DSCR Cash-out Refi Options

[Rob Schou]

Hey all!

Long story short, I want to finally refinance a property we bought and rehabbed in 2022. The low interest rate on the property has been holding me back from refinancing but a great opportunity has come up and I want to move the equity to the new project. Any recommendations on who to use for a DSCR cash-out refi? Has anyone ever found a DSCR HELOC product?

[Mark Munson]

Hi @Rob Schou

    To echo what others have said above, use the Find a Lender tab and call around to as many as you can. You'll want to ask a few things: 

1. Do you lock my interest rate and when? The right answer to this is they should lock your rate for 30 to 45 days and do so immediately upon your credit being pulled and the application submitted. 

2. What is your debt service coverage ratio? You want a ratio of 1 to 1, anything higher is more restrictive and can mean you will get less money then you are after. 

3. What is your maximum LTV on a cash-out refinance? Most lenders are at 75% LTV, but some go to 80%. 80% LTV will increase your rate fairly significantly.

4. Can you send me a formal term sheet? Make sure you get a formal term sheet to compare apples to apples, don't accept soft quotes. 

5. What is your prepayment penalty length and structure? Aim for a 3-year penalty; and a stepdown structure is most preferred. 

6. What is your closing time frame? Should be about 24 days. 

7. Do you offer buy downs? Some lenders can offer buy downs and even roll that cost into the loan. 

8. What are your fees? This should be outlined on the formal quote, but most will have origination points and an underwriting fee (this is also referred to as processing or service fee too). 

9. Can I roll my origination fee into the loan? Some lenders offer this as well, but usually at 70% LTV and no greater.

10. How much will the appraisal cost me? Some lenders have fixed costs, but most will go through an Appraisal Management Company for bids. Some lenders also upcharge you and use this as a profit center, so avoid that if you can. 

Feel free to reach out if you need any advice. Best of luck!