Commercial Cash Out Refinance: Requirements, Rates & How to Qualify

You bought a property years ago. You improved it and filled it with good tenants. Now its value is up, and a new deal is waiting. But your cash is stuck in the building.

A commercial cash out refinance can free it. You keep the property. You get cash. And you keep the rent coming in.

At Commercial Lending USA, we are a correspondent lender, table fund lender, and super broker. Our team has more than 30 years of underwriting experience. We use it to shape your deal before it ever reaches a lender.

What Is a Commercial Cash Out Refinance?

A commercial cash out refinance replaces your current mortgage with a bigger loan. The new loan pays off the old one and covers closing costs. You keep the rest as cash.

Most lenders cap the new loan at 65% to 75% of the property's value. They also want the property's income to cover the new payment by at least 1.20 times.

Want a fast estimate? Try our refinance term calculator.

How the Process Works

1. A lender appraises your property.
2. The lender sizes the new loan using value and income.
3. The new loan pays off the old loan and closing costs.
4. You receive the leftover cash.

What Can You Do With the Cash?

• Buy another commercial or residential property.
• Fund repairs or value-add upgrades.
• Pay off high-interest debt or a short-term bridge loan.
• Hold it as cash reserves.

Many investors weigh this choice against selling. Harvard Extension School even teaches this exact hold, sell, or refinance decision in its real estate finance course.

Commercial Cash Out Refinance Requirements

Banks tend to sit at the low end of the LTV range. Agency lenders such as Fannie Mae and Freddie Mac can go higher on multifamily.

What is DSCR? It stands for debt service coverage ratio. You divide the property's yearly net operating income (NOI) by its yearly loan payments. A DSCR of 1.25 means your income is 25% higher than your payments.

A Real Example: How Much Cash Could You Get?

Here is a simple case. The numbers are for teaching, not a quote.

• Property value: $2,000,000
• Current loan balance: $900,000
• Max LTV: 70%
• New loan: $1,400,000
• Closing costs at about 2%: $28,000
• Estimated cash to you: about $472,000

Now check the income. Say the property earns $160,000 in NOI. At a 7% rate and 25-year amortization, the yearly payment is about $118,700. That gives a DSCR of about 1.35. The deal passes.

Drop the NOI to $140,000, and the DSCR falls to about 1.18. The lender may cut your loan size. This is why income can limit your cash even when you have plenty of equity.

Want your own numbers? Run them through our refinance calculator, or talk to our team.

Costs and Fine Print to Know First

• Closing costs. Expect an appraisal, legal fees, title fees, and lender fees.
• Prepayment penalties. Many commercial loans charge a fee for early payoff. Types include step-down, yield maintenance, and defeasance. Check your current loan first.
• Recourse. Some loans make you personally liable. Others do not.
• Higher payments. A bigger loan means a bigger payment.

Is the Cash Taxable?

Loan proceeds are generally not taxed as income, because you must repay them. Interest is different. The IRS uses interest tracing, so what you do with the cash decides how you deduct the interest. See IRS Publication 535 and ask your CPA before you close.

Property Types We Finance

• Multifamily (5 or more units), apartments, and student housing
• Mixed-use buildings
• Rental properties and 1 to 4 unit portfolios
• Self-storage
• Assisted living and senior housing
• Hotels, motels, and restaurants
• Industrial and commercial space

Loan Options and Rates

Rates depend on the loan type, the property, and your risk profile. Your main choices are:

• DSCR loans for rentals. They qualify you on rental income, not W-2s.
• Bridge loans for fast closings or stabilizing a property first.
• SBA loans and USDA B&I loans for owner-occupied or rural properties. Our USDA commercial loan guide explains the rules.
• FHA and HUD loans and agency debt, often among the lowest long-term fixed rates for qualified multifamily.
• Stated income loans with lighter paperwork. These focus on equity and cash flow.

See every option on our types of loan page.

Cash Out Refinance vs. Other Options

If you need speed now and plan to stabilize later, a bridge loan can lead into a cash out refinance. Our guide to choosing a hard money lender can help you compare short-term options.

When a Cash Out Refinance Is Not a Good Idea

• Your income is thin, and the new payment would squeeze cash flow.
• You would pay a large prepayment penalty.
• The new rate is far above your current rate, and you have no strong use for the cash.
• You have no clear plan for the money.

How to Find a Lender

Dozens of lenders compete for these deals. Each has its own rules. A strong broker saves you time.

With a network of more than 200 private lenders and investors, we match your deal to the right fit. See why borrowers choose us on our why us page, or browse our recent funding.

Our process has three steps:

1. Property review. We look at NOI, rent roll, and a first value estimate.
2. Deal structure. We match your goals to LTV, DSCR, and seasoning rules.
3. Closing. We work to get your capital funded so you can use it.

Gather your documents early with our underwriting checklist.

Ready to see how much cash you could pull out? Start your application or call 855-365-9200.

For Brokers and Realtors

Have clients with trapped equity? Join our referral partner program. It is open to brokers and loan officers. You can also read how our referral program works.

FAQs

What is the max LTV for a commercial cash out refinance? 

Most lenders cap it at 65% to 75%. Strong multifamily deals can reach 80%.

How long must I own the property first? 

Often 6 to 24 months. Some banks ask for longer.

What DSCR do I need? 

Usually 1.20x to 1.25x. Some private lenders accept less.

Can I get a no-doc or lite-doc cash out refinance? 

Yes. These loans focus on property equity and cash flow, not tax returns. Pricing is often higher, so compare options.

Do I pay tax on the cash? 

Loan proceeds are generally not taxed as income. Interest deductions depend on how you use the money. Check with your CPA.

Can I do a cash out refinance on a mixed-use building? 

Yes. Lenders treat the income from both the retail and residential space.

More answers are on our FAQ page.

This article is for education only. It is not financial, tax, or legal advice. Terms vary by lende