The Quick Read: “No money down” means the down payment on your next rental comes from equity in a rental you own free and clear, not that the purchase loan requires nothing down. Five structures can release that equity, and each trades leverage, flexibility, and risk differently.
- A line on the paid-off rental itself caps at 70% CLTV on an investment property in Lendmire’s wholesale network, with a $500,000 maximum line and a 700 minimum credit profile.
- A line on your primary home can reach 90% CLTV, but only at a 720-or-better credit profile.
- A DSCR cash-out refinance qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, and handles LLC-held property more easily.
- Delayed financing and fixed-rate equity loans are narrower tools, each for a specific situation.
- Two separate lenders approve two separate loans, so the purchase lender decides whether borrowed funds count as down payment.
What “No Money Down” Actually Means Here
You are not skipping the down payment. You are paying it with borrowed equity instead of savings.
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.
Two loans are involved. The first releases equity from the paid-off rental. The second buys the new property, usually a DSCR loan. DSCR stands for debt service coverage ratio, which compares a property’s monthly rent to its full monthly payment. Each lender approves only its own loan. Nobody guarantees that the second lender will accept the first lender’s money as a down payment.
A paid-off rental helps in one specific way: any new loan sits in first-lien position, meaning it gets repaid first if the property is ever sold. Free and clear does not remove leverage caps, credit floors, or the rent test. Equity gets you a seat at the table, and nothing more.
For the full mechanics of the purchase loan, Lendmire’s complete DSCR loans guide covers it start to finish.
The Five Options Side by Side
Here is the comparison before the detail.
| Option | Collateral | Qualifies mainly on | Payment style |
|---|---|---|---|
| 1. Line on the paid-off rental | The rental | Personal credit, income, DTI | Variable, interest-only draw |
| 2. Line on your primary home | Your home | Personal credit, income, DTI | Variable, interest-only draw |
| 3. DSCR cash-out refinance | The rental | Rent versus full payment | Fixed term, amortizing |
| 4. Delayed financing (cash-out seasoning exception) | A recently bought cash rental | Rent versus full payment | Fixed term, amortizing |
| 5. Fixed equity loan | The rental or home | Personal profile, lender-set | Fixed, amortizing |
DTI means debt-to-income ratio, the share of your monthly income that goes to debt payments. CLTV means combined loan-to-value, which adds every loan on the property together and divides by its value.
Option 1: A HELOC on the Paid-Off Rental Itself
A HELOC is a home equity line of credit, a revolving line you borrow against and repay over time. Putting one on a rental is the option most people picture first. It is also the scarcest.
Across the wholesale network, one equity-line program accepts investment properties. The investment line tops out at 70% CLTV, and the 700 and 720 credit tiers both reach that same 70%, so a higher score buys eligibility rather than leverage. The line runs from $25,000 up to a $500,000 maximum, and 700 is a hard floor with no tier beneath it.
The structure is a 5-year interest-only draw period followed by a 25-year fully amortizing repayment period. Pricing floats the whole way and never converts to fixed. Here is a detail that surprises people: at least 75% of the line is drawn at closing. You cannot open the line, leave the balance at zero, and wait for a deal.
Because the line caps at $500,000, an investment HELOC sits in the automated-valuation lane and commonly closes with no traditional appraisal. A borrower may still request a full appraisal.
Qualification is personal. The lender looks at your credit, your income, and your DTI, which tops out at 50%. It calculates that DTI on the interest-only payment at the maximum draw. Rent on the paid-off property is not the main test, which is the sharpest contrast with DSCR lending.
Title matters too. The line is only available if the property is held in your individual name or a revocable living trust. An LLC cannot hold title. If the rental is already deeded to an LLC, you need a vesting change or a different option.
Best for: investors with strong personal credit, moderate DTI, and a rental in their own name. Watch-outs: variable payments, a lower leverage ceiling than on a primary home, and a 75% drawn-at-closing rule.
Option 2: A HELOC on Your Primary Home
Lenders typically treat an owner-occupied home as lower risk, so the ceiling rises. Primary-residence and second-home lines can reach 90% CLTV, and 90% exists only at a 720-or-better credit profile. That is the top tier, not the typical outcome.
The same personal qualification applies. DTI and credit decide the file, and the collateral is your home. The $500,000 maximum applies to investment lines, while a line above $500,000 is available on a primary residence only. That larger line requires a credit profile of 700 or better (720 on the longer-runway structure, the 5-year draw, 25-year repayment equity-line program), a full appraisal, and a cap of 75% CLTV.
This option trades leverage for exposure. You have just put a lien on the roof over your family to buy a rental. If the rental underperforms, the home is the backstop.
