The Quick Read: The program Lendmire arranges through its wholesale network runs a 5-year interest-only draw, not a 10-year one, so the 10-year label in the search does not match this structure. The line is a variable-rate credit line on a rental, qualified on the rent instead of the owner’s personal income, subject to lender guidelines. The better question is what happens at the end of the draw and whether the line fits your hold plan.
- 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 the file at a minimum 1.10x coverage, tested on the entire credit limit.
- The draw is 5 years interest-only, followed by a 25-year fully amortizing repayment period, with a 30-year maturity.
- Leverage tops out at 70% CLTV on a second lien and 75% LTV on a first lien, through select programs and subject to underwriting.
- Your lien stack, credit, property type and exit plan decide which program fits, not a draw-length label. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Why Does the 10-Year Draw Get Searched So Often?
Ten years sounds like a long runway, so investors search for it. A longer interest-only window means a lower required payment for longer. That helps cash flow on a rental you plan to hold.
Here is the catch. A draw length is only one term on a note. It tells you nothing about how the line is tested, what it costs to keep, or what the payment looks like when the draw ends. Two lines with the same draw can behave very differently.
This program does not run a 10-year draw. Its draw is 5 years of interest-only payments on the drawn balance. A repayment period of 25 years follows, and the loan matures at 30 years. Lendmire is a mortgage broker, not a lender. It places these files with a wholesale lender in its network, and each file is underwritten individually.
If your goal is a longer interest-only runway on a lump sum, that is a different product. A closed-end interest-only DSCR loan is a term loan, not a revolving line.
Key Terms Defined
Draw period: On this program, the first 5 years, when you pay interest only on the balance you have drawn.
Repayment period: On this program, the 25 years after the draw ends, when the balance amortizes with principal and interest.
DSCR: The rental’s monthly rent divided by the qualifying payment. The minimum on this line is 1.10x.
CLTV: Combined loan-to-value on a second lien. It is the first mortgage balance plus the new line, divided by the property’s value.
LTV: Loan-to-value on a first lien, where the line is the only loan on the property.
Stress payment: A fully amortizing payment on the entire credit limit at a higher test rate. It is used only to qualify the file. It is not what you pay.
Seasoning: The time rules on a purchase, a refinance and your ownership.
How Does a DSCR HELOC Work From Start to Finish?
A DSCR HELOC is a revolving line secured by a rental you keep. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The lender does not run tax returns, W-2s, pay stubs or a debt-to-income ratio. The rent, the lease, the credit report and the valuation are all documented.
Across the wholesale network, the sequence on a file runs like this.
1. Confirm the lien position. The line sits behind a first mortgage you keep, or it is the only lien on a rental you own free and clear. It is never a third lien. It is never closed together with a purchase. It is never offered on your own home or a second home.
2. Set the vesting. The owner’s LLC can hold title on an investment property. The members sign as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. The borrowers on the line do not need to match the borrowers on the first mortgage.
3. Document the rent. Rent is the lesser of the appraiser’s Form 1007 market rent or the lease. A lease in place is required. A lease above market counts only with three months of receipts. A two-to-four-unit property can have at most one vacant unit.
4. Run the coverage test. The lender divides gross monthly rent by a stress payment on the entire credit limit. Minimum coverage is 1.10x. Whether the first-mortgage payment joins that test on a second lien is the lender’s call. Its own calculation governs.
5. Order the valuation. Lines to $400,000 use an automated valuation with a property inspection report, or a full interior appraisal. Larger lines take a full interior appraisal. Appraisal waivers are not accepted.
6. Fund the opening draw. At least 80% of the line, and never less than $50,000, is drawn at closing. Later draws are at least $5,000 each.
7. Run the draw, then repay. You pay interest on what you have drawn for 5 years. Then the draw closes and the balance amortizes over 25 years.
What Does the Interest-Only Draw Cost You Over Time?
It costs you equity-building time. During the draw, the payment covers interest only. The balance stays flat unless you pay it down yourself.
The FTC’s guidance on home equity lines notes that these lines usually carry variable pricing. It also notes that you may owe only interest during the draw. The same page warns that the lender can foreclose if you do not repay as agreed. This program’s pricing is variable as well. The pricing terms come with the lender’s disclosures, and nothing here quotes them.
Think about the lifecycle in three phases:
- Years 1 to 5: the required payment is interest only on the drawn balance. Cash flow is at its widest here.
- The turn: the draw closes. The remaining balance starts to amortize over the 25-year repayment period.
- Years 6 to 30: the payment resets to include principal. The size depends on the balance you carry and the pricing at that point.
The CFPB’s explainer on home equity lines says payments are often significantly higher in repayment, and that some plans can require the whole balance when repayment begins. This program amortizes over 25 years instead of ending in a lump sum, but the step-up is real. Treat the end of the draw as a known date. Do not treat it as a surprise.
