You can cash out of a commercial property you have owned for less than twelve months. There is no rule that forces you to wait a year. What changes under twelve months is not eligibility — it is how the maximum loan is calculated, and how much you have to prove.
Almost everything written about this online is residential — Fannie Mae delayed financing, the six-month waiting period, the acquisition-cost cap, all of it written for someone who bought a house with cash. None of that governs a commercial small-balance loan. The commercial rule is different in structure, and it is stricter in some places and looser in others.
Here is the short version. Under twelve months of ownership, our program may cap the loan against your cost in the property rather than against the appraisal. To get the appraisal used instead you must show three things: the settlement statement from your purchase, evidence of 15–20% capital investment at acquisition, and paid invoices proving unfinanced capital expenditure that supports the higher value. Even then, we retain the right to limit proceeds case-by-case.
The governing passage
Read that carefully, because the verbs matter. LTV may be constrained. The appraised value may be used. We may limit the cash-out. This is a discretionary framework with documentary triggers, not a formula that pays out once you tick boxes.
Two ratios, and the loan is the lower of them
The thing that trips people up is not the seasoning language. It is that a short-seasoned cash-out is measured twice.
The first measure is loan-to-value: loan amount divided by the value of the mortgaged property, or the internally derived value. The second is loan-to-cost, which our guidelines state is only applicable on purchases or delayed financing, and which is calculated as the loan amount divided by the cost basis at the loan origination date. The governing sentence is blunt about how the two combine.
That is the whole game. If cost basis is the smaller denominator, cost basis sets your loan. A property bought for 900,000 that now appraises at 1,300,000 does not automatically support a loan sized off 1,300,000 — not while you are inside twelve months and have not built the file that moves the calculation onto the appraisal.
Cost basis is broader than the purchase price
Borrowers consistently understate their own cost basis, then wonder why the loan came back small. The definition is generous, and it is worth assembling properly before anyone runs a number.
| Included in cost basis | Excluded from cost basis |
|---|---|
| The purchase price | Mortgage broker fees |
| Verified borrower-paid hard and soft costs expended to date (rehabilitation/renovation, i.e. capital expenditure) | Origination fees |
| Customary borrower-paid, arm's-length closing costs and fees | Points |
| Real estate broker commissions, title, escrow, other closing costs | Similar charges |
| Taxes, HOA dues, fees, assessments and liens paid by the borrower or its affiliates at the time of acquisition | |
| Assignment fees |
There is a fallback: if closing costs are not documented or clearly verifiable at closing, up to 2% of the purchase price may be added to cost basis. That is a ceiling for the undocumented case, not a bonus on top of documented costs. Produce the settlement statement and the invoices, because documented costs are frequently more than 2%.
Note what "expended to date" does. Your renovation spend is not only what unlocks the appraised value; it is also part of cost basis. Money you put into the building works on both ratios.
The 15–20% capital investment test
The guideline requires "evidence of 15–20% capital investment at acquisition." Capital investment is defined separately and narrowly: it is the down payment used to acquire the property.
So this is a test about your original equity injection, not about your renovation. A property acquired with nominal cash down, or with the entire purchase funded by someone else, does not sit comfortably inside this requirement.
Two points of precision. First, 15–20% is a range in the guideline and is not further specified; we do not publish a single fixed percentage, and you should be sceptical of anyone who quotes you one. The safe planning assumption is the top of the range. Second, the evidence is documentary — the settlement statement from your acquisition, HUD-1 or closing statement, is named explicitly. Reconstructed spreadsheets and bank summaries are not what the paragraph asks for.
What counts as capital expenditure
The second evidentiary requirement is capital expenditure that supports the value increase. Our definition is specific, and the exclusions are the part people get wrong.
A large share of what a borrower thinks of as "the rehab" is site clearance and make-ready — strip-out, debris, tidying up the electrics, pulling old flooring. None of that counts here. What counts is durable improvement: roof, HVAC, structural work, systems, the long-lived items an appraiser can point at when explaining why the property is worth more than you paid.
