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Cash-Out Refinance
Replacing an existing mortgage with a larger one and taking the difference in cash.
Definition
A cash-out refinance replaces your current mortgage with a new, larger loan, allowing you to pocket the difference between the new loan amount and your existing balance. Investors commonly use this strategy to pull out equity built through appreciation or property improvements, then deploy that capital into additional investments. The new loan typically comes with a new rate and terms. Cash-out refinances usually allow a maximum LTV of 70-75% on investment properties. This is the "second R" in the BRRRR strategy and a key tool for scaling a rental portfolio without selling assets.
How This Relates to DSCR Loans
DSCR cash-out refinances let investors tap equity without documenting personal income. Most DSCR lenders allow up to 75% LTV on cash-out transactions.
Related Terms
Rate and Term Refinance
Replacing an existing mortgage with a new one to get a better rate or different term, without taking cash out.
LTV (Loan-to-Value)
The ratio of a loan amount to the appraised value of the property.
Equity
The difference between a property's market value and the outstanding mortgage balance.
BRRRR Strategy
Buy, Rehab, Rent, Refinance, Repeat — a strategy for recycling capital to build a rental portfolio.
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