Best for: investors with substantial primary-home equity and a stable income. Watch-outs: your home becomes collateral for rental risk, and your DTI absorbs the line’s payment.
Option 3: A DSCR Cash-Out Refinance on the Paid-Off Rental
A cash-out refinance replaces the old loan with a new one and hands you the difference. On a paid-off rental, there is no old loan to replace, so the lender treats the transaction as a new loan secured against the property. A new first lien goes on the property and cash comes back.
Underwriting looks at the property, not just you. The lender divides monthly rent by the full monthly payment, which means principal, interest, taxes, insurance, and HOA dues where they apply. The result is the coverage number. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Personal income is not the primary test.
Most programs we place files with cap cash-out at 75% LTV on a standard rental. Cash-out on short-term-rental collateral tops out at 70%. About six months of seasoning, meaning ownership time before refinancing, is the common expectation. A coverage ratio of 1.00 is where select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
Entity-held property is where this option separates from Option 1. A DSCR cash-out can often accommodate an LLC, subject to lender program eligibility. For property already in an LLC, this is usually the practical fork.
One catch: the new loan raises debt service on that property. A rental that cleared coverage with no debt may look thinner afterward. Run the number before you commit.
Best for: LLC-held rentals, investors with high DTI or many mortgages, and anyone who wants a fixed-term structure. The standard spine is a 30-year fixed, with extended terms and interest-only periods available through select lenders. Watch-outs: a permanent payment on that rental and a thinner coverage ratio.
Option 4: Delayed Financing on a Recently Bought Cash Rental
Delayed financing is not a separate loan. It is a seasoning exception inside a cash-out refinance, for a property you recently bought with cash. Normally the seasoning clock must run before you can pull equity. This exception lets you recover your cash sooner.
It returns documented cost, meaning the price paid plus eligible costs, not appraised value. Appreciation or a renovation boost does not come out. It also waives only the waiting period, not the coverage test, the appraisal, or the reserve rules.
The concept comes from agency mortgage guidelines. DSCR lenders write their own versions, so whether one offers it depends on that lender’s guidelines. Typical conditions include an all-cash, arm’s-length purchase with a documented source of funds and no new lien on the property in between. A purchase funded by hard money generally does not qualify.
Best for: investors who bought a rental for cash within the last few months and want to recycle the cash into the next deal. It matters for a paid-off rental only if the purchase was very recent. Watch-outs: proceeds are limited to cost, not value.
Option 5: A Fixed-Rate Home Equity Loan
A home equity loan delivers a lump sum with a fixed payment instead of a revolving line. On a paid-off rental it would be a first-lien note, which makes it functionally close to a cash-out refinance. On your primary home it sits behind your existing mortgage.
Availability on non-owner-occupied property is as limited and lender-specific as rental HELOCs. The network’s equity-line programs are variable, not fixed. If predictability matters, the DSCR cash-out refinance in Option 3 is the more reliable fixed-term route on a rental.
Best for: investors who value a fixed payment and know exactly how much they need. Watch-outs: scarce on rentals, a lump sum you pay interest on in full from day one, and no flexibility to borrow again.
Where the General Rule Breaks
Several situations flip the usual answer.
- LLC title. Equity lines need individual or revocable-trust ownership. Irrevocable, blind, and land trusts also cannot hold title.
- High DTI or many mortgages. A personal-qualification line may be declined even with large equity. A DSCR cash-out measures rent against the new payment instead. Borrowers with more than 15 financed properties are not eligible for the equity-line programs.
- Property type. Manufactured homes, co-ops, condotels, log homes, and commercial, mixed-use, or agricultural-zoned property are not offered on the equity-line programs. DSCR programs in the network also do not offer manufactured homes, log homes, or barndominiums.
- Listed property. In several states, a property listed for sale or listed in the past 60 days is ineligible.
- Borrowed down payment. Money drawn on a line is debt. Confirm with the purchase lender that it counts as acceptable down payment funds before you draw.
- Payment resets. The CFPB explains that a HELOC is an open-end line you can borrow against repeatedly during a draw period, followed by a repayment period, and that payments are often significantly higher in repayment. Experian reports typical primary-home draw periods of five to ten years and a 20-year repayment. On the network’s investment line, the structure is a 5-year draw and a 25-year repayment. A rental that cash flows on interest-only draws may not cash flow once amortization starts.
How to Size It: A Ratio Walk-Through
Skip the dollar math. Use ratios.
