The Quick Read: The five interest-only options on Lendmire’s wholesale network are a five-year draw with a 25-year repayment, a three-year draw with a 17-year repayment, a second-home line, an investment-property line, and a larger primary-residence line above $500,000, and each one charges interest only during the draw before principal payments begin, subject to lender guidelines. Lendmire is a broker, so it arranges these lines through select wholesale partners rather than lending directly. Occupancy decides almost everything else, including how much you can borrow against the property.
- An investment-property line tops out at 70% combined loan-to-value (CLTV) with a 700 minimum credit score. Primary-residence and second-home lines reach 90% CLTV only at 720 or better, while the larger primary-residence line above $500,000 caps at 75% CLTV.
- At least 75% of the line is drawn at closing, so this is closer to a funded loan than a standby credit line.
- Pricing floats through both the draw and the repayment period on these programs and does not convert to fixed.
- The line must be titled in your own name or a revocable living trust, not an LLC.
- A DSCR cash-out refinance is the usual alternative for rentals held in an entity.
How Does an Interest-Only Draw Actually Work?
An interest-only draw means your required payment covers only the interest on the balance for a set number of years. Principal stays untouched until the repayment period starts. Then the payment is recalculated so the balance reaches zero by the end of the term.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
A home equity line of credit (HELOC) is a revolving credit line secured by property. The draw period is the stretch when you can borrow against it. CLTV is your first mortgage plus the new line, divided by the property’s value.
Experian describes a typical market draw period as five to 10 years, followed by a 20-year repayment period, and notes that some lines end in a balloon payment. NerdWallet adds that most lines carry variable pricing, so even an interest-only payment moves over time. Those are market-wide patterns. The network structures below are shorter and fully amortizing, with no balloon.
Here is the part that surprises people. On many bank lines, you owe interest only on what you have actually drawn, so an unused line costs nothing. On the lines described here, at least 75% of the limit is drawn at closing. Interest-only is a feature of the payment, not a promise of a low balance.
The Five Options at a Glance
The table compares the five structures. Every figure applies only within its own occupancy type, and all of them are subject to lender guidelines and full file review.
| Option | Draw / repayment | Occupancy | Top CLTV and notes |
|---|---|---|---|
| 1. Five-year line | 5 yr / 25 yr | Primary, second home, investment | Set by occupancy tier |
| 2. Three-year line | 3 yr / 17 yr | Primary, second home | Set by occupancy tier |
| 3. Second-home line | Either structure | Second home | 90% CLTV at 720+; 640 minimum |
| 4. Investment line | 5 yr / 25 yr only | Investment property | 70% CLTV; 700 minimum; $500,000 max |
| 5. Large primary line | Per structure | Primary residence | 75% CLTV; full appraisal; up to $750,000 |
Options 1 and 2 are the two draw structures. Options 3 through 5 show how occupancy and size change the answer. All five can sit in first or second lien position as a standalone line, which means you do not have to touch an existing first mortgage.
The Five Options, One at a Time
Option 1: The Five-Year Draw With a 25-Year Repayment
This is the longer runway: five years of interest-only payments, then 25 years of amortization. The long repayment period keeps the post-draw payment lower per borrowed dollar than the shorter structure does. After closing, each additional draw carries a $1,000 minimum, and Texas raises that to $4,000.
This structure has the tighter credit paperwork. It asks for two tradelines seasoned 12 months or one seasoned 24 months. Housing history must be clean: 0x30 in six months and no more than one 30-day late in twelve at 640 and above, or 0x30 in twelve months from 600 to 639. Those standards apply across all financed properties.
On a primary residence, the ceiling depends on the credit tier. Lines up to $500,000 reach 90% CLTV at 720 or better, 85% at 700, 680 or 660, and 80% at 640. At 620 the ceiling drops to 70% CLTV on lines up to $400,000, and at 600 it is 60%. Best for: a borrower who wants the lowest post-draw payment and has a clean credit file.
Option 2: The Three-Year Draw With a 17-Year Repayment
This is the shorter runway. You get three years of interest-only payments, then 17 years of amortization. The balance has fewer years to pay off, so the step-up at the end of the draw is larger than with the five-year line.
Some states shorten both structures further, so the state of the property matters. Best for: a borrower with a defined, near-term use for the money, such as a renovation that will be refinanced or repaid soon. Skip it if you need the interest-only window to last through a long hold.
Option 3: The Second-Home Line
A second-home line follows the same draw structures, with a 640 credit minimum. Lines up to $500,000 reach 90% CLTV at 720 or better and 85% at 680 or 700. They reach 80% at 660 and 75% at 640. The maximum line is $500,000.
