSCR loan for a cash-out refinance?

Yes. Many DSCR lenders offer cash-out refinances that qualify on the property's rent instead of your income, usually up to 75% to 80% loan-to-value.

How long do I have to own a rental before a cash-out refinance?

For a conventional loan, the mortgage being paid off must be at least 12 months old and you must have been on title at least six months. DSCR lenders set their own seasoning rules.

Is a cash-out refinance on a rental property tax deductible?

Interest on a loan secured by rental property is generally a rental expense when the money is used for the rental business. Ask a tax professional how the IRS rules apply to how you use the cash.

Sources

Prepared by the MortgageInfo.us editorial team from primary sources. General education only, not financial, legal, or tax advice. How we research and fact-check.