Two conditions attach to the spend itself. It cannot be financed, and it is subject to review of paid invoices. "Cannot be financed" means expenditure funded by a rehab line, a draw facility, an unpaid contractor balance or a credit facility secured against the property does not do the job of unlocking the appraised value. "Paid invoices" means paid — not an estimate, not a signed contract, not a quote. Separately, our documentation requirements call for a capital expenditure schedule for the subject property where the capital expenditure or improvement occurred in the last twelve months, with contractor invoices or bank transactions acceptable in lieu of the schedule, and copies of receipts potentially required to substantiate it.
The proceeds cap that overrides everything
This is the sentence that decides how much money you leave with, and the one most often missing elsewhere: we may, case-by-case, limit cash-out to the initial capital expenditure plus closing costs, regardless of the timeline above.
"Regardless of the timeline" does real work. The cap is not switched off by satisfying the seasoning requirements or by crossing a date. It is a retained discretion applied to the file in front of us.
Plan for the possibility that proceeds are sized to what you put into the building plus closing costs rather than to the full equity the appraisal implies. A deal that only works when you extract the entire spread between cost and value is a fragile deal.
Occupancy and stabilization
The last line of the seasoning passage is easy to skim and expensive to miss: the subject property must meet occupancy and stabilization requirements.
Buying an under-let building, improving it and refinancing quickly is a coherent strategy, but the exit has an occupancy gate.
Our core parameters carry a 75% minimum occupancy requirement and the 90-day trailing stabilization test on both owner-occupied and investor cash-out refinances. If it is met at application, new leases commencing after that date are not required to be stabilized for 90 days.
There is one carve-out, and it is directly relevant to a recently renovated building.
The LTV ceilings stack
Seasoning is one constraint among several, and the binding one is whichever is lowest. Maximum allowable LTVs by property type, tier and credit program are set in the current pricing matrix; the figures below are the program ceilings stated in the guidelines.
Other ceilings can apply to the same file. They are not additive; they simply cap you lower.
An inexperienced investor is a borrower or primary guarantor who has owned at least one property — primary residence or investment property — for a minimum of twelve months but does not meet the experienced investor criteria, and ownership of a primary residence does not count toward experienced status. That catches a particular borrower on a short-seasoned cash-out: someone whose first commercial acquisition is the subject property itself.
Cash-out refinances also carry a minimum FICO of 650, a 1.20x DSCR under our owner-occupied core parameters on global debt service coverage, and 1.15x on investor cash-out on property DSCR. Loan size runs 100,000 to 2.5 million.
Reserves, and what the money can be used for
Cash-out refinances require six months of liquid reserves, measured in months of the qualifying principal-and-interest payment on the subject property.
There is a useful interaction for a short-seasoned deal, where liquidity is often tied up in the renovation just paid for.
Two footnotes. Gift funds cannot be used to meet the post-closing liquidity or P&I reserve requirement, so a family contribution does not solve a reserves gap. And the final reserves amount is measured at the date of the final underwriting approval memo, not off the closing settlement statement — reserves have to be there at approval, not merely at closing.
Use of proceeds is also constrained. Cash-out loan proceeds may only be used for business purposes such as capital expenditures to the property, business or property related debt, and/or normal business expenses. Separately, a borrower receiving greater than 10% cash-out, based on the final underwriting model or memo, has the loan purpose defined as refinance/cash-out — which is what puts you in the 75% column rather than the purchase column. Construction loans are not offered under this program.