Second-home ceilings match primary-home ceilings at the top tier, but the lower tiers are stricter. Best for: an owner of a vacation or part-time home who wants cash without selling or refinancing it.
Option 4: The Investment-Property Line
This is the one most rental owners are asking about, and it is the narrowest. An investment line runs the five-year draw and 25-year repayment structure only. The ceiling is 70% CLTV, the credit minimum is 700, and the maximum line is $500,000. No tier sits above 70% on an investment property.
NerdWallet reports that fewer lenders offer lines on investment properties, that requirements are stricter, and that multiple appraisals may be required. That matches what the network shows. A rental line costs more in equity than a primary-home line does, and fewer files clear it.
Best for: an investor who owns the rental personally, has real equity, and wants to keep a low-cost first mortgage in place.
Option 5: The Large Primary-Residence Line Above $500,000
A line above $500,000 is available on primary residences only. It caps at 75% CLTV and requires a full appraisal, and the maximum line is $750,000. The credit requirement is 700 or better (720 on the five-year structure).
Investment properties and second homes cannot go above $500,000. If you need a larger sum against a rental, this option does not apply. Best for: an owner-occupant with substantial equity in their home who may put some of it toward other uses.
What Underwriting Looks At
A home equity line is underwritten to you, not to the property’s rent. That is the biggest difference from a DSCR loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The line is reviewed on credit, equity, and debt-to-income (DTI).
DTI is your monthly debts divided by your monthly income. The ceiling is 50%, but credit scores from 600 to 679 are held to 45%. Going above 45% requires a score of at least 680. The payment used to test you is the interest-only payment calculated on the maximum draw, so the whole line counts even if you plan to use only part of it.
Other file details work like this:
- Credit: The floor is 600, using a single-bureau score keyed to the primary wage earner. The report must be no more than 90 days old at closing, and there are no rescores.
- Valuation: Lines at or below $500,000 ordinarily use an automated valuation instead of a traditional appraisal. A higher CLTV may require a secondary valuation, and you can always request a full appraisal. Every line above $500,000 requires one.
- Prior credit events: A bankruptcy needs four years of seasoning from discharge or dismissal. Foreclosure history is handled differently across the two structures, and one of them declines it regardless of age.
- Line size: Lines run from $25,000 to $750,000, with a $10,000 floor in Michigan.
Where the General Rule Breaks
The general rule is that an interest-only line stays cheap until the draw ends. These edge cases are where that stops being true.
Not every HELOC is interest-only. The CFPB’s HELOC brochure says some plans set a minimum payment that includes principal as well as interest, while others allow interest-only payments with nothing going to principal during the draw. Read the agreement before assuming.
Title can end the file. The property must be held by you as an individual or in a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A rental already deeded to an LLC needs a vesting change first, or a DSCR cash-out instead.
Property type matters. Single-family homes, 2-4 unit properties, PUDs, townhomes, and condominiums (including non-warrantable ones) are eligible. 2-4 unit properties require a 640 minimum on the five-year structure, and modular factory-built homes are eligible there only. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not offered on either structure.
Exposure has limits. A borrower can hold at most three lines. Combined exposure caps at $2,000,000 on the structure with the higher leverage and $750,000 on the five-year, longer-runway structure. A borrower with more than 15 financed properties is not eligible, and a property listed for sale, or listed within the past 60 days, is ineligible in several states.
Floating pricing hits twice. Payments can move during the draw even if you borrow nothing more, and they step up when repayment begins. The CFPB’s Ask page notes that a draw period could last 10 years and that payments are based on the balance. Because principal is added once amortization starts, expect a noticeably larger payment at that point.
Do not plan on extending the draw. The structures here are fixed at three or five years. Treat the end date as real, because a new interest-only window is not something you can count on.
What Happens When the Draw Ends?
The line stops accepting draws and begins fully amortizing over the repayment period, either 17 or 25 years depending on structure. There is no balloon. The payment rises because principal is now included, and it floats with pricing.
The shorter 17-year runway means a bigger jump than the 25-year one, and a fully drawn line shows it most. Prepare before the date, not after. Three exits are common:
1. Pay it down early. Voluntary principal payments during the draw reduce the balance that gets amortized later. The required payment during the draw covers interest only, so any extra principal is your choice rather than an obligation.
2. Sell or refinance the property. If the equity has grown, a cash-out refinance can retire the line and reset the term.
3. Repay from a planned event. A renovated rental that gets refinanced or sold is the cleanest version of this.
Run the repayment-phase payment on the full line before you borrow, not on the amount you expect to use. At least 75% will be drawn at closing anyway.
