Can I Take a Home Equity Loan Out on One of My Rental Properties?

The Quick Read: Yes, but only through a narrow set of lenders. Most big retail lenders skip rentals, and the ones that lend apply tighter limits than they do on a primary home.

On Lendmire’s wholesale network, an investment-property line tops out at 70% combined loan-to-value and $500,000. Title must sit in your own name or a revocable trust, subject to lender guidelines.

• A home equity line or second lien on a rental exists, but few lenders offer one.
• On an investment property, the network ceiling is 70% combined loan-to-value, with a 700 minimum credit score.
• An LLC cannot hold title on these lines. A rental already deeded to an LLC needs a title change or a different product.
• A DSCR cash-out refinance is the usual alternative for a rental that rents well. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
• Borrowing against your home to fund a rental puts the home behind the rental. That is a different risk from borrowing against the rental itself.

Key Terms Defined

Home equity loan: a loose label. It can mean a closed-end second loan, a line of credit, or a cash-out refinance of your first mortgage.

HELOC: a home equity line of credit. You draw cash as needed against your equity during a set draw period, then repay.

Second lien: a loan that sits behind your existing mortgage. If the property is sold or foreclosed, the first mortgage gets paid first.

CLTV (combined loan-to-value): your first mortgage plus the new loan, divided by the property’s value.

DSCR (debt service coverage ratio): monthly rent divided by the monthly housing payment (principal, interest, taxes, insurance, and any HOA dues).

PITIA: that full monthly housing payment, including HOA dues where they apply.

Seasoning: the waiting period a lender wants after you buy or refinance before it will lend again. About 6 months is the common expectation on a DSCR cash-out.

Revocable living trust: a trust you control and can change. Lenders on equity lines treat it like holding title in your own name.

Why Is a Rental So Much Harder to Borrow Against?

Lenders see a rental as riskier than the house you live in. Tenants, vacancy and repairs all sit between the property and the payment. So fewer lenders offer lines on rentals, and the ones that do ask for more.

NerdWallet notes that not every lender offers a HELOC on an investment property and that the requirements are strict.

Investor experience matches that. A BiggerPockets thread describes credit unions that once offered rental lines pulling back, and a 75% combined cap at banks that still lend. Treat that as color. Market-wide caps differ by lender, and the network figure on an investment property is 70%.

Where you will usually find one: small local banks, some credit unions, and a few wholesale partners. Big banks mostly say no. That is a policy choice, not a verdict on your property.

Primary-home lines carry another difference. NerdWallet describes a typical 10-year draw period on those lines. An investment line on Lendmire’s network runs a 5-year interest-only draw, then a 25-year fully amortizing repayment. Pricing floats during both stages and never converts to fixed. Check which structure a quote carries before comparing two offers.

What Does a Rental Line Look Like Through Lendmire’s Network?

Here is the program as Lendmire brokers it. Figures are typical guidance, subject to lender guidelines and a full file review, and Lendmire is not the lender.

• Ceiling: 70% combined loan-to-value on an investment property. No tier sits above that.
• Line size: up to $500,000 on an investment property. Larger lines are primary-residence only.
• Credit: 700 minimum. A 720 score reaches the same 70% ceiling as 700, so credit above 700 does not buy more borrowing power here.
• Lien position: a standalone line in first or second position.
• Draw: at least 75% of the line is drawn at closing. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
• Debt-to-income: 50% maximum, qualified on the interest-only payment at the full draw.
• Valuation: lines at or below $500,000 ordinarily use an automated valuation instead of a traditional appraisal. You can request a full appraisal.
• Property types: single-family, 2-4 units, townhomes, PUDs, and condos, including non-warrantable ones. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use and agricultural zoning are not offered.
• Limits: up to three lines per borrower, and a borrower with more than 15 financed properties is not eligible.
• Availability: a narrower set of states than Lendmire’s DSCR footprint of 41 markets, including Washington, D.C.

Bankruptcy needs 4 years of seasoning from discharge or dismissal. A foreclosure needs 7 years, and a deed-in-lieu, pre-foreclosure or short sale needs 4.

One more point. The 700 score floor is the binding constraint here. Business bank-statement income is never the limiting factor on an investment line.

Three Ways to Pull Equity From a Rental

The label “home equity loan” hides three different products.

A DSCR cash-out refinance typically asks for around a 660 score on most programs. A 620 floor exists in parts of the network, and 700+ opens the strongest leverage tiers. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders). Above $2,500,000 the network generally holds to 30-year fixed structures. Reserves vary by lender, leverage and loan size, commonly around 6 months of PITIA.

