How to Refinance an Investment Property

Refinancing a rental works like refinancing your house, except the lender wants more equity and charges more for the same loan. Fannie Mae and Freddie Mac price a rental property as riskier, because when money gets tight, owners pay the mortgage on the house they sleep in first.

Pick the goal before the loan. Want a lower interest rate or a different loan term? That's a rate-and-term refinance, and it can't put more than the greater of 1% of the loan or $2,000 in your pocket. If it's cash you're after, you need a cash-out refinance instead. The new loan is bigger than the old one, and the difference is yours to put toward the next down payment or a big repair (cash-out details).

The test for a rate-and-term refinance is how many months of savings it takes to earn back the closing costs. If you'll still own the rental well past that point, it's worth doing (break-even calculator).

After a cash-out refinance, at least 25% of a single-family rental's value has to stay in as equity. On a 2 to 4 unit building, make that 30%. Fannie Mae and Freddie Mac agree on cash-out limits and split on rate-and-term:

Limits from Fannie Mae's August 2026 eligibility matrix and Freddie Mac Guide section 4203.1.

On a $400,000 rental, the cash-out loan tops out at $300,000, and whatever you owe below that line comes back to you, minus closing costs.

Owe more than 75% and only want a better rate? Freddie Mac's 85% limit is the reason to have a broker price both agencies.

Texas owners, the state's 80% home equity cap covers your homestead only. A rental you don't live in follows the investor limits above, not the Texas cash-out rules.

Bought it with cash? Use delayed financing

If you paid cash within the last 6 months, you don't have to wait. Fannie Mae's delayed financing exception allows a cash-out refinance, capped at what you put in (the documented price plus closing costs) and inside the cash-out limits above. You'll need the settlement statement and proof of where the cash came from, and borrowed cash has to be paid back from the new loan. For cash buyers, it's the fastest way to get the money back out.

Lenders that refinance investment property loans look at four things: your credit score, your debt-to-income ratio, your reserves, and how long you've owned the place.

The score rules changed recently. Fannie Mae dropped its minimum credit score for automated approvals, the only way it takes a rental loan. Lenders still set their own floors, commonly 620, and a rental cash-out gets cheaper at every step up the score ladder.

Your debt-to-income ratio can reach 50% with an automated approval. On a refinance, lenders count 75% of the signed lease as rental income and leave the rest for vacancy and upkeep. Once the rental shows up on your Schedule E, they work from the tax return instead (how Fannie Mae counts rental income).

Newer landlords face one more limit. For applications taken on or after December 1, 2026, Fannie Mae counts the rent as extra income only if you have 12 months of experience managing rentals. Otherwise it can only offset the property's own payment.

Reserves run heavier than on a home refinance: 6 months of payments for this property, plus 2% to 6% of the balances on your other financed properties. The cash you take out doesn't count toward reserves, and Fannie Mae stops lending once you hit 10 financed properties.

Cash out also runs on two clocks: 6 months on title, and at least 12 months since the note date of any first mortgage being paid off. That second clock catches investors who bought with a mortgage less than a year ago. Inside that year, you can still do a rate-and-term refinance, or cash out sooner with a DSCR loan.

Refinancing an investment property isn't hard once the equity and reserves are in place. The files that stall usually have thin equity, or a Schedule E showing far less income than the leases do.

Investment property refinance rates run higher because Fannie Mae and Freddie Mac charge upfront fees called loan-level price adjustments (LLPAs), based on credit score and loan-to-value ratio. A rental adds its own fee, and cash out pulls from a pricier grid than rate-and-term. For a 740 to 759 score on a single-family rental:

Fees from Fannie Mae's LLPA matrix dated September 9, 2026. Freddie Mac's credit fees match for these loans.

Lenders usually build that fee into your rate or let you pay it as points, so rental quotes run above home loans. You control one piece: a lower loan-to-value on a cash-out can drop you into a cheaper row.

No public survey tracks rental rates. Freddie Mac's 30-year fixed average for primary residences was 7.03% on September 24, 2026, and rental quotes land above it. Survey rates are averages, not quotes, and don't include APR costs.

Closing costs come on top. The CFPB puts median total loan costs on a primary-residence refinance at $7,329 for 2023.

HELOC or home equity loan instead of a cash-out refinance?

If your current mortgage carries a rate in the 3s, I'd leave it alone and borrow against the equity with a second lien. A HELOC or home equity loan charges today's rate only on the new money, while a cash-out refinance replaces your whole loan at that rate.

Availability is the limit. Home equity lines on rentals are a niche product, usually capped at 70% to 80% combined LTV and often limited to single-family rentals. The math flips once your current rate is near today's market. At that point a cash-out refinance wins, with one loan and one payment.

When a DSCR loan is the better fit

A DSCR loan qualifies the property instead of you. The lender compares the rent to the full mortgage payment, and your personal income never enters the file (refinancing without tax returns).

It earns its higher cost when the conventional route is blocked, usually by an LLC on the title or a portfolio already at Fannie Mae's cap. Tax returns can block it too, when depreciation turns a profitable rental into a paper loss. Our DSCR refinance allows cash out to 75% with a ratio as low as 0.75 after 6 months of ownership.

The costs are a higher rate and, on most DSCR loans, a prepayment penalty that steps down over three to five years. Loans sold to Fannie Mae generally can't enforce one, so if there's any chance you'll sell or refinance within a few years, I'd price the penalty into the comparison.

Renting out your old home? Try a streamline first

If the home still carries an FHA or VA loan, start there. A VA Interest Rate Reduction Refinance Loan (IRRRL) only asks you to certify that you used to live there, so a former home you now rent out qualifies. An FHA Streamline Refinance works on a rental too, into a fixed-rate mortgage with no appraisal. You can't finance the closing costs, though, or take out more than $500. You won't get cash out of either, but you also skip the Fannie Mae and Freddie Mac rental fees (VA IRRRL, FHA Streamline).

1. Decide between a lower rate and cash, and check your equity against the 70% and 75% lines, where pricing changes.
2. Gather current leases, two years of tax returns with Schedule E, recent pay stubs, and bank statements or retirement account statements for your reserves.
3. Get quotes from at least three lenders, or from a broker who shops several.
4. Order the appraisal with a rent schedule: Form 1007 for a single-family rental, Form 1025 for 2 to 4 units.
5. Lock and close. The 3-day right of rescission covers only a primary residence, so a rental cash-out funds at closing.