The Quick Read: Borrowed equity sizes the purchase in two steps. The line is tested on your debt-to-income ratio first. The purchase lender then decides whether borrowed cash counts as a down payment, and the property’s rent must cover the new loan’s payment, subject to lender guidelines. Your usable cash divided by the required down-payment percentage gives a rough price ceiling.
- An investment-property line on Lendmire’s network caps at 70% CLTV and $500,000 total, and the payment is tested on the maximum draw.
- Short-term rental purchases typically top out at 75% LTV, which means about 25% down.
- Closing costs and reserves come out of your cash before you size the price.
- Clearing a 1.00 coverage ratio is not the same as positive cash flow.
Key Terms Defined
HELOC: A home equity line of credit, a revolving credit line secured by a property you already own.
CLTV: Combined loan-to-value, which adds the line to every lien already on the property and divides by the property’s value.
DTI: Debt-to-income, your monthly debt payments divided by gross (pre-tax) monthly income.
DSCR: Debt service coverage ratio, a property’s monthly rent divided by its monthly principal, interest, taxes, insurance, and association dues (PITIA).
Draw period: The stretch when you can borrow against the line and pay interest only.
Source of funds: The paper trail showing where your down payment cash came from.
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.
Why Two Approvals Decide the Outcome
A HELOC funding a short-term rental purchase is two separate loans, and each one asks a different question. The line asks whether you can carry the debt. The purchase loan, when it is a DSCR loan, asks whether the property can carry itself.
The line is underwritten to you. It looks at your credit, the equity in the property that secures it, and your DTI. The purchase loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal DTI is not the main test there.
The HELOC proceeds connect the two only as a source of down payment cash. Whether that cash counts is a program-by-program decision. The strongest files clear both tests: enough equity and DTI room for the line, and enough rental coverage for the purchase. Failing either one stops the plan.
Step 1: How Big Can the Line Be?
Line size comes from one formula: property value times the allowed CLTV, minus what is already owed. Equity is measured one property at a time and never pooled across your portfolio.
Across the wholesale network Lendmire places files with, the ceiling depends on occupancy:
| Securing property | Max CLTV | Credit needed | Line size |
|---|---|---|---|
| Investment property | 70% | 700 minimum | Up to $500,000 |
| Primary residence | Up to 90% | 720+ for the 90% tier | $25,000 to $750,000 |
Those ceilings apply to the occupancy of the property that secures the line. An investment line sits at 70% CLTV whether your score is 700 or 780. Credit above 700 buys eligibility there, not extra leverage.
Here is a worked example in percentages. Say a rental is worth 100 units and carries a first lien equal to 50% of value. At a 70% CLTV cap, the most the line can add is 20% of value. On a primary residence with the same first lien and a 720+ profile, the 90% tier leaves room for 40% of value. All of this is subject to the valuation, credit, and property review.
A few structural details matter for sizing:
- At least 75% of the line is drawn at closing.
- An investment line runs a 5-year interest-only draw followed by a 25-year repayment.
- Pricing floats through both periods and never converts to fixed.
- Lines at or below $500,000 usually use an automated valuation, though a borrower can request a full appraisal.
- Title must sit with an individual or a revocable living trust. An LLC cannot hold title on the line.
- Lendmire’s HELOC availability covers 16 full-service states, which is narrower than its 41-market DSCR footprint.
That title rule is the sharpest difference from the purchase side. DSCR loans can often close in an LLC, subject to lender program eligibility. A property already deeded to an LLC needs a vesting change before it can secure a line.
Step 2: How Does the DTI Test Cap the Line?
DTI caps the line at the payment you can carry, not the equity you have. The maximum is 50%, with 45% for credit profiles from 600 to 679 and a 680 minimum above 45%. These are typical network figures and vary by file. Investment lines already floor at 700, so the 50% ceiling is the one that applies there.
The detail most borrowers miss is that the line is qualified on the interest-only payment at the maximum draw. It is not qualified on the amount you plan to use. Because the line floats and at least 75% is drawn at closing, an oversized line weighs on DTI even if you never touch the unused part.
You can reverse the math. Start from the DTI ceiling, subtract your existing debts as a share of gross monthly income, and what remains is the room for the new payment.
A fail, fix, pass example in percentages of income:
1. Fail: Existing debts take 38% of gross income. The line’s maximum-draw payment adds 16%. Total: 54%, over a 50% ceiling.
2. Fix: Size the line smaller so the maximum-draw payment adds 10%, or pay off a car loan or card balance to lower the 38%.
3. Pass: 38% plus 10% is 48%, under 50%.
The smaller line means less cash. That is the trade, and it is why DTI sets the actual limit more often than equity does.
Step 3: Converting Cash to a Price Ceiling
Your usable cash divided by the down-payment fraction gives the rough ceiling on the purchase price. Usable cash is what is left after closing costs and reserves, because those are separate pots.
| Down payment | Where it applies | Price ceiling per unit of usable cash |
|---|---|---|
| 25% | Short-term rental purchase at 75% LTV | 4.0x |
| 20% | Standard rental purchase at 80% LTV | 5.0x |
| 15% | Select high-leverage purchase at 85% LTV, roughly 700+ score | About 6.7x |
Short-term rental purchases typically top out at 75% LTV, so 25% down is the planning figure. Standard rental purchases land at 75% to 80% LTV on most files. The 85% tier is a select-program option and is not a short-term rental ceiling.
If your net usable cash covers 10 units, a 25% down short-term rental supports roughly a 40-unit purchase price. The same cash at 20% down supports roughly 50. This is a planning shortcut. The calculator on the page can show an illustrative version, but any real number depends on the file. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Reserves deserve a separate line. They vary by lender, leverage, loan size, and transaction type, and about 6 months of PITIA is common. Many programs will not let HELOC proceeds count as both the down payment and the reserves. Plan on holding unborrowed cash for the reserve requirement.
