The Quick Read: An investor can borrow against the home they live in and use the cash for the down payment, closing costs, or rehab on a rental, while the rental gets its own separate mortgage. The line is underwritten on the borrower’s credit, debt-to-income, and the home’s value, subject to lender guidelines.
- On a primary residence, lines through Lendmire’s wholesale network can reach up to 90% CLTV, but only at a 720-or-better credit profile. On an investment property, the ceiling is 70% CLTV.
- Lines run from $25,000 to $750,000 on a primary residence. An investment line caps at $500,000.
- At least 75% of the line is drawn at closing, so the debt starts right away.
- The rental loan is a separate test. A DSCR loan on the rental qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
- This product is available only in Lendmire’s 16 full-service states, which is narrower than its DSCR footprint.
How Does Borrowing on the Home You Live In Fund a Rental?
The collateral is your primary residence. The money goes into the rental. Those are two loans on two properties, and each is judged on its own terms.
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.
The rental lender never takes a lien on your home. Each one looks at its own collateral and its own risk. Investors like this setup because it keeps cash in the bank instead of draining savings into a down payment.
Most files we see take one of three forms. The investor draws on a line against the primary home. The investor takes a lump-sum second mortgage. Or the investor refinances the first mortgage into a larger one. The network’s standalone line can sit in first or second lien position, so it works whether or not the home already has a mortgage.
Lendmire brokers these lines through select wholesale partners. It does not lend, and every figure here is subject to lender guidelines and full file review.
How Underwriting Actually Treats It, Step by Step
The line is judged as a residential loan on a home you occupy. The rental plays almost no role in that decision. Here is the sequence on a typical file.
1. Equity gets measured. Equity is the home’s value minus what is owed on it. Lenders size the line by combined loan-to-value (CLTV), which adds the first mortgage and the new line together and divides by value.
2. Value gets set. Lines at or below $500,000 ordinarily run on an automated valuation with no traditional appraisal. A higher CLTV may require a secondary valuation. Every line above $500,000 needs a full appraisal, and a borrower can ask for one on any line.
3. The borrower gets qualified. Credit, debt-to-income, and housing history drive the decision. The program floor is 600. Maximum DTI is 50%, and it drops to 45% for scores from 600 to 679. A ratio above 45% needs a 680 minimum. The payment is calculated as interest-only on the maximum draw, which is a conservative test.
4. Credit gets pulled once. The score model is single-bureau and keyed to the primary wage earner. The report can be no more than 90 days old at closing, and rescores are not available.
5. Title gets checked. The home must be held by the individual borrower or a revocable living trust. An LLC, corporation, or partnership cannot hold title on this product.
6. The line closes and funds. At least 75% of the line is drawn at closing. Pricing floats during both the draw and repayment periods and never converts to fixed.
7. The rental purchase runs as its own file. The borrower’s down payment came from borrowed money, and that shows on the file. How the rental lender treats borrowed funds, and how it seasons them, varies by lender and loan program. Reserves still have to be documented.
What Structures and Variations Exist?
Four structures cover most investor use cases. They differ by collateral, how money is paid out, and what the lender underwrites.
| Option | Collateral | Payout | Reviewed on |
|---|---|---|---|
| Line on primary home | Your residence | Revolving draw | Borrower credit and DTI |
| Lump-sum equity loan | Your residence | One payment | Borrower credit and DTI |
| Cash-out refinance | Your residence | New first mortgage | Borrower credit and DTI |
| DSCR loan on the rental | The rental | Purchase or refinance | Property rent vs. payment |
The line and the lump-sum loan are separate mortgages. A cash-out refinance replaces the existing first mortgage, which resets the terms of that loan. That matters when the current first mortgage has terms worth keeping.
Draw structures on a primary residence come in two forms. One is a 3-year interest-only draw followed by a 17-year fully amortizing repayment. The other is a 5-year interest-only draw followed by a 25-year repayment. Tennessee shortens both, to 3 years and 12 years, or 5 years and 10 years. For this article, the 5-year draw with 25-year repayment is the longer-runway structure. Investment lines use that structure only.