Run the plan before you draw. Say a rental clears roughly 1.4x on the stress test today. Rents move, and the payment on a flat balance does not fall. If the property clears 1.10x only barely, a modest rent drop could erase your cushion by the time the draw ends.
What Should You Compare Instead of Draw Length?
The best program for your situation depends on your lien stack, credit, property and plan. A single label cannot rank programs. A broker that shops several wholesale lenders can match your file to the guidelines that fit it. These are the criteria that separate lines in practice.
| Criterion | Why it matters | Question to ask |
|---|---|---|
| Lien position | Sets which leverage grid applies | Is this a second lien or a first lien? |
| Coverage test | A test on the full limit can be tighter than your draw | Is DSCR run on the entire limit? |
| Vesting | Decides if the LLC can stay on title | Can an LLC hold title? |
| Valuation path | Changes cost and file friction | Is it an automated valuation or a full appraisal? |
| Draw rules | Affects how much you must take at closing | What is the opening draw minimum? |
| Property type | Some types are excluded | Is my property type eligible? |
Draw length does not appear in this table on purpose. It matters, but only after the rows above clear. A long interest-only window on a line that your property cannot qualify for is no help.
What Are the Leverage Limits?
On this program, a second lien reaches up to 70% CLTV at a 720 credit score or better, on lines up to $500,000. Below 720 there is no second-lien cell. That is the ceiling, not an offer. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
A first lien on a rental with no mortgage reaches higher, subject to underwriting. The table shows the first-lien grid by credit tier.
| Credit score | First lien, lines to $500,000 | First lien, lines above $500,000 |
|---|---|---|
| 740 or better | Up to 75% LTV | Up to 65% LTV |
| 720 to 739 | Up to 70% LTV | Up to 65% LTV |
| 700 to 719 | Up to 70% LTV | Not offered |
First-lien lines run to $1,000,000. The 65% ceiling applies to any first-lien line above $500,000. The first-lien floor is a 700 credit score. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Credit also carries mortgage-history rules. The program looks for no 30-day mortgage late in the last 12 months. It looks for 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu. No reserves and no cash to close are required, subject to underwriting.
A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower. These overlays are the quiet reason a leverage figure on one file comes in below the grid on another.
A worked picture helps. Take a rental valued at $400,000 with a first mortgage you plan to keep. At 70% CLTV, the first mortgage plus the new line together cannot exceed 70% of value. The larger your first mortgage, the less room remains for the line. The first balance eats the CLTV room before the new line does.
What Is the Line Tested On: the Draw or the Limit?
The line is tested on the entire credit limit. Your drawn balance does not set the test.
Many investors expect the opposite. They plan to draw the minimum and assume the coverage test follows the small balance. Under this program the opening draw is at least 80% of the line, and the qualifying payment runs on the full limit regardless. A larger limit means a tighter test, even if you never draw it all.
Picture an investor who wants a large line for flexibility but intends to draw modestly later. The coverage test still sizes against the full limit. Requesting a smaller limit that matches the real plan can clear coverage where a larger one would not.
Lender guidelines govern the arithmetic. The qualifying figures here are illustrative, and the lender’s own calculation controls.
Who Fits a 5-Year Interest-Only Draw, and Who Does Not?
A short-to-medium hold with a clear exit fits best. A line works well when the money has a defined job and a defined payback.
| Investor goal | Fit | Why |
|---|---|---|
| Fund a renovation, then refinance or sell | Strong | The draw covers the work, and the exit lands inside the window |
| Down payment on the next rental | Strong | Equity moves into a new asset while the first mortgage stays untouched |
| Hold the debt for decades with no paydown plan | Weak | The balance does not fall during the draw, and the step-up lands later |
| Borrower under a 700 credit score | Not eligible | The program has no cell below its floor |
| Property in an excluded category | Not eligible | See the eligibility list below |
The honest read: a rent-qualified line suits investors who treat it as a bridge, not a permanent fixture. The strongest files plan to pay principal during the draw. They also keep rent coverage well above the 1.10x floor.
Where Does a DSCR HELOC Fit Against a Cash-Out Refinance?
A cash-out refinance replaces the first mortgage. A DSCR HELOC leaves it in place. That is the main reason investors choose the line when the existing first mortgage is worth keeping.
The tradeoff is structure. A cash-out gives you a lump sum and one loan. The line gives you a revolving balance and a second payment stream, with a lien behind the first. Lendmire’s piece DSCR HELOC vs. DSCR Cash-Out Refinance With a 10-Year Interest-Only Draw Period lays out that comparison in more detail.
When the existing first mortgage is itself a DSCR loan, its documents need to allow a second lien. Check that before you apply. A first mortgage that bars subordinate financing ends the line before it starts.
Which Properties and Borrowers Fall Outside the Program?
Eligibility is the most common place a file stalls. Spot the exclusions before you spend time on an application.