The Lendmire write-up on home equity loans on rental property goes deeper on the line-versus-loan choice.

Run the Math Before You Apply

Say you own a rental free of surprises, and the numbers below are modeled assumptions, not market data.

Equity. Value the property at 100%. Your first mortgage is 50% of value. An investment line caps at 70% combined, so the room is about 20 points of value. The lender’s own valuation decides the real number, and the $500,000 cap applies either way.

Rent check. Suppose the rent covers the current first mortgage at roughly 1.35x. Adding a second payment on the new draw can pull combined coverage toward 1.1x. That still clears 1.00. It also leaves a thin cushion.

Cash-out alternative. Refinance the same property at 75% LTV on a standard rental cash-out. The new loan replaces the first mortgage, so the whole balance is repriced, and a prepayment penalty on the old loan may apply. Coverage on the larger loan might land near 1.1x on the same rent. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

Here’s the catch. Clearing 1.00 is not the same as positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capex sit outside the calculation. A 1.10x file can still lose money in a bad year.

Banks and credit unions run a borrower-based review, so your personal DTI sets the limit, not the rent. A DSCR file reads the rental first. That matters a lot once you own several rentals, because each DSCR loan is property-by-property and you never use up one finite line.

The LLC Problem

If your rental sits in an LLC, an equity line is usually off the table. Corporations, partnerships and irrevocable, blind or land trusts cannot hold title on these lines either. Only you, or your revocable living trust, can.

You have two paths. Move the deed to your own name or a revocable trust, which gives up the liability separation the LLC provided. Or choose a DSCR cash-out, which generally fits LLC-owned rentals subject to lender program eligibility.

(Think hard before re-deeding. Liability separation is usually the reason the LLC exists.)

Should the Rental Secure It, or Your House?

Which property secures the loan decides what you risk. A line on your primary home puts the home behind the rental, so a bad year on the rental can threaten where you live. A line or DSCR loan on the rental keeps the exposure inside the rental.

Primary-home lines on the network can reach higher leverage and larger sizes than investment lines. A 90% ceiling exists only at a 720-or-better credit profile. That is a primary-residence figure and never applies to a rental.

Using home equity to fund a down payment on the next rental is common, and the math often favors it. Still, a home line adds a personal-residence lien to a business bet. The stronger play for most investors with a solid rental is to keep the debt on the rental that earns the rent. The Lendmire page on rental property home equity loans compares the two directions.

Edge Cases Worth Knowing

Free-and-clear rentals. Some lenders will not lend without an existing mortgage. On the network, a standalone line can sit in first position on a rental with no mortgage.

Short-term rentals. Many second-lien programs are long-term-rental only. A DSCR cash-out on a short-term rental tops out at 70% LTV, usually with a 640+ score and about 12 months of hosting history.

Second liens behind a first. A second lien needs the first lender’s documents to allow one. A DSCR second exists as a closed-end loan underwritten on rent against combined payments. The pool of lenders offering it is small.

Coverage below 1.00. A 1.00 floor is where many select DSCR programs start. A separate path is available through select lenders in the network, with leverage and terms adjusted. It is not one program with a moving floor.

Property type. DSCR financing does not cover manufactured homes (single- or double-wide), log homes or barndominiums. That is a hard limit, not a hurdle.

What Should You Use the Money For?

Common uses are repairs on the same rental, a down payment on the next property, paying off higher-cost debt, and reserves. The first two tend to build income. The last two reduce risk.

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. Taxstra’s HELOC guide covers the documentation side.

One practitioner pattern: borrowers who borrow for something unrelated to the property often regret it two years later. Equity pulled for a vacation does not come back.

A Go or No-Go Checklist

Move forward if most of these are true:

1. Your credit sits at 700 or better, or you are choosing a DSCR cash-out with a lower score. 2. Title is in your name or a revocable trust, or you are using a DSCR product. 3. Rent still covers the combined payment with room to spare after the new debt. 4. You can carry the new payment through a vacancy. 5. The money goes into something that earns or protects income.

Skip it if the rent only just covers the existing payment. Adding debt to a thin file adds risk without adding income.

For the bigger picture on DSCR financing, see Lendmire’s complete DSCR loans guide.

Next Step

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. An illustrative calculator on the site can give a rough estimate, though it is not a quote.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage that arranges home equity lines of credit through wholesale lending partners in its 16 full-service states. Lines on primary residences, second homes and investment properties are each reviewed individually by the lender under the program’s occupancy, credit and combined-loan-to-value guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. NerdWallet: Can you get a HELOC on an investment property?

2. BiggerPockets: Advice on getting a HELOC on a rental property

3. Taxstra: HELOC on an investment property