The Quick Read: On an investment property, a home equity line runs in two phases: a draw period when the line is open and payments are interest-only, then a repayment period when borrowing stops and the balance amortizes. Across Lendmire’s wholesale network, investment lines run one structure only, a 5-year interest-only draw followed by a 25-year fully amortizing repayment, and pricing floats through both phases.
- Investment lines cap at 70% CLTV and $500,000 total, subject to lender guidelines.
- At least 75% of the line is drawn at closing, so there is little gradual ramp-up.
- Pricing never converts to fixed, so the payment can move in either phase.
- The payment jumps when repayment starts, so a rental’s cash flow should be tested at the repayment payment.
- Titling is the sharp edge: the individual borrower or a revocable living trust holds title, not an LLC.
Most of the confusion about these lines comes from mixing up three things: the draw period, the repayment period, and the moment one turns into the other. The sections below take them in order, then cover where the general rule breaks.
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.
What Is an Investment Property HELOC, Mechanically?
An investment property HELOC is a revolving credit line secured by a lien on a rental. In this network it is a standalone line in first or second lien position. The borrower gets a limit, borrows against it, and pays interest on what is drawn.
Eligibility is narrower than on a primary residence. Investment lines require a 700 credit score, with no tier beneath it. Both the 720 and 700 tiers reach the same 70% CLTV, up to $500,000. Credit above 700 buys eligibility, not extra leverage. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Eligible collateral includes single-family homes, 2-4 unit properties, PUDs, townhomes, and condominiums, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not offered.
Lendmire is a broker. It arranges these lines through select wholesale partners, and every figure here is subject to lender guidelines and full file review. This product is available only in the 16 states where Lendmire offers full-service mortgage lending, which is narrower than its 41-market DSCR footprint. The complete DSCR loans guide covers the term-loan side of investor financing.
Key Terms Defined
Draw period: The stretch when the line is open and the borrower can take funds up to the limit.
Repayment period: The stretch after the draw ends, when no new borrowing is allowed and the balance is paid down.
Interest-only payment: A payment that covers interest on the drawn balance and nothing toward principal.
Fully amortizing: A payment schedule that pays the balance to zero by the end of the term.
CLTV: Combined loan-to-value, meaning all liens on the property added together and divided by its value.
Floating pricing: Pricing that moves with an index, so the payment can change without any new draw.
Balloon payment: A single payment of the whole remaining balance at the end of a term.
How Does the Draw Period Work?
The draw period is the time the line is open. On an investment line in this network, it lasts 5 years and payments are interest-only. Principal does not fall unless the borrower chooses to pay it down.
The CFPB’s HELOC brochure describes the general design: during the draw you can spend up to the limit, and some plans allow interest-only payments, which means nothing goes toward principal. It also notes that on a variable-rate plan, monthly payments can change even if you never draw again. That applies here, because pricing floats across the draw.
Three mechanics matter on a network file:
1. The closing draw is large. At least 75% of the line is drawn at closing. This is not a product where an investor opens a line and draws as invoices come due. A borrower who wants a small working balance should size the line down, not up.
2. Later draws have a floor. The minimum subsequent draw after closing is $1,000, with Texas at $4,000, as stated by one wholesale program. The other does not state a subsequent-draw minimum, so confirm it per file.
3. Interest accrues on drawn funds. The unused part of the line costs nothing in interest, but it is not free money either. It counts toward exposure limits.
Underwriting qualifies the borrower on the interest-only payment calculated on the maximum draw. DTI tops out at 50%, drops to 45% for credit profiles from 600 to 679, and a ratio above 45% requires a 680 minimum. On an investment line the 700 floor sits above all of those, so the binding constraints are the 70% CLTV cap and the borrower’s overall debt load.
What Changes When the Repayment Period Starts?
When the 5-year draw ends, the line closes to new borrowing and the balance amortizes over 25 years. The structure is fully amortizing, so there is no balloon on these lines. Payments now include principal, which makes them higher than the interest-only payments of the draw.
