The Quick Read: A home equity line on the home you own can fund the down payment on your next property before the sale closes, as long as your equity leaves a cushion and you can carry every payment until the old home sells.
- The line sits on the home you are leaving, so that home is the collateral.
- Open the line before you list. Several lenders will not approve one on a listed home.
- Pricing on the lines in Lendmire’s network floats and never converts to fixed.
- If the new property is a rental, the purchase loan can qualify primarily on rental income, subject to lender guidelines. The line on your old home is still underwritten on your own income and debts.
- The real risk is the overlap: the old mortgage, the line, and the new property’s payment can all run at once.
Second Home or Replacement Home?
Decide which of two plans you mean, because the financing differs. Plan one: you keep both properties. The new one is a second home or a rental. Plan two: the new home replaces the old one, and the old home sells later.
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.
Most readers searching this phrase mean plan two with a timing gap. Investors usually mean plan one. They want to turn equity from a home they are leaving into the down payment on a rental.
If you are keeping the old home too, the decision is different. You are not paying off the line from a sale. You may repay it with a refinance later.
How the Strategy Works, Step by Step
The strategy runs in four moves. Open the line on your current home, draw toward the new purchase, sell the old home, and repay the line and the first mortgage from the sale proceeds at closing.
Here is the order in more detail:
1. Pick the collateral. The line is a second lien on the home you live in. If you stop paying, the lender’s remedy is foreclosure on that home. Opendoor’s explainer makes the same point about the primary residence.
2. Size the line. Lenders look at combined loan-to-value. That is your first mortgage plus the new line, divided by the home’s value. Equity left over after the draw is your safety margin.
3. Draw. A home equity line is an open-end credit line you can borrow against and repay repeatedly. The federal consumer-finance regulator’s HELOC guide describes a draw period that can run 10 years, followed by repayment.
4. Buy. The cash goes toward a down payment on a financed purchase, or toward the whole price if you have enough room.
5. Sell and repay. If you sell the home, you generally must pay the line off in full right away, according to the regulator’s HELOC booklet. The title company handles that from your proceeds.
One more point on timing. Some lenders want a home off the market for a stretch before they approve a line. That varies by lender, but it is why the order matters. Open the line first, list second.
How Underwriting Treats the Borrowed Down Payment
Two lenders look at your file, and each runs a different test. The line lender judges you and your old home. The purchase lender judges the new property and the source of your cash.
Test one: the line. A line on your own residence is an owner-occupied product. It is underwritten on your income, debts, and credit. Across the wholesale network Lendmire works with, the maximum debt-to-income ratio is 50%. It drops to 45% for credit profiles from 600 to 679, and anything above 45% needs a 680 or better. The lender reviews your file on the interest-only payment calculated on the maximum draw, not on what you plan to use.
Test two: the purchase. If the new property is a rental bought with a DSCR loan, the lender looks mainly at the property. DSCR means debt service coverage ratio. It compares monthly rent to the monthly housing payment: principal, interest, taxes, insurance, and any association dues, known as PITIA. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal income is not the main test.
Expect the purchase lender to ask where the down payment came from. Statements showing the draw landing in your account and moving to closing keep that simple.
Here is what that means in practice. The line’s payment is not in the DSCR math, because the line is secured by a different property. It is still very much in your budget. A DSCR above 1.00 only tells you that rent covers the new property’s PITIA. It says nothing about repairs, vacancy, management, or the line payment you are also making. Clearing 1.00 is not the same as positive cash flow.
What the Line Itself Looks Like on This Network
The lines available through Lendmire’s wholesale network are standalone lines, in first or second lien position, from $25,000 to $750,000 (Michigan’s floor is $10,000). On primary residences and second homes, one structure has a 3-year interest-only draw with a 17-year repayment.
Pricing floats through both the draw and the repayment period and never converts to fixed. Experian notes that repayment-period payments run well above draw-period payments, because principal begins to amortize. Budget for that step-up.
Three details matter most for this strategy:
- Most of the line is drawn at closing. At least 75% of the line is drawn when it closes. So size the line to what you will actually use. You pay interest on the drawn balance from day one, whether or not the new purchase is ready.
- Leverage depends on the property. On a primary residence, the ceiling reaches 90% combined loan-to-value, and only at a 720-or-better credit profile. On an investment property, the ceiling is 70% CLTV. Lines above $500,000 are for primary residences only. They cap at 75% CLTV and require a full appraisal.
- Listed homes can be ineligible. In six of the states where the network operates, a property that is listed for sale, or was listed within the past 60 days, is ineligible. One more reason to open the line before the sign goes up.
Availability is narrower than the DSCR side. Lendmire arranges home equity lines in 16 full-service states. Its DSCR investor loans cover 40 states plus Washington, D.C., which makes 41 markets in all.
Structures and Variations
You can fund the purchase several ways. The table compares them side by side.
| Option | How funds arrive | Biggest risk |
|---|---|---|
| HELOC on old home | Draw against equity | Three payments overlap |
| Bridge loan | Short-term loan on old home | Added cost, short runway |
| Home equity loan | One lump sum | Fixed amount, extra lien |
| Cash-out refinance | New first mortgage | Replaces your first loan |
| Sell first, then buy | Sale proceeds | Gap with no home of your own |
| Contingent offer | Closing waits on your sale | Sellers may pass on it |
Effective Agents compares bridge loans and HELOCs. It finds bridge loans suit short gaps and HELOCs suit longer selling timelines. It also warns about a three-obligation stack: the old mortgage, the new financing, and the bridge or line payment.
