The Quick Read: It depends on a rental you already own, because a DSCR HELOC sits on a non-owner-occupied rental you keep and never on the home you are selling, and a second lien on that rental can reach up to 70% combined loan-to-value at a 720 credit score on lines from $50,000 to $500,000, subject to underwriting. The line is sized from the rental’s value, the first mortgage balance and the credit tier. The rent then has to cover a stress payment on the whole line at 1.10x or better. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
- A second lien (behind a first mortgage you keep) tops out at 70% CLTV and needs a 720 score.
- A first lien applies only to a rental with no mortgage, and its leverage steps down as credit and line size change.
- The line you request is mostly the debt you carry, because the closing draw takes most of it.
- Whether the purchase lender counts the draw as your down payment is a separate decision from the line approval.
Can a DSCR HELOC Use the Home You Are About to Sell?
No. A DSCR home equity line is secured by a one-to-four-unit rental the owner keeps. It is never offered on the owner’s own home or a second home, and it is never closed together with a purchase.
That one rule decides who can use this strategy at all. The investor who qualifies already owns a rental with equity. That investor is also planning to buy another property before the current home sells. The rental funds the down payment, and the home sale later repays whatever the investor wants to retire.
If you own no rental, the DSCR version is simply not available to you. The route left is a standard HELOC on your residence. That is a different, owner-occupied product, underwritten on your income and credit. Anyone leaning on that route should have the line open before the listing goes live.
This is also why the two-approval problem matters. One lender sets the line limit from equity. A second lender decides whether borrowed cash is acceptable as your down payment. Your real capacity is the smaller of the two.
For the broader picture of how rent-qualified loans work, see Lendmire’s complete DSCR loans guide.
How Is the Maximum Line Sized?
The ceiling is value times the allowed combined leverage, minus what is already owed on the first mortgage. Consumer explainers from CBS News walk through the same arithmetic for owner-occupied homes. Experian describes caps near 85% on a primary residence. A rental line through the network is more conservative, so do not carry the 85% figure over to a rental.
Across the wholesale network, the rental-line ceilings look like this, always subject to underwriting:
| Lien position | Credit score | Maximum leverage | Line size |
|---|---|---|---|
| Second lien (first mortgage stays) | 720 or better | 70% CLTV | $50,000–$500,000 |
| First lien (no mortgage) | 740 or better | 75% LTV | Up to $500,000 |
| First lien (no mortgage) | 700–739 | 70% LTV | Up to $500,000 |
| First lien (no mortgage) | 720 or better | 65% LTV | Above $500,000 to $1,000,000 |
Second-lien figures are CLTV, which adds the first mortgage balance to the new line before dividing by value. First-lien figures are plain LTV. A second lien has no cell below a 720 score.
Run the arithmetic in percentages. Say a rental carries a first mortgage equal to 45% of its value. At a 70% CLTV ceiling, the new line can add up to 25 points of value. If the first mortgage already uses 60% of value, only 10 points remain. A line that small can fall below the $50,000 minimum on a modest property. The program then does not fit.
Three more rules shape the final number:
- A property flagged as declining market lowers the ceiling by 5 points.
- The valuation drives value. Lines up 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.
- The 80% closing draw means you cannot open a large line and leave most of it idle as a standby fund.
Keeping a first mortgage limits you to a second lien, which carries the 720 floor.
What the Rent Test Looks Like
The line is reviewed on the rental’s income rather than yours. There is no traditional personal-income documentation: no W-2s or pay stubs, and no personal debt-to-income calculation, subject to lender guidelines.
The test is gross monthly rent divided by a qualifying payment. That payment is principal and interest on the entire credit limit, amortized fully, at the start rate plus 2 percentage points. It is a stress payment, so it is heavier than what you will pay in the interest-only draw period. Taxes and insurance are not part of it. The minimum coverage is 1.10x.
Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A lease in place is required. A two-to-four-unit property may have at most one vacant unit.
On a second lien, confirm on the file how the lender treats the first-mortgage payment in its coverage calculation. That detail changes the ratio, and the lender’s own calculation governs.
One practical point: the stress test runs on the full limit, not just the drawn amount. A bigger line demands more rent. Sizing the line to what you will actually use keeps coverage cleaner.
Other file rules matter too:
- Credit history: no 30-day mortgage late in the last 12 months, and 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu.
- Reserves: none required.
- Exposure: at most 5 loans or $2,500,000 per borrower with the program.
- Borrowers: US citizens, permanent residents, and non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are outside this lane.
- Title: an LLC can hold title, subject to program terms, with its members signing as guarantors.
