Cash-Out Refinance vs. Keeping Your Existing Loan: How I Decide on My Rental Properties (With Real Numbers)

If you own rental properties long enough, you eventually run into this question:

Do I refinance… or do I leave the loan alone and keep collecting rent?

I’ve refinanced rental properties more times than I can count. But here’s the truth most people miss:

Refinancing isn’t about chasing the lowest rate. It’s about making a smart return on your equity.

Let me walk you through a real example from one of my rentals in Garland, Texas, and how I’m thinking through the refinance decision in today’s DSCR mortgage market.

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The Deal: Garland, Texas Rental (Owned Since 2016)

This is a property I’ve owned since 2016.

• Estimated value: ~$270,000
• Loan balance owed: ~$150,000
• Previous rent: ~$1,300–$1,500/month
• New rent (after improvements): ~$1,850/month
• Recent rehab: ~$35,000

The home had the same tenant for about five years, and after a refresh, we were able to reposition the rent significantly.

So now the question becomes:

Do we keep the old debt… or refinance and restructure the deal for today’s market?

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The Biggest Mistake Investors Make: Ignoring Return on Equity

A lot of investors only look at cash flow and say:

“If it’s making money, don’t touch it.”

But I look at it differently.

Even if you have “no money left in the deal,” you still have equity tied up. And equity sitting still is expensive.

That’s why I always come back to this:

✅ Track your return on equity, not just your cash-on-cash return.

Because if you’ve got $100,000 sitting in a property and you’re making $200/month, that’s not a win. That’s dead weight.

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DSCR Loans: The Framework That Matters in 2025

When you’re refinancing rentals today, especially with a DSCR loan, you’re mainly balancing a few key variables:

• Loan-to-Value (LTV)
• DSCR (Debt Service Coverage Ratio)
• Credit score (FICO bucket)
• Cash-out vs. rate-and-term refinance
• Points / buy-down options
• Prepayment penalty structure
• Fixed rate vs. ARM options
• Interest-only vs. fully amortizing

In my case, I’m working with:

• 760 FICO
• Cash-out refinance
• DSCR above 1.20
• Property is leased

Those are all positives.

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Cash-Out Refinance vs. Rate-and-Term Refinance (Big Difference)

Here’s the quick version:

Rate-and-Term Refinance

This is basically replacing your current loan with a new one, usually to:

• lower the rate
• change terms
• clean up debt structure

Typically, rate-and-term gets better pricing.

Cash-Out Refinance

This is when you refinance and pull equity out.

Cash-out almost always comes with:

• higher rate options
• stricter LTV caps
• more cost sensitivity

In my case, cash-out was capped at 75% LTV, which is pretty standard.

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Real Numbers: What I’m Doing and Why

Here’s the structure that made the most sense for me:

• Loan amount: ~$199,000 (roughly 74–75% LTV)
• Rate: 5.994%
• Points: 3.5 points
• Escrows: ~$6,000
• Points cost: ~$7,000

So yes — I’m paying roughly $13,000 total in points and escrows.

But here’s the punchline: I owe about $150,000, so I’m pulling out roughly $50,000.

After costs, I’m walking away with about $37,000 tax-free, while also restructuring the debt and getting my rate below 6%. That’s not a “perfect” deal.

That’s a smart deal, and at least I got all of my renovation costs back!

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The Real Reason I Refinance: Control and Optionality

This is what refinancing really gives you:

• You reposition the asset
• You unlock capital without selling
• You create flexibility for your next move
• You keep your portfolio moving forward

For me and Jennifer, this refinance isn’t just about the interest rate. It’s about getting liquidity back out while the property is performing stronger than it has in years.

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My Advice: Don’t Guess — Run the Scenarios

There are a dozen ways to structure DSCR loans right now. And the difference between a good loan and a bad loan is usually just: a smarter structure and a better conversation.

If you’re trying to decide whether to refinance a rental property, the fastest way to get clarity is to talk with someone who can walk you through the options and show you the real trade-offs.

That’s exactly what we do every day at Ternus.

👉 Talk to a loan expert at Ternus and run your refinance scenarios
Visit: https://www.ternus.com

Because the goal isn’t just to refinance.

The goal is to refinance with purpose.