Two variations are worth knowing. The first uses the line for the full purchase price. That can strengthen your offer, because you avoid a purchase loan. It also puts all the risk on one floating-rate lien. The second uses the line only for the down payment and finances the rest. That keeps the line smaller and the purchase loan sized to the property’s rent.
If the new property will be a second home, a line on that home is also possible. The ceiling reaches 90% CLTV at a 720-or-better credit profile on a second home, up to $500,000. At a 640 profile, the ceiling is 75% CLTV. The minimum credit score on second homes is 640.
Where the General Rule Breaks
Equity-line strategies work in general terms. These edge cases break them.
- There is no DSCR HELOC hiding in the strategy. A line on your residence is underwritten on income and debts. DSCR is a purchase-loan test on the rental property. People mix them up because both are used in the same deal.
- Title matters. The line must be held by you as an individual or by a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on these lines. If your property is already deeded to an LLC, you need a vesting change or a DSCR cash-out instead. Many investors discover this too late.
- Lien order matters. Put the line on the home you are leaving, not on the property being financed. Stacking a second lien on the new rental complicates a DSCR purchase loan.
- Prepayment penalties can sting. DSCR loans often carry prepayment penalties that step down over several years. If you plan to buy with a DSCR loan and refinance soon to pay off the line, check the penalty schedule first.
- Lenders can limit or freeze the line. The regulator notes a lender may refuse further draws if the home’s value drops significantly. Access is not guaranteed if the sale drags.
- Property types matter. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not eligible for these lines. On the DSCR side, manufactured homes, log homes, and barndominiums are not offered through the network.
- Exposure caps apply. A borrower is limited to three lines, and an owner of more than 15 financed properties is not eligible.
- Some lenders will not fund this at all. Product rules vary. Ask whether the lender allows line proceeds toward a second home or investment property before you pay for an appraisal.
A Worked Example in Percentages
Run the numbers on this modeled setup. These are assumptions, not market data.
Say your home has a first mortgage equal to 50% of its value. You want a line that brings combined leverage to 65%. Your credit profile is above 720, so the primary-residence ceiling of 90% CLTV is not the constraint. Your own comfort is. That leaves a 35% equity cushion after the draw.
Now the new purchase. On a DSCR purchase, most files in the network land at 75% to 80% LTV, which means 20% to 25% down. Select programs reach 85% LTV, or 15% down, with roughly a 700-plus score. Coverage of 1.00 is where select programs start. Stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
Say the rental clears roughly 1.2x on its own PITIA. Typical reserves run around 6 months of PITIA. Lenders can vary that by leverage and loan size. Your line payment is on top of the new property’s payment, so test your budget at the full draw, not the partial one.
What If the Old Home Does Not Sell?
You carry three obligations: the old mortgage, the line, and the new property’s payment. The line’s pricing floats, so that payment can rise while the home sits.
Here are the exits, from least to most disruptive:
1. Reduce the asking price.
2. Pay the line down from savings or from the new property’s cash flow.
3. Rent the old home out and keep it. That turns the line into rental-property debt, so confirm the terms allow it.
4. Refinance the line into a new loan on the old home.
Plan these before you draw, not after. A line sized to the lowest sale price you would accept is safer than one sized to your hoped-for price.
Key Terms Defined
HELOC: A home equity line of credit, a revolving credit line secured by the equity in your home.
Combined loan-to-value (CLTV): Your first mortgage plus the new line, divided by the home’s value.
Debt-to-income ratio (DTI): Your monthly debts divided by your monthly gross income.
Draw period: The stretch when you can borrow from the line, usually paying interest only.
DSCR: Debt service coverage ratio, monthly rent divided by the monthly PITIA of the property being financed.
Bridge loan: A short-term loan secured by your current home, meant to cover the gap until it sells.
Good Fit, Poor Fit
This plan fits you if all of these are true:
- You have substantial equity and can keep a cushion after the draw.
- Your credit and DTI clear the line lender’s limits, and you open the line before listing.
- You can carry all payments through a longer sale than you expect.
- You have a clear exit plan if the sale stalls.
It fits poorly if you rely on the sale to make the numbers work, your equity is thin, or the home is already listed. In those cases, a contingent offer or selling first is the safer path. For the full picture on DSCR purchases, read Lendmire’s complete DSCR loans guide.
Frequently Asked Questions
Can I get a HELOC if my home is already listed?
Often not. Some lenders require the home to be off the market first. In six of the states where the network operates, a property listed within the past 60 days is ineligible. Open the line before you list.
Can I use the line for the full purchase price of a rental?
Yes, if your equity and the line limits allow it, and the line lender permits the use. The leverage ceiling on your primary residence reaches 90% CLTV at a 720-or-better credit profile. The tradeoff is that one floating-rate lien then carries all the risk.
Does the line payment count in my DSCR?
No. DSCR measures the financed property’s rent against its own PITIA. The line payment is not in that ratio, but it still has to fit your budget.
Do I pay the line off when I sell?
Yes. You generally must repay it in full at the sale, and the payoff comes out of your proceeds at closing. Many borrowers close the line then. Others keep it if the terms allow.
Can an LLC take out the line?
No. LLCs and corporations cannot hold title on these lines. The borrower must be an individual or a revocable living trust. Lender program requirements can change, so confirm the current rules.
See How the Numbers Work
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. Programs change, every file is underwritten individually, and nothing here is a commitment to lend. You can reach the team at 828-256-2183.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. Opendoor – Can you use a HELOC to buy another house
4. Experian – HELOC draw period
5. Effective Agents – How to buy before you sell
This article is part of Lendmire’s HELOC & home equity loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best HELOC Program to Buy a Second Home · Investment Property HELOC Lenders for First-Time Landlords · Best Investment Property HELOC Program for First-Time Investors
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.