The Quick Read: You qualify for a home equity line by showing enough equity, a credit profile at or above the program minimum, and a debt load the lender can accept, and repayment starts on the date the draw period ends, which your contract sets, not on a date you choose. A HELOC (home equity line of credit) works like a credit card secured by your property. You borrow during the draw period, then pay it back during the repayment period.
- Approval rests on equity, credit score, debt-to-income ratio, property type, and how the title is held.
- On an investment property, the network Lendmire works with tops out at 70% combined loan-to-value, with a 700 credit minimum.
- Repayment starts when the draw ends, and the monthly payment usually rises because principal joins the interest.
- Some plans in the wider market end in a balloon payment, so read the note before you sign.
- A closed-end DSCR cash-out refinance has no draw period at all, which removes the repayment surprise.
Key Terms Defined
Draw period: the stretch of time when you can borrow against the line, usually paying interest only.
Repayment period: the stretch after the draw ends, when you can no longer borrow and must pay the balance down.
CLTV (combined loan-to-value): all loans against the property, including the new line, divided by the property’s value.
Interest-only payment: a payment that covers the cost of borrowing but does not reduce the balance.
Fully amortizing: a payment schedule that pays the balance to zero by the end of the term.
Balloon payment: one large payment, often the entire balance, due when the term ends.
DTI (debt-to-income ratio): your monthly debt payments divided by your monthly income.
Lien position: whether the lender is first in line to be paid (first lien) or behind another loan (second lien).
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.
How a HELOC Works From Day One to Payoff
A HELOC has two phases. During the draw period you borrow as needed up to the limit. After it ends, borrowing stops and you pay the balance back on a schedule. The date that switch happens is written into your loan agreement.
| Feature | Draw period | Repayment period |
|---|---|---|
| Borrowing | Yes, up to the limit | No new draws |
| Typical payment | Interest only | Principal plus interest |
| Cost of the line | Can move | Can move |
| What ends it | The repayment start date | Payoff, or a balloon on some plans |
Lengths vary by lender. Experian describes draw periods as typically five to 10 years, followed by a repayment period of around 20 years, and notes that some plans end in a balloon. Treat those as common patterns, not promises.
Across the wholesale network Lendmire works with, two standalone line structures exist. Both can sit in first or second lien position.
- The 3-year-draw program is the higher-leverage option. It pairs a 3-year interest-only draw with a 17-year fully amortizing repayment.
- The 5-year-draw program is the longer-runway option. It pairs a 5-year interest-only draw with a 25-year fully amortizing repayment.
Investment property lines run the 5-year draw and 25-year repayment structure only. Tennessee is the exception to the schedules above, because it shortens them to 3 years and 12 years, and 5 years and 10 years.
Three more mechanics matter. At least 75% of the line is drawn at closing on both programs. Pricing floats through both the draw and repayment periods and never converts to a fixed payment. Repayment is fully amortizing, so these structures do not end in a balloon.
What Lenders Look For to Approve a Line
Lenders weigh several things: equity, credit, debt load, property type, and title. Equity usually decides the size of the line, and credit and debt-to-income (DTI) decide whether the deal works going forward. Property type and title round out the review, and where you stand on each one depends on whether the property is your home, a second home, or a rental.
Equity and combined leverage
Leverage is measured as CLTV. Add your existing mortgage balance and the new line, then divide by the property’s value. The ceilings depend on occupancy and credit.
| Occupancy | Minimum credit | Top CLTV | Largest line |
|---|---|---|---|
| Primary residence | 600 | 90% with 720+ | $500,000 at 90% CLTV; $750,000 at 75% CLTV, 700+ (720 on the longer-runway program) |
| Second home | 640 | 90% with 720+ | $500,000 |
| Investment property | 700 | 70% | $500,000 |
Those 90% figures exist only at a 720-or-better credit profile and only on lines up to $500,000. On a primary residence, a line above $500,000 caps at 75% CLTV, needs a full appraisal, and needs a credit profile of 700 or better (720 on the 5-year-draw program). Lines above $500,000 are not offered on investment properties.
Here is the equity math in percentages. Say a rental has a first mortgage equal to 55% of its value. At the 70% investment ceiling, the new line can add up to 15% of value, and only if every other test is met. Lower credit tiers carry lower ceilings, and every figure is subject to lender guidelines and full file review.
