DSCR cash-out vs. a HELOC on a rental
Two ways to tap rental equity. One replaces the loan at a fixed rate; the other is a variable line most banks won't write on investment property.
Both pull equity out of a rental. They behave completely differently, and for most investors the choice comes down to how quickly the money gets deployed and whether a variable rate is acceptable.
The DSCR cash-out refinance
- Replaces your existing loan entirely
- Fixed 30-year or interest-only structures available
- Qualifies on rent — no personal income documents
- Proceeds wire at closing in one lump sum
- Typically carries a prepayment penalty structure
- Full closing costs, roughly 3% as a planning figure
The investment-property HELOC
- Sits behind your existing first mortgage
- Draw only what you use, pay interest on the balance
- Almost always a variable rate that can move against you
- Few banks and credit unions offer them on non-owner-occupied property
- Most still underwrite your personal income and DTI
- Lower upfront cost, tighter limits
How to decide
If your existing rate is already low and you need flexible, short-duration capital, a line is attractive — assuming you can find one on a rental and qualify with personal income. If you need a large certain amount, want a fixed payment, or can't document income the way a bank wants, the DSCR cash-out refinance is the tool.
Investors exiting hard money almost never use a HELOC. You need to retire the bridge note in full, and a subordinate line won't do that.
Run both numbers
Model the new full payment against rent in a DSCR calculator before committing. A refinance that drops your coverage under 1.00 is a worse outcome than leaving the equity in place for another year.
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