Home Equity Loans on a Rental for Landlords: How to Get One

The Quick Read: A home equity loan on a rental is a loan secured by the equity in a property you rent out, and on Lendmire’s wholesale network an investment-property line tops out at 70% combined loan-to-value, requires a minimum 700 credit score, and runs up to $500,000, subject to lender guidelines.

• Title must sit with you personally or in a revocable living trust. An LLC cannot hold title on these lines.
• The ceiling is 70% CLTV on an investment property, whether your score is 700 or 780.
• Lines are available only in the 16 states where Lendmire does full-service lending, which is narrower than its 41-market DSCR footprint.
• If the property sits in an LLC, or you want more cash than the line allows, a DSCR cash-out refinance is usually the better fit.
• Lendmire is a broker. It arranges financing through select wholesale partners and does not lend.

Why Lenders Treat a Rental Differently

Lenders treat a rental as riskier than a primary home, so equity loans on rentals are harder to find and cost more. A tenant can leave or stop paying. An owner who does not live in the property is also seen as more likely to walk away from it. NerdWallet notes that home equity loans on investment properties are not widely available and may be priced higher than loans on a primary home.

Many large retail lenders respond by declining non-owner-occupied property altogether. Others cap how many rentals a borrower can own. The practical effect is that the real question is rarely whether you have equity. The real question is whether any lender in your corner of the market offers the product on a rental at all.

Lendmire sees this from the broker side, across many lenders. A handful of wholesale partners will place an equity line on an investment property. Most will not. Knowing which ones do, and what each one requires, is most of the work.

How Underwriting Treats It, Step by Step

Underwriting an equity loan on a rental follows a fixed sequence: confirm the structure, measure the equity, check title, qualify the borrower, review the property, then fund. Each step can end the file, so the order matters.

1. Pick the structure. A closed-end loan pays out a lump sum with no redraw. An open-end line lets you borrow up to a limit again and again. The investment-property product on Lendmire’s network is a standalone line, and it can sit in first or second lien position.

2. Measure combined loan-to-value. The lender adds your first-mortgage balance to the new line and divides by the property’s value. On an investment property the network ceiling is 70% CLTV. A first mortgage that already uses most of that room leaves little or nothing for a line.

3. Check title. The property must be held by you as an individual or by an inter vivos revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title.

4. Qualify the borrower. The minimum credit score on an investment line is 700. A score of 720 and a score of 700 both reach the same 70% CLTV, so a higher score buys eligibility rather than extra leverage. Debt-to-income can run as high as 50%, and the lender reviews your file on the interest-only payment calculated at the maximum draw. How a given lender counts rent toward income varies by program. It may count fully, partly, or not at all.

5. Review the property. Single-family homes, 2-4 unit properties, PUDs, townhomes, and condominiums, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not offered. Because an investment line caps at $500,000, valuation ordinarily relies on an automated model instead of a traditional appraisal, though a borrower may request a full appraisal.

6. Fund and draw. Lines run from $25,000 to $500,000 on an investment property, with a lower $10,000 floor in Michigan. At least 75% of the line is drawn at closing. The draw period is five years of interest-only payments, followed by a 25-year fully amortizing repayment. Pricing stays variable for the life of the line and never converts to fixed.

Credit history matters beyond the score. A bankruptcy needs four years of seasoning from discharge or dismissal. A foreclosure needs seven years, and a deed-in-lieu, pre-foreclosure, or short sale needs four. A borrower may hold up to three lines, and anyone with more than 15 financed properties is not eligible. All of this is subject to lender guidelines and full file review, and none of it is a commitment to lend.

Structures and Variations

An investor has four realistic ways to pull equity, and they differ most on which loan stays in place and who can hold title. The table lays out the tradeoffs.

A DSCR cash-out refinance works differently from the equity line. Across most of the network it tops out around 75% LTV on standard rentals, while short-term-rental collateral stops at 70%. About six months of seasoning is the common expectation. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders). Most programs want a credit score near 660, with a 620 floor in parts of the network, and 700 or better opens the strongest leverage tiers.

On coverage, 1.00 is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted. For a closer look at how the ratio is built, the complete DSCR loans guide walks through it.

Key Terms Defined

Junior lien: a loan recorded behind an existing mortgage, which gets repaid second if the property is sold to satisfy debts. The Consumer Financial Protection Bureau lists home equity loans and HELOCs as common second mortgages. A line on a property with no other mortgage would sit in first position.

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

Closed-end loan: a lump sum with a set repayment schedule and no redraw.