This is the point where files get surprised. A borrower underwrote and budgeted on interest-only carry for five years. Then the payment includes principal on a floating-price balance, and the rental’s cash flow has to absorb it.
The market includes plans with a different ending. Under the CFPB brochure, some plans set a repayment schedule, often over ten or 15 years, while others make the whole balance due at once as a balloon. The brochure warns that a balloon borrower must be ready to refinance, borrow elsewhere, or find another way to pay it off. The federal Regulation Z rule on home equity plans addresses balloon disclosure for consumer credit secured by a dwelling. How it applies to a business-purpose line on a rental is a question for counsel, not an assumption to make.
Here is the side-by-side that matters for a rental owner:
| Feature | Draw period | Repayment period |
|---|---|---|
| Length (investment line) | 5 years | 25 years |
| New borrowing | Allowed, $1,000 minimum | Closed |
| Payment type | Interest-only | Principal and interest |
| Pricing | Floats | Floats |
| Effect on rental cash flow | Lowest carry | Payment steps up |
Where the Draw Structure Breaks the General Rule
The general rule, taken from consumer HELOC explainers, is a roughly 10-year draw and a 20-year repayment. Experian describes a draw that typically lasts five to 10 years, and ConsumerAffairs says draws run about five to 10 years and vary by bank. Those are market-wide descriptions of consumer lines. On an investment property in this network the structure is 5 years of draw and 25 years of repayment. Not 10 and 20.
The named edge cases are where files go sideways.
Primary-residence structures do not carry over. Primary residences and second homes have a second option, a 3-year interest-only draw with a 17-year repayment. Investment lines do not. A quote built for a primary residence cannot be applied to a rental, and a quoted figure always carries its own program’s draw and repayment structure.
Title held in an LLC. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on this product. That is the sharpest structural difference from a DSCR loan, which can close in an entity, subject to lender program eligibility. A rental already deeded to an LLC needs a vesting change first, or the investor should look at a DSCR cash-out instead.
Line above $500,000. There is no such investment line. Anything above $500,000 is primary-residence only, so an investor who needs more than $500,000 against rentals is looking at a different product.
Valuation. Because the investment cap is $500,000 and full appraisals begin above $500,000, an investment line is structurally in the automated-valuation lane and commonly closes with no traditional appraisal. A higher CLTV may require a secondary valuation, and a borrower may request a full appraisal in any case.
Exposure limits. A borrower is limited to three lines. Combined exposure caps at $2,000,000 on the higher-leverage program and $750,000 on the other. A borrower with more than 15 financed properties is not eligible.
Listed properties. A property listed for sale, or listed within the past 60 days, is ineligible in NC, PA, TN, TX, and WA.
Derogatory history. A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure-family history on investment files follows a 7-year path for a foreclosure and 4 years for a deed-in-lieu, pre-foreclosure, or short sale.
Mid-draw changes. Some market lines adjust limits during the draw based on value or credit changes, a risk ConsumerAffairs flags for hybrid plans. Read the line agreement for this on any file.
Stress-Testing a Rental Against the Repayment Payment
The draw payment flatters a rental. Interest-only carry on a drawn balance is the lowest payment the line will ever have, and it is the number most investors budget on.
Test the file at the repayment payment instead. Run three checks:
1. Rental cash flow at the amortizing payment. Take the rent, subtract the full amortizing payment on the line plus the first mortgage, and see what is left before repairs, vacancy, and management.
2. Movement in pricing. Floating pricing means the payment can rise in either phase. Test a higher payment, not today’s.
3. The exit before month 60. Decide whether the plan is to pay down principal during the draw, refinance, or ride into repayment.
Picture an investor with a rental that cash flows comfortably on interest-only carry. At the transition the amortizing payment on the same balance lands noticeably higher, and the margin that looked wide shrinks. That is the file to model before closing, not after.
