A cabin that has risen in value, or one you built or renovated for less than it is now worth, holds equity you can put to work. A cash-out refinance replaces the existing loan with a larger one and pays you the difference.
How much you can take out
We lend up to 80% of the cabin’s appraised value on a cash-out refinance. The new loan pays off the old one and the closing costs, and the remainder comes to you.
| Appraised value | $700,000 |
| 80% loan-to-value | $560,000 |
| Existing loan paid off | $380,000 |
| Cash before closing costs | $180,000 |
The cabin still has to carry the new payment
A larger loan means a larger payment, and the debt service coverage ratio is recalculated on it. We prefer the rent to cover the payment at 1.0 or better. Because we count nightly rental income from 12 months of history, a cabin with a strong booking record supports more cash out than one that has been lightly rented.
Common reasons investors refinance
- To fund the down payment on another cabin
- To pay off a construction loan or fix and flip loan with long-term debt once the work is finished
- To pay for an addition, a pool or a game room that will raise the nightly rate
- To move several cabins into one portfolio loan with a single payment
Terms
- Fixed terms from 5 to 30 years, with interest-only options
- Credit scores from 600
- A 3-year or 5-year prepayment penalty, or none at a higher rate
- About 30 days to close, appraisal included
- No tax returns or employment check
What to have ready
- The settlement statement from your purchase
- Twelve months of rental income, from your manager or the booking platforms
- The current mortgage statement
- Two months of bank statements
- Your short-term rental permit and insurance policy
Full terms are on the DSCR rental loans page.