DSCR Second Mortgages on Texas Rental Properties
- Investor
- DSCR
- Second lien
- Texas
A lot of Texas investors have rental equity locked behind a first mortgage they don’t want to touch. A DSCR second mortgage can free up some of that equity without refinancing the first. It’s part of our non-QM loan options.
DSCR Second Mortgages: when it fits and when to look elsewhere
| Loan category | Non-QM |
|---|---|
| Who it’s for | Investors with equity in a Texas rental (investment, non-homestead property only) |
| How eligibility is shown | The property’s rent compared with its payments (DSCR) |
| Property types | Investment property (varies by program) |
| Fits when | You have a low first-mortgage rate to keep · You have equity in a rental · You’re funding the next purchase |
| Look elsewhere when | It’s your homestead. Texas home equity rules apply to homestead property, and this program doesn’t cover it. |
| Lenders compared | More than 50 wholesale lenders |
The short answer: A DSCR second mortgage lets you borrow against equity in a Texas rental property while keeping your existing first mortgage in place, and it qualifies on the property’s rental income. It covers investment property only, not your homestead. CapFi Lending, an Austin broker licensed to make loans anywhere in Texas, compares these programs across more than 50 wholesale lenders.
DSCR second mortgage vs DSCR cash-out refinance
| DSCR second mortgage | DSCR cash-out refinance | |
|---|---|---|
| Existing first mortgage | Stays in place | Paid off and replaced |
| Payments afterward | Two loans, two payments | One new loan |
| How you qualify | Rent compared with combined payments | Rent compared with new payment |
| Loan amount | Set amount, closed-end second lien (not a HELOC) | Based on new appraised value |
| Property | Investment property only | Investment property only |
| Equity limits | Combined limits vary by lender | Limits vary by lender |
| Fits when | Your first mortgage terms are worth keeping | You want one loan or want to change the first |
Second mortgage vs cash-out refinance
- DSCR second: keeps your existing first mortgage and its rate. You add a second payment.
- Cash-out refinance: replaces your first mortgage with a new, larger loan at current terms.
Which one makes more sense depends on your first-mortgage terms, how much cash you need and what each option costs. Combined loan-to-value limits and terms vary by lender. We compare both for your scenario. Borrowing against the home you live in instead? Compare a HELOC on your home, which follows separate Texas homestead rules.
Common uses
- A down payment on your next rental
- Renovations or improvements
- Other investment needs
Fits when
- You have a low first-mortgage rate to keep
- You have equity in a rental
- You’re funding the next purchase
Look elsewhere when
- It’s your homestead. Texas home equity rules apply to homestead property, and this program doesn’t cover it.
Documents
- Current mortgage statement
- Leases
- Insurance declarations
- Entity documents, if the property is held in an LLC
Requirements vary by lender.
How CapFi shops it
I compare DSCR second mortgage options across more than 50 wholesale lenders, and we can sign up an additional lender if your deal needs one. See also our investment property loans and, for self-employed investors who’d rather qualify on income, bank statement loans.
FAQs
Can I get a second mortgage on a rental property?
Yes, some lenders offer second mortgages on investment properties qualified on rental income (DSCR). Combined loan-to-value limits and terms vary by lender. CapFi Lending compares options across more than 50 wholesale lenders. These programs cover investment property only, not your homestead, which falls under separate Texas home equity rules.
Is a DSCR second better than a cash-out refinance?
It depends. A second mortgage can keep a low first-mortgage rate in place, while a cash-out refinance replaces it with a new loan at current terms. The right fit depends on your existing loan and how much cash you need. CapFi Lending compares both options for your scenario.
How is DSCR calculated on a second mortgage?
Most lenders compare the property’s qualifying rent with the combined monthly cost of both loans plus taxes, insurance and any HOA dues. Because the second adds a payment, the ratio is usually lower than on the first mortgage alone. The exact method varies by lender, so we estimate the combined ratio before you apply.
Can I use a DSCR second mortgage to buy another rental?
Yes, many investors use the proceeds toward a down payment on their next property. The lender reviews the rental you’re borrowing against, and the new purchase is financed separately. Lenders may have their own rules on how proceeds are used and what reserves you need afterward, which vary by lender. We can line up both loans together.
Can I get a DSCR second mortgage if my rental is owned by an LLC?
Some lenders allow it. They’ll review the LLC’s formation documents and operating agreement. Whether an LLC-owned property qualifies, and on what terms, varies by lender, so share your entity documents early and we’ll match you to lenders that accept your ownership structure.
Is a DSCR second mortgage the same as a HELOC on a rental property?
No. A DSCR second is typically a closed-end loan: you receive a set amount at closing and repay it on a fixed schedule. A HELOC is a revolving line you draw from over time. Some lenders offer investment-property lines of credit separately, and terms vary by lender. We’ll compare both if a line fits your plan better.
Rated 4.9 on Google (81 reviews) · Austin mortgage broker
- CapFi Lending
- Licensed in Texas
- Equal Housing Opportunity
Program availability, eligibility and terms are set by each lender and vary by lender and scenario. This is not a commitment to lend.
Work with a local Austin broker: