MENU
Refinancing with DSCR Loans: How Real Estate Investors Can Unlock Equity & Better Terms
For today's real estate investors, refinancing is a powerful strategy to optimize cash flow, unlock property equity, and secure better loan terms. One of the most effective refinancing tools for investment properties is the Debt Service Coverage Ratio (DSCR) loan. Whether you’re looking to lower your mortgage payment, pull cash out for new investments, or switch to a loan with better terms, DSCR refinancing can be a game-changer.
In this guide, we’ll explore everything you need to know about refinancing using a DSCR loan, including how it works, eligibility requirements, and the benefits for real estate investors.
________________________________
What is a DSCR Loan Refinance?
A DSCR loan refinance is a mortgage refinancing option specifically designed for rental property investors. Unlike traditional loans that require personal income verification, DSCR refinancing is based on the rental property’s ability to generate enough cash flow to cover the new mortgage payments.
🔑 Key Metric: Debt Service Coverage Ratio (DSCR)
Lenders assess eligibility by calculating the DSCR, which compares a property’s net operating income (NOI) to its total debt obligations.
DSCR = Gross Monthly Rental Income ÷ Monthly PITIA (Principle + Interest + Taxes + Insurance + Association Dues)
- ✅ If DSCR ≥ 1.25+ → Strong candidate for refinancing (income exceeds debt by 25%)
- 💛 If DSCR = 1.0 → Break-even (income covers debt exactly) When you're refinancing a property, the DSCR must be at or higher than 1.00.
- ⛔ If DSCR < 1.0 → Ineligible for Refinancing
Because DSCR loans focus on property cash flow rather than the borrower’s W-2 income or tax returns, they’re particularly beneficial for investors with multiple rental properties, self-employed investors, or those with complex tax write-offs.
________________________________
Why Refinance with a DSCR Loan?
💵 Top Benefits for Investors
✅ Access Property Equity (Cash-Out Refi): Investors can pull cash out of an appreciating property to reinvest in new rental properties, renovations, or other investments.
✅ Lower Your Monthly Payment: If interest rates have dropped or your property’s rental income has increased, refinancing could help secure a lower mortgage payment.
✅ Switch to Better Loan Terms: Convert an existing high-interest hard money loan, a private money loan, a construction/ rehab loan, or an adjustable-rate mortgage (ARM) into a fixed-rate DSCR loan for predictable payments.
✅ Consolidate Debt: If you have multiple loans on an investment property, refinancing into a single DSCR loan with a better rate can improve overall cash flow.
✅ No Personal Income Requirement: Unlike traditional cash-out refinancing, DSCR loans don’t require W-2s, tax returns, or DTI (debt-to-income) calculations.
________________________________
Types of DSCR Refinancing Options
1. DSCR Cash-Out Refinance
- Allows investors to tap into home equity by pulling cash from an investment property.
- Ideal for funding new real estate deals, making renovations, or boosting liquidity.
- Loan amounts typically capped at 75% loan-to-value (LTV), depending on DSCR and lender requirements.
2. Rate-and-Term Refinance (aka No Cash-Out Refinance)
- Replacing an existing loan with a DSCR loan at a lower interest rate or better terms.
- No cash is taken out—only the loan structure changes.
- Best suited for investors looking to lower monthly payments or switch from ARM to fixed-rate loans.
3. Portfolio Refinance (Multiple Properties)
- Investors with several rental properties can refinance them under one DSCR loan, streamlining management and payments.
- Helps improve liquidity, reduce administrative burden, and secure bulk financing at competitive rates.
- Often referred to as a "blanket loan" or "cross-collateralization".
________________________________
How to Qualify for a DSCR Refinance Loan
Unlike conventional refinancing, which requires borrowers to meet income and DTI (Debt-to-Income) ratio requirements, DSCR loan refinances are based only on rental income.
Basic Requirements:
✔️ Minimum DSCR Ratio: For refinancing, most lenders require at least 1.0 to 1.25 DSCR for approval. Higher DSCR ratios may see better rates.
✔️ Property Type: Single-family rentals (SFR), multi-family (2-4 units), condos, vacation rentals (Airbnb), and some commercial properties are eligible.
✔️ Credit Score: A minimum credit score of 620-680 is typically required, though higher scores can secure better terms. Our programs accept credit scores lower as low as 550.»
✔️ Loan-to-Value (LTV) Limits: 75% Max LTV for cash-out refinancing, 80% Max LTV for rate-and-term refinances.
✔️ Property Appraisal: Lenders will evaluate the property’s market rent and appraised value to confirm DSCR eligibility.
