There are two reasons to refinance an investment property, and they’re underwritten differently: a rate-and-term refinance replaces your current loan with better terms, while a cash-out refinance replaces it with a larger loan and hands you the difference in cash. Knowing which one you’re after shapes everything — the rate, the loan-to-value cap, and what you’ll need to show.
Rate-and-term: better terms, no cash out
This swaps your existing loan for a new one, without pulling equity out. For example, you might get a lower rate or a different term. You might also move from an adjustable to a fixed rate. Because you’re not taking cash, lenders treat it as lower risk. As a result, the loan-to-value can go higher and pricing is often a touch better. Investors use it to cut the payment, lock a fixed rate, or exit a maturing balloon.
Cash-out: pull equity, redeploy it
This replaces your loan with a larger one and gives you the difference as cash. It’s how investors turn built-up equity into the down payment on the next property — without selling. The trade-off: lenders treat cash-out as higher risk. Therefore, they usually cap the loan-to-value a bit lower, often around 70%–75%. In addition, pricing runs slightly higher than rate-and-term.
Both still qualify on the property’s income
Whichever you choose, an investment refinance qualifies the same way a purchase does. In other words, the property’s income has to cover the new payment (DSCR). Instead of your personal income or tax returns, the property carries the file. On a cash-out, the larger loan means a larger payment. So the income has to stretch further. That DSCR test, alongside the LTV cap, limits how much you can pull.
Which one fits?
Here are the two refinance paths explained: rate-and-term and cash-out. If rates have dropped, your balloon is coming due, or you just want to stabilize the payment, choose rate-and-term. However, if you’ve built equity and want to put it to work on the next deal, choose cash-out. That equity can come from appreciation or from raising rents. Some investors do a rate-and-term now and a cash-out later once the property has grown into more equity.
A typical deal
A scenario I see often: an investor with a rental that’s appreciated and whose adjustable loan is about to adjust. If they just want to lock a fixed rate, we do a rate-and-term. Instead, if they’d rather pull equity for the next purchase, we run a cash-out. Then we confirm the bigger payment still clears the DSCR. Same property, two very different refinances — the goal decides.
Refinancing a West Palm Beach triplex after a flat appraisal
- LoanRate-and-term refinance
- PropertyRental triplex
- LocationWest Palm Beach, FL
- ClosedAugust 2026
Almost $1,000lower monthly payment
The situation
The owner bought this triplex in 2023 and paid a premium for it. Three years later, his loan still carried a rate in the high 8% range, and he wanted to bring the payment down.
The challenge
The new appraisal came in no higher than his 2023 purchase price. On that value, the loan he needed sat slightly above the program’s standard LTV limit.
How it closed
We took the file back to the underwriter and obtained an exception for a slightly higher LTV, so the refinance could go through.
The result
His monthly payment dropped by almost $1,000. He’s a returning client.
Underwriting exceptions are decided case by case and aren’t guaranteed. Results depend on the property, the borrower and market conditions. Client details are anonymized. See more recent deals.
Ready to refinance?
The right refinance depends on your goal and your equity. Tell us about your deal and we’ll lay out both paths — in English or Spanish.
By Andres Jara — Alpha Equity Lending (NMLS #1855083). 20+ years in real estate finance, an MS in Finance, and an active South Florida investor and landlord.