Which Loan Tests Which of Your Numbers?
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 CFPB’s ability-to-repay rule described investment-purpose loans in this way when it set the line between consumer and business credit.
This is why the HELOC payment lands differently on each purchase path:
| Factor | DTI-based purchase | DSCR purchase |
|---|---|---|
| Main test | Your income vs. all debts | Rent vs. the property’s PITIA |
| HELOC payment in the test | Yes, stacked into DTI | No, outside the ratio |
| HELOC payment on your budget | Yes | Yes |
| Borrowed down payment | Lender-specific | Lender-specific |
Agency loans show the DTI side clearly. Freddie Mac’s guide requires an outstanding HELOC balance’s payment to be counted in monthly DTI. That is a contrast, not a DSCR rule. On a DSCR purchase the line’s payment is not in the ratio, but it still comes out of your pocket every month.
How Short-Term Rental Income Gets Counted
Short-term rental income is set on the purchase, and the line’s payment never offsets it. Most programs take either an appraiser’s market-rent schedule (Form 1007 for single-family, Form 1025 for 2 to 4 units) or a third-party revenue estimate, usually discounted before the ratio is run.
On the network, short-term rental purchases typically allow up to 75% LTV with a 640+ score, about 12 months of hosting history, and a 1.00 coverage floor. These are typical ranges and vary by lender. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
Keep two limits in mind. Projected nightly revenue is not a safe way to shrink your DTI for the line. And DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside the calculation, and so does the HELOC payment. Clearing 1.00 is not positive cash flow.
Will the Purchase Lender Accept Borrowed Funds?
Most purchase lenders will look at where the cash came from, and their stances differ. Across the network, three treatments are common:
- Accept documented line proceeds.
- Cap the borrowed share of the down payment.
- Require a slice of unborrowed, seasoned cash.
A plan that borrows 100% of the down payment can fail on that rule alone, even when the line and the deal both look strong. The paper trail typically includes the line’s closing documents, the draw confirmation, and statements showing the cash arriving. The new liability will also show on your credit report. Confirm the purchase lender’s rule before you draw. Do not draw before you have a target property.
Stacked Payments and Payment Shock
Each HELOC-funded down payment adds a payment you must keep covering. The investor’s budget carries the line, the new mortgage, and the operating costs, and a new short-term rental may still be ramping up.
| Stage | What changes |
|---|---|
| Draw period | Interest-only payment on a floating balance |
| Repayment period | Payment steps up as principal amortizes |
| Floating pricing | The payment can move without any change in your balance |
| Ramp-up months | Revenue may run below the figure used at qualification |
Stress the plan with higher vacancy and lower revenue than the lender used. A line also preserves cash at the cost of a lien on another property, so a shortfall puts that property at risk.
Where the General Rule Breaks
- The cash needed exceeds the cap. An investment line stops at $500,000 total. There is no larger investment tier.
- DTI is already tight. Because the line is tested on the maximum draw, a high DTI shrinks it fast.
- Title is in an entity. An LLC-held property cannot secure the line until the vesting changes.
- You are near the exposure limits. A borrower can hold three lines, and one with more than 15 financed properties is not eligible.
- A first lien already sits on the securing property. The line can sit in first or second position, and the combined CLTV still has to fit under the cap.
- The purchase is DTI-based. A bank-statement purchase, for example, stacks the line’s payment and the new mortgage into the ratio.
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.
Sequence and Sizing in Practice
Size the line to the need. Leave room under the CLTV ceiling and cushion under the DTI ceiling.
1. Confirm the purchase lender’s borrowed-funds rule.
2. Run the DTI test using the maximum-draw payment.
3. Open the line and document the draw.
4. Hold reserves in unborrowed cash.
5. Go under contract with the price ceiling from Step 3.
For the loan side, the complete DSCR loans guide covers the full purchase structure, including leverage tiers, credit ranges, and reserves.
Frequently Asked Questions
Does the HELOC payment count against my DTI?
Yes, for the line itself. The payment is tested on the maximum draw, and the ceiling is typically 50%. On a DSCR purchase the payment sits outside the coverage ratio, but it still comes out of your budget.
Can I borrow the full down payment?
Sometimes, but not always. Some programs accept documented line proceeds, some cap the borrowed share, and some want unborrowed seasoned cash. Ask the purchase lender before you draw.
Do I have to draw the whole line?
At least 75% is drawn at closing on the network’s programs. After that, additional draws start at a $1,000 minimum, with a higher minimum in one state. A smaller line is the cleaner way to limit what you borrow.
Can the HELOC also fund my reserves?
Often it cannot. Many programs want reserves, commonly around 6 months of PITIA, in unborrowed funds. Treat reserves and the down payment as separate pots.
Should the line be on my primary home or the rental?
It depends on the numbers. A primary residence line can reach a higher CLTV tier at a 720+ profile, and an investment line stops at 70% CLTV and $500,000. The primary option puts your home at risk, and the rental option puts the rental at risk.
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. You can reach the team at 828-256-2183.
Investors focused on short-term rentals can review DSCR loans for Airbnb and short-term rentals.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Federal Register – CFPB Ability-to-Repay final rule
2. Freddie Mac Seller/Servicer Guide 5401.2
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: HELOC Tiers for a First-Time Equity Borrower on a Primary Home · How a HELOC Funds Four Years of Tuition for a Parent Borrower · How Much Home a First-Lien HELOC Down Payment Supports After DTI
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.