How to Refinance an Investment Property in California

Refinancing your investment property isn't like refinancing your primary residence.

The rules are different. The rates are higher. The qualification process is stricter.

But done right, it can lower your payment, pull out cash for your next deal, or kill expensive hard money debt.

I'm Bill McCoy, a California mortgage broker (CA DRE #01212512). I own rentals myself and I've helped dozens of investors refinance their California properties.

Here's what you need to know.

The Rules Are Different for Investment Properties

Higher rates. Expect 0.5% to 1% higher than a primary residence refi. In 2026, that means roughly 6.75-7.25% vs. 6.00% on your home.

Why? If you hit financial trouble, you'll prioritize your own roof over your rental. Lenders know this.

Lower max LTV. You'll need more equity. Investment property refis cap at 75% LTV for cash-out and 75-80% for rate-and-term. Compare that to 80% cash-out and 97% rate-and-term on your primary residence.

Stricter qualification. Lenders want 700+ credit scores, DTI under 43%, 6-12 months of reserves, and solid proof of rental income.

Three Types of Investment Property Refinances

Rate-and-Term Refi

Same loan amount, better terms. Makes sense when you can drop your rate by 1%+ or switch from an ARM to fixed.

Example: Refinancing a $450,000 loan from 7.5% to 6.5% saves $303/month ($3,636/year). With ~$6,000 in closing costs, you break even in 20 months.

Cash-Out Refi

Access your equity. Max 75% LTV.

Example: Property worth $800,000 with a $400,000 balance? You could pull $200,000 cash and use it as down payment on 2-3 more properties.

DSCR Refi

Qualify based on the property's rental income, not your personal income. No W-2s, no tax returns, no employment verification.

The lender calculates your Debt Service Coverage Ratio: monthly rent divided by monthly PITIA. Hit a 1.0-1.25 DSCR and you're in.

Perfect for self-employed investors with heavy write-offs.

Learn how DSCR loans work | DSCR vs. conventional — full comparison

When Refinancing Makes Sense

• You can drop your rate by 1%+. Classic reason. A $500K loan going from 8% to 7% saves $4,200/year.
• You're ditching expensive debt. Hard money at 10-12%? Refinancing into a 7% DSCR loan saves massive amounts.
• You need capital for more deals. Pull equity from Property A to fund Properties B and C. That's velocity of money.
• You want to buy out a partner. Refi in your name, pay them their share from the new loan.
• You're switching from ARM to fixed. Lock in before rates climb higher.

When Refinancing Doesn't Make Sense

• Your rate is already low. Locked in 4.5% in 2021? Don't refi to 7% just for cash. Look at a HELOC instead.
• You're selling within 24 months. You won't recoup closing costs.
• The property barely cash flows. Adding closing costs to a thin deal makes it worse.
• You don't have 25%+ equity. At 80% LTV or higher, most lenders won't touch it.

Tax Benefits Worth Knowing

Investment property mortgage interest is fully deductible on Schedule E — no $750K cap like your primary residence.

Cash from a refi is not taxable (it's a loan, not income). Closing costs are deductible too, but you amortize them over the loan's life.

Always check with your CPA.

Get a Free Investment Property Refi Quote

I'll compare conventional and DSCR options to find the best fit for your rental portfolio.

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Read next: Step-by-step refi process and common mistakes | DSCR vs. conventional refi breakdown

Better Offers Inc | CA DRE #01212512