As property values rise and rental income stabilizes, many real estate investors look to unlock equity through refinancing. Whether you're looking to fund your next acquisition, renovate existing properties, or pay off high-interest debt, cash-out refinancing can be a powerful tool—especially when paired with a DSCR loan.
DSCR loans offer a simplified path to accessing capital by focusing on property income rather than personal income. In this guide, we’ll explore how cash-out refinancing works with DSCR loans, who it’s best for, lender requirements, and how to leverage this strategy to scale your investment portfolio.
What Is a DSCR Loan?
A DSCR loan (Debt Service Coverage Ratio loan) is a type of real estate financing designed specifically for investment properties. Unlike conventional loans, DSCR loans use the property’s net operating income (NOI) to determine eligibility—not the borrower’s personal income or tax returns.
DSCR Formula:
DSCR = Net Operating Income / Annual Debt Service
If your rental property generates $90,000 in NOI and the new loan's annual debt payments will be $72,000:
DSCR = $90,000 ÷ $72,000 = 1.25
Most lenders require a minimum DSCR of 1.20 to 1.25 for approval.