Eligible property types include single-family homes, PUDs, townhomes, two-to-four-unit properties, warrantable and non-warrantable condominiums, and lots up to 10 acres. The leverage grid above governs every property type.
Not eligible on this program:
- Rural-designated property
- Row homes and condotels
- Commercial, agricultural and mixed-use property
- Leaseholds and land trusts
- Age-restricted communities and hobby farms
- Modular and log homes, and land contracts
- A property listed for sale in the prior 2 months
- A property with a solar lien
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).
Borrowers must be US citizens, permanent residents, or non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible. Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Those states are Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington.
What Breaks These Files in Practice?
Operators see the same handful of problems.
The lease does not match the rent. Rent is the lesser of market rent and the lease. A lease below market pulls coverage down. A lease above market needs three months of receipts. Pull the receipts before you submit.
Coverage runs on the limit, not the draw. Investors size the line to a dream number and then fail the test. Size to the real need.
The first mortgage eats the CLTV room. A large existing balance leaves little room under 70% CLTV. Run the combined number first.
A vacant unit count. A two-to-four-unit property can carry at most 1 vacant unit. Two empty units end the file.
An excluded property type. A condotel or row home is out regardless of strong rent.
Vesting paperwork. An LLC on title needs the guarantor signatures and the non-borrowing owner acknowledgment in order. Missing signatures create delays that have nothing to do with credit.
Tax treatment varies; consult a qualified professional before relying on any deduction.
What Does a Variable Rate Mean for Your Plan?
It means your payment can move in both phases, and you cannot lock it. Build a cushion into coverage so a pricing change does not push the property below break-even.
This program does not end in a balloon. It amortizes over 25 years. Still, read the note for the repayment terms before you sign.
Interest-only is a feature that is hard to offer inside the standard qualified-mortgage box, and real estate investors are a core audience for non-QM lending, according to Scotsman Guide’s coverage of non-QM lending. Business-purpose investor loans are reviewed differently from a standard owner-occupied mortgage. That is part of why rent-based lines exist.
How Do You Plan the Exit?
Plan the exit before the first draw. The best files have a date and a method.
1. Mark the end of the draw on a calendar as a fixed event, not a vague future.
2. Decide your payoff path: pay principal during the draw, refinance the stack, or sell the property.
3. Recheck coverage and credit about 24 months before the draw ends. A score that slips below the floor narrows your refinance options.
4. Keep lease and rent records current. A refinance will test rent again.
5. Compare the step-up payment against current rent. If coverage is thin, act before the draw closes, not after.
What Should You Ask a Broker?
Ask what the program really offers, not what the label says. These questions separate a real fit from a marketing fit.
- Is this a second lien or a first lien, and which leverage grid applies to my credit score?
- Is coverage tested on the full limit, and how does the lender treat my first mortgage in that test?
- Can my LLC hold title, and which signatures does the lender need?
- Is my property type eligible, and does an overlay lower my ceiling?
- What is the opening draw minimum, and what is the draw period on the note?
- What does the repayment period look like when the draw ends?
Frequently Asked Questions
Does Lendmire’s network offer a DSCR HELOC with a 10-year draw?
No. The program Lendmire arranges runs a 5-year interest-only draw, then a 25-year repayment period, with a 30-year maturity. Investors who want a longer interest-only window on a lump sum should look at closed-end interest-only DSCR loans, which are a different product.
What credit score and leverage does the program typically require?
On most files, a second lien needs a 720 score and reaches up to 70% CLTV on lines to $500,000. A first lien needs at least a 700 and reaches up to 75% LTV at 740 or better on lines to $500,000. First-lien lines above $500,000 are capped at 65% LTV. All of it is subject to underwriting and overlays.
Is a personal income file required?
No traditional personal-income documentation, W-2s, pay stubs or debt-to-income ratio are used. The file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The lender still documents the lease, the credit report and the valuation.
How much of the line do I have to draw at closing?
At least 80% of the line, and never less than $50,000. Later draws are at least $5,000 each. Coverage is still tested on the entire limit, so size the line to your plan.
Can I keep my existing first mortgage?
Yes, on a second-lien line. The line sits behind the first mortgage you keep. If the first mortgage is a DSCR loan, its documents must allow a second lien.
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. Lendmire is a mortgage broker and arranges these files through select wholesale lenders. It is not a commitment to lend. Your own lien stack and exit date will decide whether a 5-year draw is enough, and that is the number to settle first.
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.
Investors who want the broader program framework can review how DSCR loans work.
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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. FTC – Home equity loans and home equity lines of credit
2. CFPB’s explainer on home equity lines
3. Scotsman Guide’s coverage of non-QM lending
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 an Airbnb Held in an LLC · Best DSCR HELOC Program for Rental Property Renovations · Best DSCR HELOC Program With the Longest Possible Draw Period
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.