Always read a quoted figure alongside the draw and repayment structure it belongs to.
Where the General Rule Breaks
The idea sounds simple, but the edge cases are where files stall. These are the ones that come up most.
The zero-balance line does not fit. Some investors want to open a line, leave it untouched, and draw only when a deal appears. On this network, at least 75% of the line is drawn at closing. Size the line to the amount you actually need, not the biggest line you can get.
Borrowing on the rental itself is a narrower market. An investment line caps at $500,000 and tops out at 70% CLTV on an investment property. It needs a 700 minimum credit profile. Both 720 and 700 reach that same 70%, so a higher score earns eligibility, not leverage. Because the line cannot exceed $500,000, it commonly closes with no traditional appraisal. The upside is that default does not put your residence at risk.
LLC title blocks the product. A rental already deeded to an LLC cannot carry this line. It needs a vesting change, or a DSCR cash-out instead. A DSCR cash-out generally tolerates entity vesting, subject to lender program eligibility. This is the sharpest structural difference between the two products.
Lines above $500,000 are primary-residence only. They need a credit profile of 700 or better (720 on the longer-runway structure). They cap at 75% CLTV and require a full appraisal.
The top leverage tier is narrow. Primary-residence CLTV reaches 90% only at a 720-or-better profile. Below that, the ceiling is lower. Texas is a special case: a primary residence there is a homestead and caps at 80% combined loan-to-value.
Occupancy is a real obligation. The line is underwritten as a loan on your home. If you plan to move out and rent that home, tell the lender before you apply, not after. Misrepresenting occupancy is not a gray area.
Property type limits apply. The line accepts single-family, 2-4 units, PUDs, townhomes, and condos, including non-warrantable ones. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not offered.
Derogatory history is split. A bankruptcy needs 4 years of seasoning on both structures. On primary residences, one structure seasons a foreclosure at 7 years and a short sale or deed-in-lieu at 4. The other declines that history entirely.
Exposure is capped. A borrower is limited to three lines, and a borrower with more than 15 financed properties is not eligible.
A Worked Example in Percentages
Consider an investor with a primary home carrying a first mortgage equal to 55% of its value, and a credit profile of 720 or better. A line sized to 75% CLTV would draw about 20% of the home’s value. The investor then buys a rental.
The rental is a purchase on a DSCR loan at 75% LTV, so the borrower brings 25% down plus closing costs. Say the rental’s rent covers its own payment at roughly 1.2x. That ratio compares rent to the rental’s PITIA only. It says nothing about the line on the primary home, which the investor pays from personal income. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Here is the part people miss. Clearing 1.00x on the DSCR is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation. The investor still carries the line’s payment on top of all of that.
Now run it the other way. Suppose rent covers the rental payment at 0.95x. A DSCR below 1.00 is available through select lenders in the network, with leverage and terms adjusted. The shortfall plus the line payment would sit on the investor’s household income. The stress case is the one to size first.
DSCR Terms That Matter on the Rental Side
A rental financed with a DSCR loan has its own parameters. Most files land at 75%-80% LTV on a purchase, which means 20%-25% down. Select programs reach 85% LTV with roughly a 700+ credit score. Cash-out refinances top out around 75% LTV across most of the network, with about 6 months of seasoning as the common expectation.
Standard loan sizes reach up to $3,000,000 on standard programs, with smaller balances available through select lenders, and above $2,500,000 the network generally holds to 30-year fixed structures. A 620 credit floor exists in parts of the network. Most programs want around 660, and 700+ unlocks the strongest leverage tiers.
The 1.00x coverage level is where many select programs start. Coverage below 1.00x is a separate path through select lenders, with leverage and terms adjusted. Short-term rental files follow different tiers. Purchase leverage tops out at 75% LTV, and cash-out sits at 70% on short-term-rental collateral. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Reserves vary by lender, leverage, loan size, and transaction type. They are commonly around 6 months of PITIA. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, and larger loans typically step up to about 9 months. A borrowed down payment does not erase reserve rules, credit floors, or property eligibility.
The strongest files clear both tests: enough equity in the home, and enough rent on the rental. For the program basics, the complete DSCR loans guide covers each requirement in more depth.