Open-end line: a revolving line you can draw on again, up to its limit, during the draw period.

Draw period: the stretch when you can borrow and pay interest only, before full repayment begins.

Vesting: the legal form in which title is held, such as an individual, a trust, or an LLC.

DSCR: monthly rent divided by the full monthly housing obligation, meaning principal, interest, taxes, insurance, and any HOA dues.

Where the General Rule Breaks

The general rule is that an equity line needs personal title and some room under 70% CLTV. Several situations break that rule, and each one changes the answer.

LLC-owned rentals. A property already deeded to an LLC cannot take an equity line on this network. You can move title into your own name or a revocable trust, which may carry its own consequences with your first lender and insurer. Or you can skip the line and use a DSCR cash-out instead, subject to program terms for entity-titled borrowers. Most landlords who hold in an LLC for asset protection choose the second path.

Rental with a large first mortgage. If your first loan already uses 65% or more of the value, a 70% CLTV ceiling leaves almost nothing. A cash-out refinance at up to 75% LTV may open more room, but it replaces your existing first mortgage. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.

Converting a home to a rental. Some owners consider taking the line while the property is still a primary residence and renting it out afterward. Lenders price and approve a loan based on the occupancy you disclose at application. Misstating your plans is a misrepresentation risk. The primary-residence ceiling also reaches 90% CLTV only at a 720 credit profile, and that tier does not apply to a property you intend to rent.

Property type. A manufactured home, a log home, or a barndominium is not offered under these programs, whether the loan is an equity line or a DSCR loan.

Many financed properties. More than 15 financed properties makes a borrower ineligible for the line, and three lines is the limit. A larger portfolio is the situation where the DSCR route becomes the practical path.

Texas and several other states. A few states add restrictions, such as ineligibility for properties listed for sale within the past 60 days. A Texas primary residence follows its own limits. Investment properties follow the standard table.

A Worked Example in Percentages

Say you own a duplex with a first mortgage equal to 55% of its value and a credit score above 700. The ceiling is 70% CLTV, so the most the line can add is 15% of the property’s value. That sum is also subject to the $500,000 cap. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

Now compare the cash-out refinance on the same duplex. At a 75% LTV ceiling for a standard rental, a refinance could take total debt up to 75% of value. That is 20% of value, a few points more than the line allows. But it pays off the existing first mortgage and starts a new one. That matters if your current first loan is attractive. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

At least 75% of the line is drawn at closing, so most of it starts costing you interest immediately. Draw only what the project needs. Unused room is useful, but only the amount you actually draw reaches the property.

Now run the cash-flow side. The line is underwritten on your personal debt-to-income, not on the property’s coverage ratio. A DSCR cash-out, by contrast, qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Clearing 1.00 on coverage is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses all sit outside the ratio. A rental that barely clears coverage can still lose money once those costs land.

Which Route Fits Which Investor

For an investor who holds title personally, owns a rental with a manageable first mortgage, and needs a modest sum, the equity line is often the cleaner choice. It leaves the first mortgage untouched. It suits a project like a roof, a unit renovation, or a down payment on the next rental.

The DSCR path tends to work better in four situations:

• The property sits in an LLC.
• You need more than the $500,000 line cap.
• Your personal debt-to-income is tight.
• The rent covers the payment on its own.

NerdWallet also points investors to a DSCR second mortgage as an alternative that is reviewed on rental income instead of personal income.

This is a genuine toss-up for some landlords. A line keeps a low-cost first mortgage in place, and a cash-out replaces it. If your first loan is well priced, the line may win even though its own pricing floats. If your first loan is not, the cash-out gives you one clean payment and a fixed structure. The 30-year fixed is the spine of the DSCR product, and some select lenders offer 40-year terms, interest-only periods, or ARM structures. Lendmire’s piece Can I Take a Home Equity Loan Out on One of My Rental Properties? compares these paths in more detail.

A larger down payment or more equity can lower your monthly payment and lift your DSCR. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.

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.

Next Steps

If you are considering an equity line on a rental and want to see how the numbers work, Lendmire can help you compare your options based on the property, the equity available, your credit profile, combined leverage, and your goals. Call 828-256-2183 or request a quote. The calculator on this page is an illustrative estimate only, and every file is reviewed individually.

For current guidelines and terms, see Lendmire’s investment-property HELOC programs page.

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: Home equity loans on investment properties

2. Consumer Financial Protection Bureau: What is a second mortgage loan or junior lien?

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