DSCR Refinance: A Guide for Real Estate Investors

If you’ve read our general guide to DSCR Loans, you’re already familiar with the idea.

If you’re not familiar, here’s a quick review:

DSCR stands for Debt Service Coverage Ratio, and DSCR loans are loans that you qualify for using the income produced by a rental property, rather than your personal income.

In addition to purchasing, DSCR loans can be used for refinancing your rental property.

There are 2 types of DSCR refinance: the rate-and-term, and the cash-out.

In this guide, when we say “DSCR refinance,” we are referring to a DSCR rate-and-term refinance, rather than a DSCR cash out refinance. If you’re looking for information on the latter, check out our DSCR cash out refinance guide.

DSCR Refinance vs. DSCR Cash-Out Refinance

The rate and term refinance is often referred to simply as ‘a refinance’, and refers to a refinance where there is no cash taken out of the property. This is the kind of refinance we are focused on in this guide.

As you may have guessed, the rate-and-term refinance is purely about the rate and/or term, meaning the purpose is to modify the interest rate and/or the term (length of the loan) to be more favorable for the purposes of the investor.

This contrasts with the cash-out refinance, where in addition to any rate or term incentives, the investor wishes to take money out of the property.

How Does a DSCR Refinance Work?

With a DSCR refinance, you replace your existing mortgage with a new loan—typically at a higher amount—secured by the same property. The difference between your new loan amount and the remaining balance on your original mortgage is given to you as cash at closing. This extra cash can be used for almost any investment purpose: buying another rental, renovating the property, or simply increasing your liquidity.

Qualification Requirements

Unlike traditional cash-out refinances, lenders focus primarily on the property’s Debt Service Coverage Ratio. This means they’ll look at the rental income and compare it to the property’s monthly expenses (mainly the new mortgage payment, taxes, and insurance). However, credit score is also a factor.

Minimum DSCR

Most lenders require a DSCR of at least 1.0 (meaning the income covers the expenses), but many prefer to see a DSCR of 1.2 or higher for a cash out.

The DSCR Formula = Gross Rental Income / Total Monthly Debt Payments

For example, let’s say you own a duplex that brings in $3000 in gross rents each month.

Let’s also say that your total loan payment on the duplex is $2500 per month.

$3000 divided by $2500 equals 1.2, so your DSCR (debt service coverage ratio) is 1.2.

This is a pretty healthy DSCR, and almost any lender would be satisfied with it.

Minimum Credit Score

Most lenders require a minimum credit score of 650 – either from you, or a cosigner.

Some lenders require a score as high as 680 or more.

Like with most loans, while a lender’s minimum score will get you in the door, factors like your rate and term will likely improve as your credit score does.

No Personal Income Verification

Your employment status, W-2s, and tax returns are generally not required.

Instead, the lender will ask for a lease agreement, a rent roll, and possibly an appraisal showing the property’s fair market rent.

Typical Borrower Profile

DSCR cash out refinances are most popular with investors who want to leverage the equity in their rental portfolio without the headaches of traditional income documentation. This is especially useful for self-employed investors, people with high write-offs on their tax returns, or those growing a real estate business and looking to scale faster.

Benefits of a DSCR Refinance

• Access equity from your investment property without traditional income hurdles
• Qualify based on the property’s income, not your personal finances
• Funds can be used for new investments, renovations, or other needs
• Often available for both single-family and multi-family (1–8 units) properties

Potential Drawbacks:

• Interest rates may be higher than on conventional loans
• Maximum cash out amounts and LTV (Loan-to-Value) ratios can be lower than traditional cash outs
• Not all lenders offer DSCR cash out refinances in every state

When Does a DSCR Refinance Make Sense?

• You want to scale your rental portfolio using existing equity
• Your personal income is difficult to document, or you’ve been denied for a conventional cash out
• You need funds for property improvements, repairs, or other investments