✔️ Reserves: this terms refers to the amount of liquid funds the applicant has in bank accounts after the refinance is completed. This is counted in terms of the number of months of PITIA. Most lenders have some reserve requirement ranging from 3-6 months of the PITIA. For example, if the lender requires 6 months of reserves, and the monthly PITIA payment is $3,000/mo, the borrower must have at least $18,000 on hand after the refinance is completed. (6 x $3,000 = $18,000). Note: in Cash Out Refinances, most lenders allow the cash out proceeds to count towards the refinance requirement.
📌 Pro Tip: Some lenders offer “No Ratio DSCR Loans” for investors with strong assets but lower rental income. This allows the investor to use the access their equity to improve the property to enhance it rental income potential without the restriction of qualifying using under-performing existing rental income. We offer No Ratio DSCR refinance options »
________________________________
How to Apply for a DSCR Refinance Loan
Step-by-Step Guide
1. Assess Your Current Loan & Goals – Determine if you need a lower rate, better terms, or cash-out equity.
2. Calculate Your DSCR Ratio – Use your property’s NOI and mortgage payments to ensure you meet lender DSCR requirements.
3. Gather Necessary Documents – Unlike traditional loans, you don’t need tax returns. However, you’ll need:
- Rental property lease agreements
- Property tax and property insurance records. Association dues (if these apply to the property)
- Most current mortgage statement for the property being refinanced.
- DSCR loan application from lender
4. Credit Report - The lender will order a credit report after you've made application.
5. Property Appraisal & Underwriting – The lender will conduct an appraisal and verify the property’s value and rental income potential.
6. Loan Approval & Closing – Once approved, you’ll lock in your rate and close the refinance loan.
________________________________
Frequently Asked Questions About DSCR Refinancing
1. Can I refinance an owner-occupied property with a DSCR loan?
No, DSCR loans are exclusively for investment properties. If you live in the property, you’ll need a traditional refinance. If you have moved out of the property, the lender may allow you to refinance the existing loan using a DSCR loan provided that you prove to the lender that you have already purchased and moved into a new home.
2. What’s the minimum DSCR for refinancing?
Most lenders require a minimum DSCR of 1.00. You can also consider a No Ratio DSCR refinance »
3. Can I do a cash-out refinance with a DSCR loan?
Yes! Cash-out refinancing is a popular strategy for investors who want to tap into property equity for new investments, improving existing ones, or consolidating debts.
4. Do DSCR refinance loans require a personal income check?
No. DSCR loans do not require W-2s, tax returns, or DTI calculations—they are based solely on property cash flow.
5. What’s the maximum LTV for DSCR refinancing?
Maximum LTVs are typically 75% for cash-out refinances and 80% for rate-and-term refinances.
________________________________
Final Thoughts: Is DSCR Refinancing Right for You?
Refinancing with a DSCR loan can optimize your rental portfolio, improve cash flow, and free up capital for new opportunities. Whether you're looking to lower your interest rate, access home equity, or simplify your investment loans, DSCR refinancing provides flexible, investor-friendly financing options.
If you’re ready to refinance with a DSCR loan, we offer a wide variety of DSCR refinance programs tailored to real estate investors. Our expert team can help you compare rates, find the best terms, and streamline the process.
📞 Call us today or apply online to explore your DSCR refinance options!
👉 Explore DSCR Refinance Programs »
________________________________
Next Steps
- Use our DSCR Loan Calculator to run your own DSCR scenarios »
- Check out our DSCR Loan FAQ for more answers »
You can also drop us a line HERE »
Yours in successful homeownership,
Derek Bissen
Loan Originator
NMLS#365627
Unconventional Lending Program Director
Derek Bissen is a licensed Mortgage Loan Originator with over 25 years of experience in the industry. Derek is a self-employed lending expert who is known for his ability to work with borrowers who have substantial wealth and non-traditional lending needs. He is a creative loan structurer and specializes in portfolio lending, asset-based lending, bank statement lending, as well as traditional loans such as Conventional, FHA, VA, and first-time homebuyers. Derek's expertise in the mortgage industry is unparalleled. He is a trusted advisor to his clients, providing them with customized loan solutions that meet their unique financial goals and needs. His vast experience and knowledge make him a valuable asset to anyone looking to purchase a home or refinance their existing mortgage. As a highly-experienced loan originator and author, Derek is committed to sharing his knowledge with others. He regularly provides valuable insights and advice to readers looking to navigate the complex world of mortgage lending. His articles are informative, engaging, and backed by years of hands-on experience. With his wealth of knowledge and dedication to his clients, he is the go-to source for all your mortgage lending needs. If you're looking for a reliable and trustworthy mortgage expert, contact Derek today to learn more about how he can help you achieve your financial goals.