The Quick Read: The program that fits your rental will not carry a 20-year draw period. Across Lendmire’s wholesale network, the line runs a 5-year interest-only draw, then a 25-year repayment period, for a 30-year maturity at a variable rate. It qualifies primarily on property-level rental income covering the payment at 1.10x or better, subject to underwriting and lender guidelines.
- The line is a standalone second lien behind the first mortgage you keep, or a standalone first lien on a rental with no mortgage.
- Rent qualifies it. It does not require traditional personal-income documentation, W-2s or a personal income calculation, subject to lender guidelines.
- The coverage test runs on the entire credit limit, drawn or not.
- At least 80% of the line is drawn at closing. Later draws are at least $5,000.
- The best program for your situation depends on the property, your credit profile and how much leverage you need.
Some people search for a 20-year draw period. This article explains why that is not how this product is built. It also shows what you can get and how to judge which program fits. If you want the wider picture of rent-qualified financing first, start with Lendmire’s complete DSCR loans guide.
What Is a DSCR HELOC on a Rental Property?
A DSCR HELOC is a revolving line of credit secured by a rental you already own. DSCR stands for debt service coverage ratio. It means the rent is compared with the payment, instead of your paycheck being compared with your debts.
The structure comes first. The line is written as one of two things:
- A standalone second lien. It sits behind the first mortgage you keep. You do not refinance that mortgage.
- A standalone first lien. It sits on a rental that has no mortgage.
It is never closed together with a purchase. It is never a third lien. It is never a line on your own home or a second home. The program covers one-to-four-unit non-owner-occupied rentals. Your LLC can hold title, subject to program terms, with the members signing as guarantors.
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.
Borrowers must be U.S. citizens, permanent residents, or non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible on this program.
Why Is There No 20-Year Draw Period?
Because this line is built as 5 years of interest-only drawing, then 25 years of repayment. That adds up to a 30-year maturity. A 20-year draw is not part of the program, and no file in the network is structured that way.
Here is what the five-year draw means in practice:
- You borrow during the draw period, and you pay interest only on the drawn balance.
- When year five ends, borrowing stops.
- The balance then amortizes over 25 years, so principal starts to come out of every payment.
A longer draw window sounds attractive. It is not the same as cheaper money. It would only delay the day principal starts to be paid down. The debt would still be there, and the payment would still step up later.
There is also a late-draw trap. Say you wait until year four to take your first follow-on draw. You then have about a year to use the line. Plan the uses early.
If your real goal is a long runway before repayment, the useful question is different. Ask how the repayment payment looks against your rent. The step-up is where the structure is tested, not the draw.
How Does Underwriting Treat the Line, Step by Step?
The lender checks whether the rent covers a stress payment on the whole line. It then checks credit, value, title and exposure. Here is the order a file usually moves through, subject to underwriting.
1. Eligibility of the property and timing. A rental bought or refinanced inside the last 6 months is not eligible (that clock runs from the last note date to the new note date), and the owner must have held title for 6 months (settlement date to note date).
2. A lease in place. A lease is required. On a two-to-four-unit property, at most 1 unit may be vacant.
3. The rent figure. The lender uses the lesser of the appraiser’s market rent (Form 1007) or the lease. A lease above market can count with three months of receipts.
4. The stress payment. The lender sizes a fully amortizing payment on the entire credit limit. It uses a cushion above the starting rate. You never see that cushion as a quote. The rate and the pricing terms come with the lender’s disclosures.
5. The coverage test. Gross monthly rent divided by that qualifying payment must reach 1.10x. On a second lien, the lender’s own coverage calculation governs how the first mortgage factors in.
6. Credit. The minimum score is 720 on a second lien and 700 on a first lien. The lender’s own credit report sets the tier. The program also looks for no 30-day mortgage late in the last 12 months. It wants 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu.
7. Valuation and title. Covered in the leverage section below.
8. Exposure. A borrower can hold at most 5 loans or $2,500,000 with the program.
No reserves and no cash to close are required, subject to underwriting.
A quick picture of the coverage test. Say the rent clears the stress payment at 1.15x. That meets the 1.10x floor. Say it comes in at 1.05x. That falls short. Options a lender would review include a smaller line, since the test runs on the full limit, or a different program. Neither outcome is a promise.