Market surveys differ from this. NerdWallet reports that investment-property lines often want a 720 score and cap near 80% LTV, with many lenders setting thresholds below 70%. That is a market-wide statistic. In this network, an investment line is capped at 70% CLTV with a 700 minimum.
Credit
The program floor is 600, though second homes start at 640 and investment properties at 700. The score model uses a single bureau, keyed to the primary wage earner. The report can be no more than 90 days old at closing, and rescores are not allowed. Tradeline and housing-history standards differ by program. The 5-year-draw program asks for two tradelines seasoned 12 months or one seasoned 24 months.
A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure history splits by program on primary and second homes. One program seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4 years. The other declines that history regardless of age. Investment files follow the 7-and-4-year path.
Debt load
DTI tops out at 50%, and 45% for credit profiles from 600 to 679. A ratio above 45% requires a 680 minimum. The lender reviews your file on the interest-only payment calculated on the maximum draw, not on what you plan to borrow. That detail matters later, and the repayment section below picks it up.
Valuation, property, and title
Lines at or below $500,000 ordinarily use an automated valuation instead of a traditional appraisal. A higher CLTV may call for a second valuation, and you can request a full appraisal in any case. Investment lines can require multiple appraisals.
Eligible properties include single-family homes, 2-4 unit buildings, PUDs, townhomes, and condominiums, including non-warrantable ones. A 2-4 unit property needs a 640 minimum on the 5-year-draw program. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned property are not offered.
Title is the sharpest catch. The property must be held by you personally or by a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A borrower is limited to three lines, and an owner of more than 15 financed properties is not eligible. Availability is limited to Lendmire’s 16 full-service states, which is narrower than its DSCR footprint.
When Does Repayment Actually Start?
Repayment starts on the date your agreement says the draw period ends. You do not trigger it, and the lender does not pick it later. The FTC explains that once the draw period ends, you cannot borrow more and must repay the balance, either in full or through payments over time. It also warns that if you do not repay as agreed, the lender can foreclose.
Federal rules require the lender to put the timeline in writing. Under Regulation Z, disclosures must state the length of the draw period and any repayment period. They must also show different payment terms for each phase and flag the possibility of a balloon payment. Read three places in your paperwork:
- The draw length: this tells you when borrowing stops.
- The repayment length: this tells you how long the principal payoff runs.
- The payoff clause: this tells you whether the balance amortizes or comes due as a balloon.
The draw length alone does not tell you the whole story. Some plans require a little principal during the draw, so a payment increase can arrive before the formal repayment phase. Because the cost of the line floats, the payment can also change in either phase even if you borrow nothing new.
Qualifying With Repayment in Mind
Qualify for the payment you will have later, not the one you have on day one. The approval test uses the interest-only payment on the maximum draw. Your real payment steps up when principal joins in. A file that looks easy in the draw period can look thin in repayment.
| Stage | What you pay | What it does to cash flow |
|---|---|---|
| Draw period | Interest on the balance | Looks strong |
| Repayment period | Principal plus interest | Tightens, often sharply |
| Balloon plan | Whole balance at the end | Forces a refinance or sale |
Remember that at least 75% of the line is drawn at closing. You start with a large balance accruing interest, so the repayment payment is built on most of the limit from the first month. The size of the jump depends on the balance, the repayment length, and where pricing sits then, so the table shows direction rather than amounts.
Run the stress test before you apply. Take the full line, assume it is all drawn, and spread it over the repayment schedule. Then ask whether the property’s rent and your other income still cover it.
A practitioner note from broker-side files: borrowers who pass the draw-period test but fail the repayment-period test are usually the ones who sized the line to the maximum. A smaller line with a longer runway often leaves more room than the largest line the equity allows.
Where the General Rule Breaks
Several situations change the answer to when repayment starts or whether you qualify at all.
- Balloon plans. Some plans in the wider market demand the whole balance at the end. The network structures above amortize fully, but you must check any other lender’s note.
- Principal during the draw. Some plans require principal early, which means repayment effectively starts sooner.
- LLC-owned rentals. If the property is already deeded to an LLC, it cannot take this line without a vesting change. A DSCR cash-out refinance may fit better, depending on program guidelines.
- Lines above $500,000. These are available on a primary residence only, at 75% CLTV, with a full appraisal.
