FINANCING

How to Refinance a Rental Property in 2026

Updated March 2026

Two Types of Refi

Rate-and-term refinance: you replace your current mortgage with a better one (lower rate, different term). No cash out. Cash-out refinance: you take a new, larger loan and pocket the difference. This is how BRRRR investors recycle capital. Most investment property refinances in 2026 are cash-out — investors pulling equity to fund the next deal.

What Lenders Want

For a cash-out refi on an investment property: 75% maximum LTV (meaning you need 25%+ equity), credit score 660+ (700+ for best terms), DSCR of 1.25+ (the property's NOI must cover 125% of the new mortgage payment), 6-12 months of seasoning since purchase (many lenders require you've owned it 6+ months), and sometimes 6 months of reserves in the bank.

The Math on Cash-Out

Property worth \$150K, current loan balance \$90K. Cash-out refi at 75% LTV: new loan \$112,500. Cash in your pocket: \$112,500 - \$90,000 = \$22,500 (minus closing costs of ~\$3-4K). Your monthly payment increases because the loan is larger, so make sure the property still cash-flows with the bigger mortgage. Run DSCR on the new payment before committing.

When to Wait

If rates are significantly higher than your current rate, a rate-and-term refi makes no sense. But a cash-out refi might still work if you can deploy that equity into a property earning more than the incremental rate cost. If you pull \$20K at 7.5% (\$1,500/year interest cost) and invest it in a property earning \$3,000/year cash flow, you're net positive \$1,500. Always compare the cost of the cash-out against the return on where you'll deploy it.