Cash Out Refi-LTV on a rental property vrs owner occupied

[Mario Morales]

If you own a 2-flat with an additional non-conforming garden unit (basement) being rented, and you're considering a cash-out refinance, how will the lender evaluate the rental income? Specifically:

• Will the lender only consider the rental income from the two legally zoned units, even though all three rental incomes are declared on your tax return?
• Will they base their calculations solely on the income from the two legal units and disregard the non-conforming basement?

Additionally:

1. What is the current loan-to-value (LTV) ratio for rental properties?
2. If the property were owner-occupied, would I only receive credit for one rental unit's income, while the non-conforming basement income wouldn't count?

From my understanding, it might be more advantageous to refinance as a rental property at a lower LTV with income from two units, rather than as owner-occupied at a higher LTV with only one rental income considered. Does this make sense?