Why Cash-Out Refinances Are Set to Boom in 2026

As 2026 begins, more and more investors are talking about refinancing, but not for the same reasons as in the past. Rates are stable, equity has been building up, and yet people are becoming more careful with how they spend their money. According to S&P Global, cash-out refinancing made up about 43% to 45% of DSCR loan volume in 2024 and 2025. This shows that investors are still interested in these loans even when rates are high.

Conditions are ripe for further growth with cash-out refinancing in 2026, since around $65 billion in non-QM issuances will be able to be redeemed then, and rate projections are lower than they were in 2025. This makes cash-out refinance trends a key financing focus for investor portfolios in the coming year.

The Rate Environment Is Creating a Window

Mortgage rates have been slowly going down since their high in 2023, and by mid-2026, they should be in a more predictable range. Freddie Mac's data reveals that 30-year fixed rates fell from over 7% in early 2025 to the low-6% level by the end of the year. The Federal Reserve also projected more decreases throughout 2026.

This is important for refinancing, but it's especially important for borrowers who have equity built in their properties. Investors who bought or refinanced when rates were higher are now seeing chances to restructure their debt without going back to the unsustainable standards of the early 2020s.

Rather than waiting for “perfect” rates, borrowers are acting on spreads that support:

• Sustainable monthly payments
• Controlled leverage
• Access to trapped equity

This change is one of the biggest reasons why more people are applying for cash-out refinances as we head into the first quarter of 2026.

Equity Levels Are the Real Catalyst

ATTOM data shows that about 45% of U.S. properties with mortgages were equity-rich as they entered 2025. This means that the amount owed on the loan is 50% or less of the current value of the property.

A correctly constructed cash-out refinance is different from HELOCs or short-term credit solutions because it lets borrowers restructure their debt into more long-term, predictable payments while still being in charge of their assets.

After cash-out refinancing, lenders usually want at least 20% equity left over. This means that the loan-to-value ratio can't be more than 80%. Properties with more equity can get better terms and bigger cash-out amounts.

Cash-Out Refinance Demand Is Shifting Toward Investors

The Federal Housing Finance Agency's data showed that refinancing activity went up more than 12% month-over-month during the rate drop period in late 2025. However, the most important change is who is driving that demand.

In 2026, cash-out activity will increasingly be led by:

• Rental property investors
• Small portfolio operators
• Fix-and-hold borrowers exiting stabilization phases

For brokers, this trend reinforces the importance of understanding:

• Investor-specific underwriting expectations
• Property performance documentation
• Exit and reinvestment strategies

It's not enough to say that cash-out refinancing is a decision based on rates anymore. The best deals make it easier to get financing while also helping a portfolio develop.

Underwriting Discipline Is Shaping Cash-Out Refinance Requirements

Lenders have not made it easier to get loans, even though demand is rising. In reality, the criteria for refinance loans presents a more cautious, execution-focused way of doing things.

Across the market, most programs require:

• Minimum 20% remaining equity post-refinance
• Credit scores starting at 620, with pricing tiers above
• Debt-to-income ratios which are typically capped at around 43%
• Documented income or property cash flow
• Seasoning periods of six months or more

DSCR-based programs make it even easier for borrowers to get loans since they look at the cash flow of the property instead of the borrower's personal income. This helps investors who have several properties or complex income structures.

Lenders are putting more weight on how well an investment property performs and how experienced the borrower is, not just how much it is worth. They prefer brokers who expect criticism over those who react to it.

Why Cash-Out Refinances Outperform Alternatives in 2026

HELOCs and second-position loans are still useful instruments, but they come with trade-offs that investors are increasingly avoiding, such as:

• Variable rates
• Shorter draw periods
• Layered payment obligations

On the other hand, a cash-out refinance restructures debt into an easy-to-understand framework. That certainty is important for investors who expect to hold for more than a year.

When positioned correctly, cash-out refinances allow borrowers to:

• Lock in long-term financing
• Reduce exposure to rate volatility
• Redeploy equity without asset sales
• Maintain operational flexibility

These benefits are why cash-out refinance are growing in popularity even while rates are relatively high.

What Brokers Should Be Watching in 2026

For third-party originators, the opportunity is differentiation. Successful brokers are aligning cash-out strategies with:

• Clear borrower intent
• Realistic leverage profiles
• Defined reinvestment plans

This approach improves execution speed, approval confidence, and long-term client retention.

RCN Capital still sees a lot of demand from brokers for refinance solutions that offer both flexibility and discipline. Brokers may become strategic consultants instead of merely transaction facilitators by learning how today's cash-out refinance rates, equity dynamics, and underwriting criteria all affect each other.

Positioning Cash-Out Refinances for Long-Term Success

The cash-out refinance boom in 2026 is structural. It is caused by rates stabilizing, record amounts of equity, and continued demand from investors for scalable capital. Brokers who know how to navigate these conditions and can help borrowers make the most of them will be in the great position in the coming year.

Are you ready to help your investor clients get the most out of their portfolios by using strategic cash-out refinancing? Check out RCN Capital's broker program to find out how working with an experienced direct lender might help you take advantage of the refinancing boom in 2026.