Say you want to buy a rental with a 25% down payment. Your investment line can reach 70% of the paid-off rental’s value. So the paid-off property must be worth at least about 36% of the new purchase price just to cover the down payment (25 divided by 70). That ignores closing costs and reserves, so you need more. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
With 20% down, the paid-off rental needs to be worth roughly 29% of the new price. Select high-leverage purchase programs reach 85% LTV, meaning 15% down, with about a 700+ score. In that case the ratio drops to roughly 21%. Most purchase files land at 75% to 80% LTV. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Now test the second loan. The new property must clear coverage on its own PITIA, which stands for principal, interest, taxes, insurance, and HOA dues. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
A larger down payment lowers the monthly payment and can lift the coverage ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
For a deeper look at funding a purchase this way, see Lendmire’s piece on using home equity to buy a rental with an investment property HELOC.
The Sequence, Step by Step
1. Confirm title and eligibility. Check that the paid-off rental is in your name or a revocable trust, and that it is an eligible property type.
2. Check your numbers. Credit profile, DTI at the maximum draw, and combined exposure. A borrower is limited to three lines, and combined exposure caps at $2,000,000 on the higher-leverage program and $750,000 on the other.
3. Ask the purchase lender first. Confirm they accept equity-line funds as down payment, and how they count the new payment.
4. Open and draw. Plan the draw around the closing-day requirement, since the line is funded when it opens rather than later.
5. Close the purchase. The new property’s coverage ratio is tested on its own.
6. Plan the exit. Refinance the new property, pay down from rents, or sell. Build the plan before you draw, not after.
Benzinga lists the documents lenders typically ask for on rental HELOCs: proof of income, tax returns, rental agreements, and insurance.
Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
Which Option Fits You?
Pick based on your situation, not on the headline leverage number.
- Rental in your own name, strong credit, low DTI: Option 1 is the cleanest.
- Large primary-home equity and a secure income: Option 2, if you accept the home risk.
- Rental in an LLC, high DTI, or several mortgages: Option 3 is usually the practical route.
- Rental bought for cash very recently: look at Option 4 first.
- You want one fixed payment and a known amount: Option 5, or Option 3 if the fixed-rate home equity loan isn’t available.
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. Equity-line programs are available in a narrower set of states than the 41-market DSCR footprint, and every figure is subject to lender guidelines and full file review.
Key Terms Defined
HELOC: A home equity line of credit, a revolving line secured by property equity that you draw on as needed.
CLTV: Combined loan-to-value, all loans on the property added together and divided by its value.
DSCR: Debt service coverage ratio, monthly rent divided by the full monthly payment on the property.
Seasoning: The waiting period a lender wants between buying a property and refinancing it.
Draw period: The stretch when you can borrow from the line, usually with interest-only payments.
First lien: A loan with first claim on the property if it is sold or foreclosed.
DTI: Debt-to-income ratio, the share of monthly income that goes to debt payments.
Frequently Asked Questions
Can I really buy a rental with no money out of pocket?
You can fund the down payment with equity instead of savings, so no cash from your own accounts. You still owe closing costs, reserves, and the new loan’s payment. The purchase lender must also accept borrowed funds as the down payment, so confirm that before you draw.
Is it harder to get a HELOC on a rental than on my home?
Yes, it is narrower and more lender-specific. On an investment property in Lendmire’s wholesale network, the ceiling is 70% CLTV with a 700 minimum credit profile. A primary-residence line can reach 90% CLTV, and only at a 720-or-better profile.
Can a HELOC sit open at zero until I find a deal?
Not on the network’s investment line, where at least 75% of the line is drawn at closing. If you have a deal in sight, a DSCR cash-out refinance often fits better than an open line.
What if my rental is in an LLC?
Equity lines require your individual name or a revocable living trust. An LLC cannot hold title. You would need a vesting change, or a DSCR cash-out, which can often accommodate entity-held property, subject to lender program eligibility.
Does clearing 1.00 coverage mean the new rental will cash flow?
No. Coverage compares rent to the mortgage payment, taxes, insurance, and HOA dues only. Repairs, vacancy, management, utilities, and capital expenses sit outside the number, so budget for them separately.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) arranging home equity lines of credit — primary-residence, second-home and investment-property lines — through a wholesale lending network in its 16 full-service states. Eligibility is determined by the lender on each file. 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. CFPB: What Is a Home Equity Line of Credit HELOC
2. Experian – HELOC draw period
3. Benzinga – HELOCs on Investment Properties
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Where to Get a Portfolio DSCR Cash-Out Refinance With a Fixed Term on a Rental Property · Can You Get a DSCR Cash-Out Refinance to Pull Cash Out of a Paid-Down Rental? · 5 Short-Term Rental Cash-Out Refinance Options Based on How Much Equity You Have
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.