The Quick Read: A home equity line of credit can supply the cash for a short-term rental down payment, but it never buys the property, so a host ends up with two separate loans reviewed by two different lenders. The line is underwritten to you personally, on credit, equity, and debt-to-income. The purchase loan is reviewed mostly on whether the property’s rent covers its payment. Neither approval guarantees the other.
- An investment-property line in Lendmire’s wholesale network tops out at 70% combined loan-to-value (CLTV), with a 700 minimum credit score and a $500,000 maximum line.
- A line on your primary residence can reach higher CLTV, but the 90% ceiling exists only at a 720-or-better credit profile.
- The DSCR purchase loan still needs its own down payment tier, reserves, and rental coverage. Borrowed funds can cover the first but often not the second.
- Most files should draw the line before going under contract, because you cannot open a line on the property you are about to buy.
Two Loans, Two Tests
The setup is simple to say and easy to get wrong. You borrow against equity in a property you already own. You park that cash in your account. Then you use it as the down payment on a DSCR loan (a loan reviewed on the property’s rent compared with its payment). For the full picture of how those purchase loans work, see Lendmire’s complete DSCR loans guide.
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 line asks whether you are a good borrower with enough equity. The purchase loan asks whether the new rental can carry itself. A host with strong rental coverage and thin equity stalls at the first test. A host with plenty of equity and a weak property stalls at the second.
How Much Down Payment the Purchase Loan Needs
Across the network, DSCR purchases on long-term rentals typically land at 75% to 80% loan-to-value (LTV), which means 20% to 25% down. Select programs reach 85% LTV, or 15% down, usually with a score around 700 or higher.
Short-term rentals sit lower. An STR purchase typically tops out at 75% LTV, so plan on at least 25% down. Expect a 640 or better credit score and about 12 months of hosting history, and an STR purchase carries a 1.00 coverage floor. Cash-out on STR collateral runs around 70% LTV, while cash-out on a standard long-term rental reaches about 75%.
Coverage is the second test. A 1.00 ratio is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger coverage opens better pricing and leverage.
Here is how the stack looks on a modeled STR purchase at the top STR leverage tier:
| Piece | What it covers | Can the HELOC fund it? |
|---|---|---|
| Down payment | 25% of price at 75% LTV | Often, if the purchase lender allows it |
| Closing costs | Fees and prepaid items | Often |
| Reserves | Commonly about 6 months of PITIA | Often not |
| Cushion | Repairs, vacancy, furnishing | Your call, with the payment in mind |
PITIA stands for principal, interest, taxes, insurance, and association dues. It is the full monthly obligation on the purchase loan. Reserves vary by lender, leverage, loan size, and transaction type. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, while larger loans typically step up to about 9 months.
How Much Line Your Equity Supports
The line is sized on equity, not rent. Take the property’s value, multiply by the CLTV cap, and subtract every lien already on it. What remains is the maximum line, before any dollar cap. The CFPB’s HELOC booklet walks through the same method with a 75% illustration, and that figure is an example, not a program limit.
On an investment property in Lendmire’s network, the cap is 70% CLTV, and credit above 700 buys eligibility rather than extra leverage. Lines run from $25,000 to $500,000 on investment collateral. There is no tier above that.
This is where recent buyers get stuck. A rental bought with 20% to 25% down leaves a first mortgage at 75% to 80% of value. That already sits above a 70% ceiling, so the line has no room until the balance falls or the value rises. Equity on a primary residence tends to go further. Primary-residence lines can reach 90% CLTV, but only at a 720-or-better credit profile. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Because an investment line caps at $500,000, it normally runs on an automated valuation instead of a full appraisal. A full appraisal is required only above that size, and a borrower can request one anyway. Market sources note that some lenders order multiple appraisals on rentals, which NerdWallet also flags alongside a smaller lender pool and higher costs on rental-secured lines.
Where the Line Sits: Your Home or Your Rental
The strategy question is which property holds the collateral. Each choice trades leverage for risk.
| Factor | Line on your primary home | Line on an existing rental |
|---|---|---|
| Ceiling | Up to 90% CLTV at 720+ | 70% CLTV, 700 minimum |
| Maximum line | Above $500,000 possible | $500,000 total |
| What is at risk | Your residence | The rental itself |
| Availability | Broader | Narrower lender pool |
Using the residence puts your home behind an investment bet. Using the rental keeps the home out of it but gives you a lower ceiling and fewer lenders. Neither is automatically wiser; it depends on how much equity each property has and how much risk you want attached to your home.
What the Line Actually Looks Like
A few mechanics change the real cost of borrowing. In the network, an investment line is a standalone first- or second-lien line with a 5-year interest-only draw followed by a 25-year repayment. That structure is specific to this line. NerdWallet describes the broader market norm as a 10-year draw and repayment of up to 20 years, so do not carry those numbers over.
Three details matter for hosts:
- At least 75% of the line is drawn at closing. Size the line to the need, because you start paying on most of it right away.
- Pricing floats through both the draw and repayment periods and never converts to fixed. The payment can rise, and it steps up again when principal begins.
- The lender reviews your file on the interest-only payment calculated on the maximum draw, with a 50% maximum debt-to-income ratio. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
Those payments also count against you when the purchase lender reviews your debts, and the line shows on your credit report as a liability.
What Lenders Do With Short-Term Rental Income
On the line itself, rent barely matters. The line is underwritten to you personally: credit, debt-to-income, and equity. A host with a few months of strong bookings and a thin credit file has less to show than a host with a clean score and equity.
Rent matters on the purchase loan. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. For STRs, programs often look at trailing platform payouts, a third-party projection, or an appraiser’s market-rent schedule. The exact path depends on the program, and about 12 months of hosting history is a common expectation.
