What You Actually Walk Away With at the Cash-Out Refinance

The refinance is the fourth step in BRRRR. You buy, rehab, rent, and then a long term lender pays off your short term loan and sends you whatever is left over. That leftover is the line on the settlement statement labeled cash to borrower. It is what people are asking about when they ask what cash to close to borrower means in a refinance: money moving toward you rather than away from you. The opposite label, cash to close from borrower, means you wire money in to make the closing happen.

The loan amount is not that number. Four things come out ahead of you.

Where the cash-out figure starts

Refinance loan = appraised value x refinance LTV

The standard deal on this site buys at $300,000, puts $60,000 into the rehab, and finishes at a $500,000 after-repair value. At 75% LTV that is a $375,000 loan. The stage by stage math at this value shows where each piece lands.

Seventy-five percent is the usual ceiling for an investor cash-out refinance on a single family rental. Some lenders stop at 70%. Some DSCR lenders reach 80% with a strong ratio and credit. The number they multiply is the appraiser’s value, not your estimate, so the whole chain starts with a figure you do not control.

$375,000 is the top of the ladder. Here is the walk down.

The payoff of the short-term loan comes first

The closing agent pays your existing lender before anyone else. On the financed version of this deal, the hard money loan was $270,000, which is 90% of the purchase price.

Two things ride along with the principal. The first is interest accrued since your last payment. If the loan was interest-only and you paid monthly during the rehab, the payoff holds just the days since that payment, roughly $1,650 on a two-thirds month at 11%. If the loan deferred interest instead of billing it, the entire accrued balance sits in the payoff, which on a six-month hold is about $14,850. Those two structures change your check by thirteen thousand dollars.

The second is an exit fee or prepayment penalty, if your note has one. Read the note before you schedule the refinance. The BRRRR formula treats that charge as a holding cost, but on the settlement statement it shows up inside the payoff.

Closing costs on the new loan

Refinance closing costs run 2 to 4% of the new loan. On $375,000 at 3% that is $11,250. Itemized, it is usually one origination point, an appraisal, title search and lender’s title insurance, a settlement or attorney fee, recording and any state transfer charge, plus underwriting and processing fees.

The ranges move by state. Title insurance in a state with filed rates costs a set amount per thousand of loan. Recording and transfer taxes vary by county. An appraisal on a rental often includes a rent schedule, which adds to the fee. Ask for a fee sheet early and compare it to the 3% the calculator assumes.

Escrows and prepaids come out too

This is the bucket most investors miss, because it is not a cost of borrowing. It is prepayment of bills you already owe.

Prepaid interest covers the days from closing to the end of the month. On $375,000 at 7.25%, that is about $74 a day. Close on the 20th and you owe roughly $819. Close on the 3rd and it is closer to $2,000.

The tax escrow account gets funded at closing. Taxes on this deal are $6,000 a year, or $500 a month. Lenders typically collect the months already elapsed in the tax cycle plus a two-month cushion, so expect $1,000 to $4,000 depending on when your county bills. Call it $2,000.

Insurance is $2,500 a year. The annual landlord premium is usually due at closing, plus two months into escrow, around $2,900 together.

Some DSCR lenders do not escrow at all. Nothing comes out at closing, and you pay the tax bill yourself when it arrives.

A worked payoff: appraisal to deposited funds

Six-month hold, interest paid monthly, closing on the 20th.

• New loan: $375,000
• Hard money principal payoff: $270,000
• Accrued interest in the payoff: $1,650
• Refinance closing costs: $11,250
• Prepaid interest, 11 days: $819
• Tax escrow funding: $2,000
• Insurance premium and escrow: $2,900

Cash to borrower: about $86,400.

You had $121,350 of your own money in the project. So roughly $35,000 stays in the deal, not the $27,600 you get from subtracting only the payoff and closing costs. About $4,900 of that gap is tax and insurance money sitting in an account with your name on it, which softens the result without changing the check. A full deal walked end to end carries these same figures through to the rental year.

The simple version still shrinks

The simple tab buys with cash: $300,000 plus $60,000 of rehab, $360,000 in, a $375,000 loan out, $15,000 ahead. There is no payoff line, so the full loan is available. But closing costs, prepaid interest and escrows still come out, roughly $16,969 on these numbers. The wire lands at about $358,031. You are not $15,000 ahead. You are about $1,969 short of even, and whether a deal truly returns everything turns on exactly this gap.

Reading the line on the settlement statement

Most BRRRR refinances are business purpose loans, so they are exempt from the consumer disclosure rules. You get an ALTA settlement statement rather than a Closing Disclosure. Look for the summary at the bottom of the borrower column: total credits, total debits, and a balance due to or from borrower.

If you do get a Closing Disclosure, page three has a Calculating Cash to Close table with checkboxes for From Borrower and To Borrower. Either way, request the figures a day or two before signing and check the payoff amount against your lender’s own statement. Payoff quotes expire, and a stale one creates a shortage at the table.

Investment property refinances have no three-day rescission period, so funds usually wire the same or next business day.

When you have to bring money instead

Change three things and the check disappears. Say the appraisal lands at $450,000 instead of $500,000, the lender caps you at 70%, and the rehab ran twelve months on a loan that deferred interest.

The loan is $315,000. The payoff is $299,700, because a year at 11% on $270,000 accrued $29,700. Closing costs are $9,450, prepaid interest $688, escrows $4,900. Cash to borrower: about $262.

If the appraisal comes in at $425,000, the 70% loan is $297,500 and you wire roughly $16,700 to close. The lower appraisal does not cancel the debt. It just stops covering it. Buying at a price that leaves room, which is the point of the 70% rule, is the defense against this.

Check your own numbers

The BRRRR Calculator on the home page shows the refinance loan, the payoff, the cash out and the cash left in the deal for your purchase price, rehab and ARV. Add your escrow and prepaid estimates on top of its closing cost figure, and the output is close to the number the closing agent will wire.