DSCR on manufactured homes, log homes, and barndominiums is not offered in the network.
What Does the Decision Look Like?
Equity from the home makes sense when cash is the constraint. The investor has a strong credit profile, real equity in the home, and a rental whose rent clears the loan’s coverage test with room. The line preserves savings for reserves, which a DSCR file needs anyway.
It makes less sense when the household budget is already tight. The line’s payment counts against DTI on any later purchase that needs conventional-style qualification. A DSCR loan avoids that DTI test, but it still reviews credit and reserves.
Three questions settle it. How much equity can you safely take out and still leave a cushion? How is the title held? Does the rent carry the rental, and can your income carry the line?
Investors who want to see the economics of the strategy itself can read Lendmire’s piece Will You Make Money If Using Home Equity To Buy Property For Rental?. Those comparing lender types can read who does home equity loans on investment property.
What Risks Sit on the Home You Live In?
The home is collateral. The Consumer Financial Protection Bureau’s guide to home equity warns that missed payments could mean losing the home to foreclosure. It also explains that a line of credit has a draw period followed by a repayment period, and that the rate on a line often adjusts. The guide also says the lender can foreclose if the line is not repaid as agreed. It also notes that you pay interest only on the amount borrowed.
If the rental underperforms, your residence still backs the debt. These loans are usually recourse, so a shortfall after a foreclosure sale can still be owed. Falling behind on a second lien can also trigger foreclosure while the first mortgage stays current.
Whether a lender may freeze or cut a line depends on the contract. Read that clause before you sign.
The line’s pricing floats during both draw and repayment, so payments can move. That is a cash-flow risk the DSCR on the rental never captures.
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.
Key Terms Defined
CLTV (combined loan-to-value): The first mortgage plus the new line, divided by the home’s value.
Draw period: The stretch when you can borrow from the line and pay interest only.
Repayment period: The stretch after the draw ends, when you pay principal and interest on a fixed schedule.
DSCR (debt service coverage ratio): Monthly rent divided by the rental’s monthly PITIA.
PITIA: Principal, interest, taxes, insurance, and association dues on the rental.
Vesting: The legal name that holds title to a property.
Frequently Asked Questions
Can I use a primary home equity loan for the down payment on a rental?
Yes, in most cases the funds are yours to use as you choose. The line is underwritten on your credit, DTI, and the home’s value. The rental lender will see the borrowed funds and review reserves, and treatment varies by lender.
What is the maximum CLTV on a line through Lendmire’s network?
On a primary residence, up to 90% CLTV, and only at a 720-or-better credit profile. A Texas primary residence caps at 80%. Every figure is subject to lender guidelines.
Can my LLC hold the property for this kind of line?
No. Title must sit with the individual borrower or a revocable living trust. A property already in an LLC needs a vesting change, or a DSCR cash-out instead.
Do I have to draw the whole line at closing?
At least 75% of the line is drawn at closing. Subsequent draws can follow after closing, with a $1,000 minimum on most lines and $4,000 in Texas. Size the line to what you will actually use.
Is a DSCR loan better than borrowing against my home?
It depends on the file. A DSCR loan is reviewed primarily on property-level rental income covering the payment, so it puts no lien on your home. A line against your home preserves cash but adds debt and risk to your residence.
Next Steps
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. The site’s illustrative calculator gives a rough estimate only, not a quote.
Lendmire is a mortgage broker arranging DSCR investor loans across 40 states plus Washington, D.C., while the home equity line described here is available in 16 full-service states. Both are subject to lender guidelines, and none of this is a commitment to lend.
Equity pulled from a home you live in can start a rental portfolio, but the rental has to carry its own weight before the line ever pays for itself.
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.
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References
1. HAR.com, How to Use Home Equity to Buy Rentals
2. CFPB, Using home equity to meet financial needs
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a BRRRR Investor Refinance a DSCR Loan After Bridge Exit? · How to Cash Out on the Full Value After a DSCR Exit From Hard Money · How Much Equity and Reserves a Rental HELOC Lender Expects
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.