Eligibility Checks Hosts Miss
Several structural rules decide eligibility before any math happens.
Title. Investment lines in the network must be held by an individual borrower or a revocable living trust. LLCs, corporations, partnerships, and irrevocable or land trusts cannot hold title. Many hosts hold rentals in an LLC, so this is the sharpest difference from a DSCR loan. A property already deeded to an LLC needs a vesting change or a DSCR cash-out refinance instead, subject to program eligibility.
Property type. Eligible types include single-family, 2-4 units, townhomes, PUDs, and condominiums, including non-warrantable ones. Manufactured homes, condotels, log homes, commercial, and mixed-use are not eligible. On the DSCR side, manufactured homes, log homes, and barndominiums are not offered either.
Exposure. A borrower can hold at most three lines, and an owner of more than 15 financed properties is not eligible.
Availability. The line is offered only in the states where Lendmire provides full-service mortgage lending. That footprint is narrower than the DSCR footprint of 41 markets, including Washington, D.C.
Step by Step
1. Check the equity math. Value times 70% for a rental, minus all liens, tells you the ceiling.
2. Ask the purchase lender first. Some DSCR programs accept a documented line drawn against another property, and others cap how much of the down payment can be borrowed.
3. Open the line. Do this before you go under contract.
4. Draw and season the cash. Keep the closing documents and bank statements showing the funds landing.
5. Close the purchase. The DSCR loan is reviewed on rent against its own payment.
6. Hold the line. The CFPB’s HELOC brochure says lenders can generally freeze or reduce a line when the home’s value falls or the borrower’s finances worsen. An undrawn line is not committed money.
For the DSCR leverage tiers on STR purchases versus cash-outs, see the short-term rental DSCR down payment rules.
The Tradeoffs and What Can Go Wrong
A common trap is mistaking coverage for cash flow. DSCR compares rent to PITIA only. Clearing 1.00 does not mean the property makes money, because repairs, vacancy, management, utilities, and capital expenses sit outside the ratio. The HELOC payment sits outside it too, and it comes out of your pocket. STR income is also seasonal, so a slow quarter can squeeze a host who carries both payments.
Other risks stack up:
- Payment step-ups. The line floats and later begins amortizing, so test your coverage against the higher payment.
- Near-total borrowing. If the line funds the entire down payment, you hold almost no equity of your own in the new property.
- A freeze. A line can be reduced exactly when values soften, which is when you may need it most.
- Permit or rules changes. If a local STR rule changes, rent can fall while both debts remain.
Reasoning it through, a larger down payment can lift DSCR and soften the monthly obligation. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests, enough equity and enough rental coverage.
Who It Fits and Who It Doesn’t
| Situation | HELOC route | DSCR cash-out route |
|---|---|---|
| Owner holds title personally | Possible | Possible |
| Property deeded to an LLC | Not eligible as titled | Possible, subject to program terms |
| Low first mortgage, high equity | Keeps existing loan in place | Replaces the first mortgage |
| Property type is a condotel | Not eligible | Program-dependent |
| Equity is mostly in an owned rental | 70% CLTV ceiling | Around 70% LTV on STR collateral |
The HELOC route tends to fit hosts who hold title personally, have a strong credit profile, and have a low first mortgage worth keeping. A DSCR cash-out refinance tends to fit hosts with LLC-held properties or equity-rich rentals where the property’s income carries the file. Both are education points, not recommendations, and each file is underwritten individually.
Key Terms Defined
HELOC: A revolving line of credit secured by a property you already own, reviewed on your credit and equity.
CLTV: Combined loan-to-value, which adds every loan on the property and divides by its value.
DSCR: Debt service coverage ratio, the property’s monthly rent divided by its PITIA.
PITIA: Principal, interest, taxes, insurance, and association dues on the purchase loan.
Reserves: Liquid funds a lender wants you to hold after closing.
Seasoning: The waiting period or track record a lender wants before it counts something.
If You Want to See the Numbers
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. As a broker, it arranges financing through select lenders in its wholesale network and is never the lender itself.
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. This article is general education, not legal or tax advice, so consult a qualified attorney or CPA about your own situation.
Frequently Asked Questions
Can I open a HELOC on the short-term rental I am about to buy?
No. A line needs an existing property with equity, and a newly purchased rental is usually at its highest leverage. Hosts typically open the line on a home or rental they already own, draw the funds, and then go under contract.
Does my STR income help me qualify for the line?
Mostly no. The line is underwritten to you personally on credit, debt-to-income, and equity. The rent matters to the DSCR purchase loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
Can my LLC hold title on the property securing the line?
Not in the network’s investment line. Title must sit with an individual or a revocable living trust. A property already in an LLC would need a vesting change or a DSCR cash-out refinance instead, subject to program eligibility.
Does the purchase lender accept a borrowed down payment?
It depends on the program. Some accept a documented line drawn against another property, and some limit how much of the down payment can be borrowed money. Ask before you draw. Also confirm whether the funds can count toward reserves, which they often cannot.
How much can an investment-property line be?
On an investment property, the line runs from $25,000 up to $500,000 total at 70% CLTV, with a 700 minimum credit score. There is no higher investment tier. Lines above $500,000 exist only on primary residences.
Investors focused on short-term rentals can review DSCR loans for Airbnb and short-term rentals.
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
2. NerdWallet – Can You Get a HELOC on an Investment Property?
3. CFPB – What You Should Know About HELOCs
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Investment Property HELOCs for Space Coast Landlords in Florida · Investment Property HELOC for North Carolina Rental Owners · Investment Property HELOCs for San Diego Landlords Tapping Rental Equity
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.