Cash-out refinance on a paid-off rental
Can I pull cash out of a rental I own free and clear?
With no existing mortgage to pay off, a cash-out refinance on a free-and-clear rental is the cleanest version of this transaction — the loan amount is simply the appraised value times whatever maximum LTV a lender publishes, and that ceiling is the whole story.
- DSCR cash-out refinance A property owned free and clear has no existing lien to work around, so the loan amount is a straightforward function of appraised value and the lender’s published maximum LTV.
- A home equity line sized like a primary-residence HELOC Investment-property equity products are scarcer and structured differently than owner-occupied HELOCs, and most of the volume in this space runs through a DSCR cash-out refinance instead.
Lenders in the directory
Who publishes criteria this deal clears
Matched across all 37 lenders in the directory on published maximum LTV. This list is computed from stored criteria, not curated — it changes when a lender’s published figures change.
Writes the product, has not published the threshold
These 11 carry a relevant product but have not published the figure this scenario depends on, or carry no verification date. We will not claim they qualify and we will not claim they do not — ask them directly.
Why this is the simplest cash-out scenario
Every other cash-out scenario in this directory has to account for an existing loan balance being paid off first. A free-and-clear property skips that step entirely: the new loan amount, up to the lender’s maximum LTV, is cash in the borrower’s pocket at closing, minus closing costs. This page filters to lenders publishing a maximum LTV at or above 75%, since that is the leverage level where a cash-out refinance on a paid-off property starts to meaningfully change what an investor can do with the proceeds.
DSCR still has to clear on the new payment
Pulling cash out creates a mortgage payment where there was none before, and that new payment has to be run through the same DSCR calculation as a purchase — the rent has to cover it at whatever ratio the specific lender requires. A property that comfortably supported itself with no mortgage can come uncomfortably close to a DSCR floor once a large cash-out loan is placed on it; running the numbers before assuming the maximum leverage is the right amount to take matters here.
What the proceeds are commonly used for, and why that is not a lender question
Use of proceeds — a down payment on the next property, a renovation on this one, an unrelated investment — is generally not something these lenders restrict or ask to verify after closing, unlike a purchase-money loan where the source of funds is scrutinized closely. That said, some lenders’ pricing or terms differ by stated purpose, so confirm rather than assume.
What to have ready
- Proof of clear title (no existing mortgage or lien)
- Current lease or market-rent estimate
- Statement of intended use of proceeds, even if not formally required
Questions
Is a cash-out refinance on a paid-off rental easier than one with an existing loan?
Does DSCR still apply if the property currently has no mortgage payment?
Do lenders restrict what the cash-out proceeds are used for?
Terms used on this page
- Cash-Out Refinance (Rental Property) — A cash-out refinance replaces an existing loan on a rental with a larger one, paying the borrower the difference in cash. The proceeds are loan proceeds, not taxable income.
- Debt Service Coverage Ratio (DSCR) — DSCR is a property’s gross monthly rent divided by its total monthly mortgage payment. A DSCR of 1.00 means the rent exactly covers the payment; 1.25 means rent exceeds the payment by 25%.