Should You Skip the HELOC and Use a DSCR Loan?
If the property is a pure rental, or sits in an LLC, a DSCR cash-out refinance often fits better. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
The DSCR (debt service coverage ratio) compares rent to the full monthly payment on the loan, including principal, interest, taxes, insurance, and any association dues. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Here is how the numbers compare across the network.
- Cash-out leverage: A DSCR cash-out tops out around 75% LTV on standard rentals and 70% on short-term-rental collateral. About six months of seasoning is the common expectation.
- Coverage: 1.00 is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted. Stronger coverage opens better pricing and leverage.
- Credit: A 620 floor exists in parts of the network. Most programs want around 660, and 700 or better unlocks the strongest tiers.
- Loan size: Standard sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders).
- Interest-only periods: Available through select lenders in the network, along with 40-year terms.
- Entities: Loans to LLC-titled borrowers are possible, subject to lender program eligibility.
One caution: clearing 1.00 does not mean positive cash flow. DSCR counts only rent against the payment. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. For the full mechanics, see the complete DSCR loans guide.
How Do You Choose Among the Five?
Start with occupancy, because it sets the ceiling. Then work through these questions in order:
1. Whose name is on the deed? If it is an LLC, stop here and look at DSCR.
2. What is the property? Check the eligible and ineligible lists above.
3. How much equity do you have? An investment line needs a CLTV at or below 70%, so count your first mortgage in that math.
4. What is your credit tier? The minimum depends on occupancy: investment lines start at 700, second homes at 640, and primary homes at 600. A primary line above $500,000 is the exception, since it needs 700 or better (720 on the five-year structure).
5. How long do you need interest-only? Five years with a 25-year amortization suits a longer hold. Three years with 17 suits a short project with a defined exit.
6. Can you carry the full-line payment? Your DTI is tested on the maximum draw, and you should test yourself the same way.
If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Home equity lines through the network are available in Lendmire’s 16 full-service states, which is narrower than its DSCR footprint.
Key Terms Defined
Draw period: The years when you can borrow from the line and your minimum payment covers interest only.
Repayment period: The years after the draw ends, when borrowing stops and the balance amortizes to zero.
CLTV: Combined loan-to-value, meaning all loans against the property divided by its value.
DTI: Debt-to-income, meaning your monthly debt payments divided by your monthly income.
Amortization: Paying down principal along with interest, so the balance shrinks to zero over the term.
Lien position: Whether the line sits first in line to be repaid (first lien) or behind another mortgage (second lien).
DSCR: Debt service coverage ratio, meaning rent divided by the full monthly payment on the property.
Frequently Asked Questions
Can I pay principal during the interest-only draw?
Yes. The minimum is interest-only, but voluntary principal payments reduce the balance that will amortize later. That lowers the payment when repayment begins. Because at least 75% of the line is drawn at closing, early paydown is often the cleanest way to soften the later step-up.
Do I owe interest on the whole line or only what I borrow?
You owe it on the drawn balance, but on these lines at least 75% is drawn at closing. That means most of the limit accrues interest from day one. Later draws carry a $1,000 minimum on the five-year structure.
Can an LLC take out one of these lines?
No. The property must be held by an individual or an inter vivos revocable living trust. A rental deeded to an LLC needs a vesting change first. Many investors in that position use a DSCR cash-out refinance, subject to lender program eligibility.
What is the most I can borrow on a rental?
An investment-property line reaches 70% CLTV with a 700 minimum credit score and a $500,000 maximum line. No higher tier exists for investment properties. Market surveys report 85% CLTV on primary-home lines, as NerdWallet’s HELOC explainer notes. On this network, the investment-property ceiling is 70%.
Is a HELOC or a DSCR cash-out better for a rental?
It depends on title, equity, and goals. A line suits an individually titled rental where you want to keep the existing first mortgage. A DSCR cash-out suits entity-held rentals and borrowers who prefer qualification based on the property’s rent. Cash-out reaches about 75% LTV on standard rentals through most of the network. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and real estate investors in its 16 full-service states. Home equity lines of credit are arranged through wholesale lending channels; Lendmire brokes the line and the lender underwrites each application under its occupancy-based guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Experian
2. NerdWallet – Home equity line of credit explainer
3. NerdWallet
This article is part of Lendmire’s HELOC & home equity loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: What Is a DSCR HELOC With a 1007 Rent Schedule Appraisal? · 5 DSCR Cash-Out Refinance Options and the Approval Process Step by Step · 5 DSCR Cash-Out Refinance Options When the Bridge Loan Is Coming Due on a Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.