One more point. DSCR compares rent to PITIA only. Clearing 1.00 on that ratio is not the same as positive cash flow, because repairs, vacancy, management, utilities, and capex sit outside the calculation. The same caution applies to an HELOC-funded rental.
HELOC Draw Structure and a Later DSCR Refinance
Investors often use a line as a bridge and plan to refinance into a term loan. A DSCR refinance counts the full payment on the new loan against the property’s rent. Typically, DSCR purchases land at 75%-80% LTV, and a cash-out refinance tops out around 75% LTV across most of the network, with about 6 months of seasoning the common expectation. For short-term-rental collateral, cash-out is 70%.
For the refinance to work, the line is paid off from the proceeds. A balance sitting at the 70% CLTV cap on the HELOC leaves less room under a 75% cash-out ceiling than an investor might expect, so the line and the take-out loan have to be sized together. Credit matters too. Most DSCR programs want around 660, 700+ unlocks the strongest leverage tiers, and a 620 floor exists in parts of the network. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Coverage floors differ by path. A coverage ratio of 1.00 is where many select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Reserves vary by lender, leverage, loan size, and transaction type, commonly around 6 months of PITIA.
Lendmire’s piece Will Bank Refi HELOC Into 30 Year Fixed Investment Property? covers the take-out side in more detail.
Which Structure Fits Which Investor?
The line fits an investor who holds equity in a rental, has a 700 credit profile, holds title personally or in a revocable trust, and wants a modest-sized revolving balance with a long runway. It fits worse when the goal is a small, gradual draw, when the property sits in an LLC, or when the need is above $500,000.
| Situation | Better fit |
|---|---|
| Needs under $500,000, personal title, 700+ credit | Investment HELOC |
| Rental titled in an LLC | DSCR cash-out refinance |
| Needs a large lump sum | Cash-out refinance |
| Wants a small, gradual draw | Likely not this product (75% drawn at closing) |
| Borrower owns more than 15 financed properties | Not eligible for the line |
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Common Mistakes
Budgeting on the interest-only payment. The repayment payment is the one that matters over 25 years.
Assuming the line converts to fixed. On both wholesale programs, pricing floats across the draw and repayment and never converts to fixed.
Reading a primary-residence quote as an investment quote. The draw and repayment structures differ by occupancy.
Assuming interest-only means the debt is shrinking. The CFPB brochure notes that principal paid during the draw typically does not retire the loan.
Stacking lines past the limit. Three lines per borrower, with combined exposure caps, is the ceiling.
Frequently Asked Questions
How long is the draw period on an investment property HELOC?
Five years on the investment structure in Lendmire’s wholesale network, followed by a 25-year fully amortizing repayment. Primary residences and second homes also have a 3-year draw option, but investment lines do not. Figures are subject to lender guidelines and file review.
Is the payment interest-only the whole time?
No. Payments are interest-only during the draw, then principal and interest during repayment. Because pricing floats through both phases, the payment can move even without a new draw.
Can an investor keep borrowing after the draw ends?
No. Once repayment starts, the line closes to new borrowing. Repaying principal does not reopen it.
How much of the line has to be drawn at closing?
At least 75% of the line is drawn at closing. After that, the minimum subsequent draw is $1,000, with Texas at $4,000, as stated by one of the wholesale programs.
Can an LLC borrow on this line?
No. Title must be held by the individual borrower or a revocable living trust. An LLC-titled rental needs a vesting change or a DSCR cash-out instead, subject to lender program eligibility.
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. Reach the team at 828-256-2183 or request a quote.
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 brokers 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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References
2. CFPB Regulation Z § 1026.40
3. Experian: What Is a Draw Period on a HELOC
4. ConsumerAffairs: HELOC Draw Period
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Do All DSCR Cash-Out Loans Carry an Early Exit Fee? · How to Cash-Out Refinance a 2–4 Unit Rental From Start to Close · How to Document a Cash Purchase for Delayed Financing on a Duplex
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.