Are you considering refinancing your investment property but aren’t sure where to start? You’re not alone. Census data shows that 68.7% of rental properties are owned by individual investors, with many newer landlords having little experience refinancing residential real estate beyond their own homes.
While the mortgage options and eligibility requirements for investment properties can differ from primary residences, the overall process is much the same.
- Refinancing an investment property works similarly to refinancing your primary home, but you’ll typically encounter stricter borrower requirements.
- Mortgage companies offer a variety of refinance options for investment properties, including rate-and-term, cash-out, and renovation refinances.
- You can use the rental income generated by your investment property to help qualify for your new loan.
Can You Refinance an Investment Property?
Yes — both single-family homes and multi-unit properties are eligible, whether you have long-term tenants or rent short-term through platforms like Airbnb or Vrbo. However, lenders typically apply stricter requirements to investment property refinances than to primary residences, including:
- A higher credit score
- A lower debt-to-income (DTI) ratio
- Greater existing equity
- A larger reserve balance
Note: Government-backed mortgages — FHA, VA, and USDA — are designed for owner-occupied homes and are generally not available for investment properties, though there are a couple of exceptions covered below.
Why Refinance an Investment Property?
Investors refinance for a wide range of reasons:
- Reducing monthly costs to improve cash flow and retain more rental income
- Accessing equity to consolidate debt or fund a major expense
- Using cash-out proceeds to purchase additional properties — the typical down payment on a rental property is 27.4%, according to the National Association of Realtors, and a cash-out refinance can be a practical source of those funds
- Funding significant repairs or improvements to support higher rents without a large out-of-pocket outlay
Investment Property Refinance Strategies
Rate-and-Term Refinance
A rate-and-term refinance lets you lower your monthly payments by reducing your interest rate or extending your loan term. It can also be used to switch between fixed and adjustable rates, or to shorten your repayment schedule and build free-and-clear ownership sooner.
If rates have dropped, your financial profile has improved, or you’ve gained significant equity since taking out your current loan, a rate-and-term refinance can be an effective way to reduce your mortgage costs.
Note: Refinancing can result in higher total finance charges over the life of the loan depending on the new term.
Cash-Out Refinance
A cash-out refinance offers all the term-adjustment options of a rate-and-term loan, plus the ability to borrow against built-up equity and receive a lump sum at closing. Common uses include:
- Consolidating high-interest debt (the most common use, per the Consumer Financial Protection Bureau)
- Expanding your portfolio with additional properties
- Major purchases, life events, or education costs
- Improvements to the rental property or primary residence
- Seeding a business venture
Because you’re increasing your loan balance, cash-out refinances carry somewhat higher rates and stricter eligibility requirements than rate-and-term alternatives.
Renovation Refinance
If your goal is to fund improvements, a renovation refinance may be worth considering instead of a cash-out. Popular options include Fannie Mae HomeStyle Renovation and Freddie Mac CHOICERenovation mortgages, which typically offer lower rates than cash-out alternatives. Because the LTV ratio is based on the property’s as-completed value, you may also have access to more funds.
Key limitations to be aware of:
- Only single-family investment properties qualify — multi-unit properties are not eligible under Fannie Mae and Freddie Mac guidelines
- Funds must be used for the subject property only — no cash back at closing or improvements to a different property
- Greater lender oversight is involved — improvement plans must be approved before closing, and work must be completed by licensed contractors paid directly by the lender
Refi.com does not currently offer renovation refinance loans.
DSCR Refinance
DSCR (debt service coverage ratio) refinances are designed for investors with strong cash flow who may struggle to qualify under conventional lending guidelines. Eligibility is based primarily on the property’s ability to cover its debt obligations — measured by dividing the property’s net operating income (NOI) by its total debt expenses. Lenders typically look for a DSCR of at least 1.25.
The main advantage is flexibility: it may be possible to qualify even with a lower credit score, higher personal debt, or less established equity, as long as the property’s income supports the loan. DSCR loans are available as both rate-and-term and cash-out refinances.
Refi.com does not offer DSCR refinances.
Requirements for Refinancing an Investment Property
Lenders apply stricter standards to investment property refinances because borrowers facing financial hardship are statistically more likely to stop paying on a rental before their primary residence. Common requirements include:
- Credit score of 680 or higher (720+ is often required for cash-out refinances)
- Maximum DTI of 45%, with 36% or below preferred
- At least 25% equity in the home; multi-unit investors typically need 30% remaining equity for a cash-out transaction
- At least six months of housing expenses in reserve after closing — sometimes up to 12 months, and potentially more for investors with multiple financed properties
These aren’t rigid cutoffs for every lender. Many mortgage companies have flexibility to approve borrowers with compensating factors — for example, a lower credit score combined with a low DTI and significant equity, or a higher DTI offset by a strong credit profile.
Streamline Refinances for Rental Properties
Streamline refinances — which typically don’t require income verification, a detailed credit check, or a new appraisal — are generally not available for investment properties through conventional lenders.
There is one exception: rental owners who already have an FHA or VA-backed mortgage on their investment property may be eligible for streamline refinances. This typically applies to borrowers who originally took out the loan as owner-occupants, fulfilled the one-year occupancy requirement, and then converted the property to a rental.
Learn more in our guides to the FHA streamline refinance and the VA streamline refinance.
Documentation Needed to Refinance an Investment Property
The documents needed are similar to a primary residence refinance. Most borrowers will need to provide:
- Proof of employment and income (recent pay stubs, W-2s, and two years of filed tax returns)
- Two months of bank and investment account statements showing sufficient funds for closing costs and reserves
- Current mortgage statements and documents pertaining to the existing loan
- Proof of adequate homeowners insurance coverage
If you plan to use rental income to help qualify — which most investors will — your lender will also need:
- Copies of current leases
- Two years of Schedule E (Form 1040) tax filings documenting rental income and expenses
Both long-term and short-term rental income (including Airbnb and Vrbo) can typically be used to qualify, though some lenders may apply more scrutiny to properties without formal lease agreements.
Tips for Refinancing Your Investment Property
Since investment property standards are stricter, making your financial profile as strong as possible will improve both your approval odds and the rate you’re offered:
- Build and maintain a high credit score
- Pay down existing debts to improve your DTI
- Avoid taking on or co-signing new loans before applying
- Maintain healthy balances across your bank and investment accounts
- Keep comprehensive documentation of the property’s income and expenses
- Ensure you’re charging market-rate rent and minimizing unnecessary expenses (without sacrificing maintenance)
Is Refinancing Your Investment Property Worth It?
Whether you want to lower monthly payments, change your loan structure, or access equity to expand your portfolio, refinancing can be an effective tool for reaching your investment goals.
Ready to take the next step? Start your application with Refi.com today to see what rates and options you qualify for.