How Much Can You Borrow on a Rental?
Leverage depends on lien position and credit score. The figures below are ceilings, not offers, and they apply to investment property through select programs, subject to underwriting.
| Lien position | Credit score | Maximum | Line size |
|---|---|---|---|
| Second lien | 720 or better | 70% CLTV | $50,000–$500,000 |
| First lien | 740 or better | 75% LTV | Up to $500,000 |
| First lien | 700–739 | 70% LTV | Up to $500,000 |
| First lien | 720 or better | 65% LTV | Above $500,000, to $1,000,000 |
CLTV means combined loan-to-value. It adds the first mortgage balance to the new line, then divides by value. First-lien lines are measured as LTV, because there is only one loan. Below a 720 score there is no second-lien option.
Here is the second-lien math in percentages. Say your first mortgage sits at 55% of value and your score is 740. A line can take you up to 70% combined, so about 15 points of value is available. The lender’s figures govern.
Valuation depends on line size:
- Lines up to $400,000. An automated valuation with a confidence score of 85 or better, plus a property inspection report. A full interior appraisal also works.
- Lines above $400,000. A full interior appraisal on Form 1004, 1073 or 1025.
Appraisal waivers are not accepted. Title follows the same split. A first lien and second liens above $400,000 take a full title policy. Smaller second liens use an owner-and-encumbrance report.
What Happens When the Draw Ends?
Borrowing stops and the payment steps up. The CFPB’s explanation of home equity lines describes the general pattern. You can borrow up to your limit during the draw period. After it ends, you repay.
The same CFPB page says these lines usually carry variable rates, so payments can change as the rate moves. The agency’s HELOC booklet adds that payments may change even if you draw no more. That matches this program. The rate stays variable through both phases and never converts to fixed.
Here is the lifecycle of this line:
| Phase | Years | What you pay | What changes |
|---|---|---|---|
| Draw period | 1–5 | Interest only, on the drawn balance | You can take draws of $5,000 or more |
| Repayment period | 6–30 | Fully amortizing | Borrowing stops; principal is paid down |
The step-up is the part first-time line users underestimate. Interest-only payments cover the cost of borrowing and nothing else. Once amortization starts, the payment includes principal. Plan for that payment, not the draw-period one. Ask a simple question now. Will rent still carry the property comfortably at repayment, even if the variable rate has moved?
Investors using a line to fund rehabs and reposition a property often model both phases before drawing.
What Makes a Program the Best One for You?
The best program for your situation depends on the property, the equity, the credit profile and the plan for the money. No single lender wins every file. Lendmire is a mortgage broker, not a lender. It works with select wholesale DSCR HELOC lenders in its network and matches the scenario to the program. The lenders that write a given file depend on the facts.
Use these criteria to compare any program you are offered.
| Criterion | Why it matters | What to ask |
|---|---|---|
| Draw and repayment structure | Sets when the payment steps up | How long is each phase? |
| Coverage test | Decides how much line the rent supports | Is it tested on the full limit? |
| Leverage by lien | Sets how much equity you can reach | What is the CLTV or LTV at my score? |
| Draw rules | Limits flexibility | What is required at closing and per later draw? |
| Entity and title | Affects ownership structure | Can my LLC hold title? |
| Valuation path | Affects rehab value and cost | Automated valuation or full appraisal? |
The draw rules on this program are firm. At least 80% of the line, and never less than $50,000, is drawn at closing. Later draws are at least $5,000. That makes the line less flexible than a classic revolving line. Pick the line size you will actually use.
Where Do the Rules Break?
The general rule is that rent covers the stress payment and you reach equity. These edge cases change the answer.
A large undrawn balance still counts. The coverage test runs on the entire credit limit. A bigger line needs more rent, even if you draw only part of it.
A rehab may not show up in the valuation. An automated valuation may not capture post-rehab value. A recently rehabbed rental can need a full interior appraisal instead. An improvement may support a higher appraised value, depending on comps and underwriter review.
A recent purchase is out. Because of the seasoning rule above, a brand-new rental cannot take this line. A DSCR cash-out refinance is the usual alternative, and its seasoning rules vary by lender. Lendmire’s page on the DSCR cash-out refinance covers that route.