The evidence pack
If you are inside twelve months and want the appraisal to drive the loan, this is what has to exist. Assemble it before valuation.
| Item | Why it is required | Common failure |
|---|---|---|
| Settlement statement (HUD-1/closing statement) from your acquisition | Named explicitly in the seasoning rule; establishes purchase price and your cash in | Borrower has the purchase contract but not the final signed statement |
| Evidence of 15–20% capital investment at acquisition | Demonstrates your down payment / acquisition funds | Purchase was largely financed, so documented injection is thin |
| Capital expenditure schedule for work in the last 12 months | Required documentation where improvement occurred in the last twelve months | Assembled from memory, no dates, no line items |
| Paid contractor invoices or bank transactions; receipts may be required | The expenditure is subject to review of paid invoices | Quotes and estimates supplied instead of paid invoices |
| Evidence the expenditure was not financed | Financed capital expenditure does not satisfy the rule | Rehab line or unpaid contractor balance behind the work |
| Rent roll / leases supporting 75% occupancy for the trailing 90 days | Occupancy and stabilization requirement | Building was being renovated and let up late |
| Appraisal ordered through an approved appraisal management company | Borrower- or broker-direct appraisals are not acceptable | Borrower already paid for their own appraisal |
That last row costs real money. Appraisals must be ordered through an approved appraisal management company; those ordered by the broker or borrower directly are not acceptable. An existing appraisal may be considered subject to internal review if dated within six months of the new loan's closing date and addressed to another lender — reports prepared for the borrower's benefit are not accepted.
A worked illustration
The figures below are invented to show how the ratios interact. They are not a quote, and they are not a policy statement.
Suppose you bought a multi-tenant retail building nine months ago for 800,000, put 200,000 of your own funds in at acquisition, paid 26,000 in documented closing costs, and have since spent 120,000 of unfinanced, invoiced money on a new roof and a full HVAC replacement. The building is 85% occupied and has been for four months. It now appraises at 1,250,000.
Cost basis is 800,000 plus 120,000 plus 26,000, or 946,000. Capital investment at acquisition is 200,000 against an 800,000 price — 25%, above the 15–20% band. The expenditure is durable, unfinanced and invoiced, and occupancy clears the trailing test. That is the file that supports using the appraised value, where 1,250,000 at the 75% ceiling points at a materially larger loan than 946,000 of cost basis would. Whether you receive the full difference is still subject to the case-by-case cap, and to DSCR, credit, reserves and every other program requirement.
Now change one fact. Say the 120,000 was demolition, debris removal, rewiring outlets and pulling carpet. None of that is capital expenditure under our definition. The value story is unsupported, cost basis is smaller, and the loan is a different loan.
Where the guidelines are silent
The guidelines do not set a minimum ownership period below which a cash-out refinance is prohibited outright. They do not specify a fixed reduced LTV that applies automatically under twelve months — the language is that LTV may be constrained. They do not state a minimum amount or percentage of capital expenditure required to support a value increase, nor how recently the work must have been completed. They do not resolve, in the seasoning paragraph itself, whether the 15–20% capital investment is measured against purchase price or against total cost basis. And they do not publish a maximum cash-out dollar figure.
Where the text gives discretion, we have left it as discretion. A number for your file comes from underwriting your file, not from a page like this one.
What this page does not do
This page explains how the loan seasoning rule for cash-out refinances is written and how the ratios interact. It is not an approval, a commitment, a rate quote or a term sheet. It does not tell you what your property will appraise at, what your proceeds will be, or whether your capital expenditure will be accepted — those are underwriting determinations made on documents, not on descriptions.
It also does not address the downstream items that decide whether a loan closes: credit and background review, entity and title work, insurance and escrow requirements, prepayment structure, zoning conditions, appraisal review outcome, or the debt service coverage arithmetic on your rents. Guidelines are current as of the effective date shown and are subject to change.
Guideline SBC 08/03/2026 · Reviewed August 30, 2026
Published August 31, 2026 · Updated August 31, 2026
How to use this guide
This article is educational guidance, not an offer or commitment to lend. Rules, property facts, credit, leverage, documentation, and full underwriting still control any actual scenario.