Refinancing as a business owner runs into the same wall as buying: lenders want to see income, and your tax returns may show less than you earn. The good news is the same set of options applies. The property you already own is also on your side, because your equity is part of the picture.
This page covers how to refinance as a self-employed borrower in New York: the two main kinds of refinance, how income gets documented for each, the New York-specific cost question of mortgage recording tax, and what to think about before you start.
Rate-and-term vs cash-out: what's the difference?
A rate-and-term refinance replaces your current mortgage with a new one for roughly the same balance. People use it to change the interest rate, change the loan's term, switch from an adjustable to a fixed structure, or remove a co-borrower.
A cash-out refinance replaces your mortgage with a larger one and pays you the difference in cash. For a cash-out refinance, self-employed owners often have a business reason: paying off higher-cost debt, funding renovations, building reserves, or investing in the company. Cash-out loans generally have stricter requirements than rate-and-term, including how much equity must remain.
| Rate-and-term | Cash-out | |
|---|---|---|
| Main purpose | Change the rate, term or loan structure | Turn home equity into cash |
| New loan balance | About the same as the current balance plus costs | Larger than the current balance |
| Typical requirements | Usually less strict | Usually stricter, with more equity required to remain |
| Self-employed documentation | Any path a program allows | Any path a program allows; some bank statement programs offer cash-out |
Documenting income: full-doc or a bank statement refinance
Lenders verify income on a refinance the same way they do on a purchase. If your tax returns support the new loan, a conventional full-doc refinance is usually the first thing to check. Fannie Mae's rules on self-employment history, generally two years, apply just as they do for a purchase.
If write-offs make your returns too low, bank statement, 1099 and P&L programs may be options. Bank statement cash-out refinances do exist in the non-QM market, though each lender sets its own equity, credit and reserve requirements. Non-QM refinances carry the usual tradeoffs: rates typically higher than conventional and stricter reserve requirements.
If you bought with a non-QM loan, check whether your tax returns now support a conventional refinance. Your situation may have changed since you bought.
Example: a cash-out for a growing business
A Nassau County landscaping company owner has built up equity in his single-family home and wants cash to buy equipment and pay off business credit lines. His returns show low net income because of depreciation and vehicle costs. He compares a full-doc cash-out, a bank statement cash-out using 24 months of business deposits, and a CEMA to limit recording tax to the new money. His CPA weighs in on the business side.
Self-employed refinance requirements
Requirements vary by program, but a lender reviewing a refinance will generally look at these. Any one of them can stop a refinance, which is why it helps to check them before you apply.
- Income you can document on the chosen path, with debts that fit against it
- Equity: how much you have, based on a new appraisal, and how much must remain after a cash-out
- Credit history, including your payment record on the current mortgage
- Reserves left after closing
- Title and property: liens, open permits or, for co-ops and condos, the building's status and board rules
- Seasoning: some programs want you to have held the property or the current loan for a period before a cash-out
Mortgage recording tax and the CEMA
New York charges mortgage recording tax when a mortgage is recorded. In New York City, the buyer's effective rate on 1–3 family homes and condo units is about 1.8% for loans under $500,000 and about 1.925% for loans of $500,000 or more. Westchester's total is 1.3%. On a refinance, that tax can be a large cost if it's charged on the whole new loan.
A Consolidation, Extension and Modification Agreement, or CEMA, combines your existing mortgage with the new one. Done this way, recording tax is generally owed only on the new money, not the full balance. For a rate-and-term refinance with little new money, that can make a real difference. For a cash-out refinance, the tax applies to the additional amount.
A CEMA requires your current lender's cooperation and adds paperwork and legal fees. Not every lender or program offers it. Ask early whether a CEMA is available for the program you're considering.
Refinancing a co-op or condo
Co-op loans are secured by shares and a proprietary lease, not real property, so co-op loans aren't subject to mortgage recording tax and a CEMA doesn't apply. Co-op refinances usually need board consent, and many buildings limit how much can be financed. Many non-QM lenders don't lend on co-ops, which narrows options for self-employed owners.
Condo refinances go through the same building review as a purchase. If your building has become non-warrantable since you bought, because of investor concentration, litigation or other issues, the programs available to you may have changed.
Questions to answer before you refinance
We don't make predictions about where the market is going. A refinance should make sense on your numbers as they are today, compared side by side with keeping your current loan.
- What is the goal: lower cost over time, cash for a specific use, or a different loan structure?
- How long do you expect to keep the home? Closing costs take time to recover.
- Will the new loan's documentation path be the same as your current one, or can you move to a different one?
- Is a CEMA available, and does it apply to your property type?
- For cash-out: is the cash for the business? Talk to your CPA about how that affects your taxes and your books.
Common questions
Can I refinance if I'm self-employed?
Yes, self-employed borrowers can refinance using the same documentation paths as a purchase: tax returns, bank statements, 1099s, a P&L or assets. Which ones are available depends on your credit, equity, property type and the program's rules. Approval isn't automatic on any path.
Can I do a cash-out refinance with bank statements?
Bank statement cash-out refinances exist in the non-QM market. Lenders set their own requirements for equity, credit and reserves, and cash-out terms are usually stricter than rate-and-term. We'll review whether a program fits your scenario and property.
What is a CEMA and do I need one?
A CEMA (Consolidation, Extension and Modification Agreement) combines your existing mortgage with the new one so New York mortgage recording tax is generally owed only on the new money. You don't need one, but it can reduce costs on a refinance. It requires your current lender's cooperation and doesn't apply to co-ops.
Can I refinance out of a bank statement loan into a conventional loan?
Possibly, if your tax returns now support a conventional loan and you meet its other requirements. Check your current loan's disclosures for any prepayment terms first. Comparing both paths shows whether a change makes sense.
Do I need board approval to refinance a co-op?
Usually, yes. Co-op boards commonly review refinances, and many buildings cap how much of the apartment's value can be financed. Check your building's rules early, and confirm the lender lends on co-ops, since many non-QM lenders don't.
How much does it cost to refinance a mortgage?
It depends on the loan size, the program and the property, so there's no single figure. Typical costs include lender fees, an appraisal, title insurance, attorney fees and, in New York, mortgage recording tax, which a CEMA can limit to the new money. Your Loan Estimate itemizes every cost for your specific scenario, so compare those line by line.
What documentation is needed for a refinance?
Expect your current mortgage statement, homeowner's insurance, property tax bill, ID, asset statements and income documents for your path: tax returns for full-doc, or 12 to 24 months of bank statements, 1099s or a P&L for non-QM programs. A refinance is a new loan, so the lender looks at your income as it stands now, not when you bought.
What disqualifies you from refinancing your home?
Common obstacles are too little equity, income that can't be documented on any path, high debts relative to income, recent late mortgage payments or other serious credit problems, and title or property issues such as liens. For co-ops, board rules or financing caps can block a refinance. Requirements vary by lender and program.
What's the difference between a refinance and a home equity loan?
A refinance replaces your existing mortgage with a new one. A home equity loan or line of credit is a separate second loan that sits behind your current mortgage, which stays in place. A second loan can make sense if you want to keep your existing first mortgage. A cash-out refinance can make sense if you want one loan. Requirements and costs differ, so compare both.