Some property is out. Not eligible on this lane:
- rural-designated property
- row homes
- condotels
- commercial or agricultural property
- leaseholds
- land trusts
- age-restricted communities
- hobby farms
- modular and log homes
- land contracts
- mixed-use property
- a property listed for sale in the prior 2 months
- a property with a solar lien
Single-family, PUD, townhome, two-to-four-unit and condominium properties are eligible property types. On a condo, the monthly obligation counts HOA dues.
Some markets cut the ceiling. A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower.
Refinancing out requires payoff. If you later refinance the property, the line is paid off at that refinance.
Geography. The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. The states are Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington.
One more point. Clearing 1.10x does not mean the property cash flows. Vacancy, repairs and management sit outside the ratio.
Who Fits, and What Does the Decision Look Like?
This line fits a landlord who has built equity, wants to reach it without touching the first mortgage, and does not want the personal income file opened. Think of an investor who holds a rental with a mortgage they are happy with. The rent covers the stress payment with room above 1.10x, and the score clears 720. That investor can compare a second-lien line against other options.
Common uses are rehab funds, a down payment on the next deal, or a bridge ahead of a cash-out refinance. Each use has a different payoff plan. Decide the exit before you draw.
A few cases lean the other way:
- You want to replace the first mortgage entirely. A cash-out refinance does that. This line does not.
- You are buying and need financing at closing. This line is never closed with a purchase.
- Your score is below 700. No tier on this program fits.
- You need a draw period much longer than five years. This program does not offer one.
Tax treatment can depend on how the funds are used and how the property is held. Borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction. NerdWallet’s overview of HELOCs on investment property is a useful general read.
For a portfolio owner weighing several rentals at once, the exposure cap of 5 loans or $2,500,000 matters.
Key Terms Defined
Draw period: On this program, the first 5 years, when you can borrow against the line and pay interest only on what you have drawn.
Repayment period: On this program, the 25 years after the draw ends, when borrowing stops and the balance amortizes.
DSCR: Debt service coverage ratio. Gross monthly rent divided by the qualifying payment. The program floor is 1.10x.
CLTV: Combined loan-to-value. The first mortgage balance plus the new line, divided by the property’s value.
Seasoning: The waiting period a lender requires after you buy or refinance before the property is eligible.
Lien position: Where the loan stands in line if the property is sold to pay debts. A second lien sits behind the first mortgage. A first lien sits alone.
Frequently Asked Questions
Can a DSCR HELOC have a 20-year draw period?
Not on this program. The draw is 5 years of interest-only borrowing, followed by a 25-year repayment period and a 30-year maturity. If you need a different structure, a broker can tell you what the network offers, but this program’s terms are fixed.
Does the undrawn part of the line count in the coverage test?
Yes. The stress payment is sized on the entire credit limit, drawn or not. A large line needs more rent behind it than a small one. That is why choosing the right line size matters.
Can my LLC own the property?
Yes, subject to program terms. Vesting in the owner’s LLC is allowed on investment property. The members sign as guarantors. A title holder who is not a borrower signs an acknowledgment and the security instrument.
Is the rate fixed or variable?
Variable. It stays variable through both the draw and repayment phases. Your payments can change as the rate moves, even if you draw no more. The lender’s disclosures carry the pricing terms.
What credit score do I need?
The minimum is 720 on a second lien and 700 on a first lien. Higher tiers reach more leverage. Every figure is subject to underwriting.
Next Step
If you are considering a home equity line on a rental property and want to see how the numbers work, Lendmire can help you compare DSCR HELOC options based on the property, the rent, the equity available, credit profile, combined leverage, and your goals. You can reach the team at 828-256-2183. A five-year draw is short enough that the repayment plan should shape the decision from day one.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. CFPB’s explanation of home equity lines
2. CFPB – What you should know about home equity lines of credit (booklet)
3. NerdWallet’s overview of HELOCs on investment property
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best DSCR HELOC Program on a Second Investment Property for Growing Portfolios · Best DSCR HELOC Program for Rental Property Renovations · Best DSCR HELOC Program on an Airbnb Held in an LLC
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.