Refinancing rentals and second homes, answered plainly
Can I take cash out of a rental?
Plain answer
Yes, many programs allow cash-out on investment property, but the maximum loan-to-value is usually lower than for a home you live in, reserves requirements are higher and pricing reflects the added risk. Keep records of how you use the money; the tax treatment of interest depends on its use.
Last reviewed against the primary sources listed below.
Questions to ask
- What is the maximum loan-to-value for a cash-out on this property type?
- How many months of reserves are required?
- Is there a minimum time since purchase?
Tax records
Interest on a rental's mortgage is generally a rental expense when the money is used for the rental. Publication 527 explains; ask a tax professional about other uses.
Landlords also ask
How long do I have to own a property before a cash-out refinance?
Many programs have a seasoning period. Fannie Mae's cash-out rules are in its Selling Guide.
What is a simple way to reduce capital gains tax on a rental?
Tax rules on sales, exchanges and depreciation recapture are complex. IRS Publication 527 and a tax professional are the right sources.