- Recently listed property. A property listed for sale, or listed within the past 60 days, is ineligible in Indiana, North Carolina, Pennsylvania, Tennessee, Texas, and Washington.
- Texas homesteads. A Texas primary residence is a homestead and caps at 80% combined loan-to-value. Texas primary residences also carry a 12-day waiting period, a one-lien-at-a-time rule, and 12-month seasoning.
- Exposure limits. Combined exposure across your lines caps at $2,000,000 on the 3-year-draw program and $750,000 on the 5-year-draw program.
On investment property in general, NerdWallet says lenders do not all offer these lines, and that qualification is strict because lenders see default risk as higher. That fits what brokers see: a thin lender pool and narrow ceilings.
Your Options as Repayment Approaches
You have four moves as the draw end date nears, and the best one depends on equity and cash flow.
1. Pay the balance down. A smaller balance means a smaller repayment payment.
2. Let it amortize. If rent and income cover the full payment, staying put is the simplest path.
3. Refinance the balance. A new loan replaces the line, and you must requalify on the then-current file.
4. Sell. This is the exit when a balloon or payment jump does not fit.
A DSCR cash-out refinance is the cleanest alternative for a rental. It is a closed-end loan with no draw period, so payments are fully amortizing from the first one. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Cash-out on a standard rental tops out around 75% LTV, and about 6 months of seasoning is the common expectation. Extended terms and interest-only periods are available through select lenders. Lendmire’s complete DSCR loans guide covers that path in full.
Questions to Ask Before You Apply
Put these to any lender, and get the answers in writing.
- What is the exact draw length, and what is the repayment length?
- Does repayment amortize, or does a balloon come due?
- Does the plan require any principal during the draw?
- Can the cost of the line change, and in which phases?
- What is the minimum draw after closing, and how much must be drawn at closing?
- Can title be held in an LLC, or must it be in my name?
- Is a full appraisal required, or will an automated valuation do?
- What happens when the draw ends, and can the line be renewed?
On the 5-year-draw program, the minimum subsequent draw after closing is $1,000, except in Texas, where it is $4,000.
The Timeline Start to Finish
A line on a rental follows a predictable sequence. You apply, the lender runs the valuation, and you close with at least 75% of the line drawn. The draw period then runs for 5 years on an investment line. The last year of the draw is the time to act, because that is when you decide between paying down, refinancing, or selling. Repayment follows, running the remaining 25 years until the balance reaches zero. Primary and second-home lines on the 3-year-draw program compress that into 3 years of draw and 17 years of repayment.
Frequently Asked Questions
When does HELOC repayment start?
It starts on the date the draw period ends, and your loan agreement states that date. After that you can no longer borrow, and payments typically add principal to interest. Check the agreement for the exact date, since lengths vary by lender and plan.
Can I qualify for a HELOC on a rental property?
Yes, through select lenders. On an investment property in this network, you need a 700 credit minimum, and combined leverage tops out at 70% CLTV. Lines are limited to $500,000 and must be held in your own name or a revocable living trust. Every file is subject to lender guidelines and full review.
Does the payment go up when repayment starts?
Usually it does. During the draw you typically pay interest only, and in repayment you pay principal as well. The size of the increase depends on your balance, the repayment length, and where pricing sits then.
Can I keep borrowing after repayment starts?
No. The FTC confirms that borrowing stops when the draw period ends. If you need more cash later, you would apply for a new line or another loan.
Is a HELOC or a DSCR cash-out refinance better for a rental?
It depends on how the property is titled and how you want the payment structured. A line suits you if you hold title personally and want to borrow in stages. A DSCR cash-out suits an LLC-owned rental or an investor who wants fully amortizing payments from day one.
Next Step
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. Lendmire is a broker that arranges financing through select lenders in its wholesale network, and all figures here are subject to lender guidelines and are not a commitment to lend.
Repayment dates are fixed in the note on day one, so the investors who stay ahead of them are the ones who read that clause before they close.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program 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. Experian
2. NerdWallet
3. FTC, Home Equity Loans and Home Equity Lines of Credit
4. CFPB, Regulation Z §1026.40
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: How to Qualify for a HELOC for Investment Purchases · How to Qualify for a HELOC Lender When Big Banks Decline · How to Qualify for a HELOC for Homeowners Locked Into a Low First Mortgage
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.