Which Rentals Are Out?
Several property types do not fit this program. Rural-designated property, row homes, condotels, leaseholds, land trusts and age-restricted communities are excluded. So are mixed-use, commercial and agricultural property, modular and log homes, and a property with a solar lien. Single-family, PUD, townhome, two-to-four-unit and condominium properties are eligible property types.
Two timing rules can knock out an otherwise strong rental. A property listed for sale in the prior 2 months is ineligible. 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).
An investor who just refinanced the rental has to wait before using it as the funding source.
Will the Purchase Lender Count the Draw as Your Down Payment?
Not automatically. This is the half of the question that the line approval cannot answer.
Across the lenders in the network, treatment of borrowed funds varies. Some accept a fully borrowed down payment. Others cap the borrowed share or want a portion in unborrowed cash. The DSCR HELOC itself requires no reserves and no cash to close, but the new purchase loan has its own file.
Before drawing a dollar, put these questions to the purchase lender:
- Is a down payment funded by a home equity line acceptable, in full or in part?
- Does the line’s payment enter the debt coverage ratio on the new property, or only the cash-flow picture?
- Which documents do you want to see, such as the line agreement, the draw confirmation and the bank statements showing the cash path?
- Can the funds land in the LLC’s account if the new property will be titled in an entity, subject to program terms?
- Are borrowed funds excluded from reserves?
Write the answers down. A lender that accepts borrowed funds on a purchase still reads the new property’s rent against its own payment. The line’s cost is real money leaving your account whether or not the ratio counts it.
Lendmire’s piece How to Use an Investment Property HELOC as a Down Payment Before Your Home Sells covers the borrowed-funds question in more depth from the purchase side.
The Order of Operations
Sequence matters because the line cannot be closed together with a purchase. A workable order looks like this:
1. Confirm the rental fits. Check lien position, credit tier, seasoning, property type and the 1.10x stress test on the full limit.
2. Ask the purchase lender first. Get its position on borrowed funds in writing before opening anything.
3. Open the line as its own transaction. Valuation, title and the rent documents all run on the rental, and the lender’s HELOC disclosures come with it.
4. Draw and document. At least 80% of the line is funded at closing. Move the cash where the purchase lender wants it and keep the paper trail.
5. Buy the new property. The purchase file reads the new rent against the new payment.
6. Sell the home and decide what to retire. Sale proceeds can pay down the line or the old first mortgage. You choose, based on cost and cash flow.
A later draw is allowed in amounts of at least $5,000, but the program is built around one large draw at closing. Treat the line as a funded loan with a draw feature, not as a standby account.
How Does This Compare With Other Down Payment Sources?
The right source depends on what you own and how long you plan to carry the debt. Each product below is described under its own rules, not this program’s.
| Source | Secured by | Reviewed on | Fits when |
|---|---|---|---|
| DSCR HELOC | A rental you keep | Rent coverage | You own a rental with equity and want to leave its first mortgage alone |
| Primary-home HELOC | Your own residence | Your income and credit | You are selling the home and have no rental |
| DSCR cash-out refinance | A rental | Rent coverage | You want to replace the first mortgage and pull cash in one loan |
| Cash from savings | Nothing | Not applicable | You want no added debt on the purchase |
A cash-out refinance replaces the existing first mortgage, which matters if that mortgage has terms worth keeping. Benzinga lists a cash-out refinance and a bridge loan among the alternatives to a HELOC for a down payment.
The strongest case for a DSCR HELOC is an investor with a low-rate first mortgage on a rental and healthy rent. The strongest case against it is a thin-margin rental where the stress test barely clears, or where rent is soft.
Where the Plan Breaks
Payment stacking is the main risk. Until the old home sells, you may carry the old home’s mortgage, the line on the rental, the first mortgage on that rental, and the new loan on the property you just bought. The line is a variable-rate product, so its cost can move.
The program’s draw period is 5 years of interest-only payments on the drawn balance. After that comes a 25-year fully amortizing repayment period, with a 30-year maturity. The payment steps up when repayment begins. The CFPB notes that HELOC payments can change from month to month and often rise once repayment starts. For a landlord whose rents are flat, that step-up deserves a plan.
Three stress tests are worth running before committing:
- Slow sale. What if the old home takes months longer than planned? Count the carry across all the loans, not just the new one.
- Soft rent. Does the rental still cover its own payments if rent dips or a unit sits vacant?
- Leverage creep. A fully borrowed down payment pushes toward 100% financing across several liens. The new property’s cash flow has to carry both the purchase loan and the repayment of the draw.
A reasonable stop-loss is a date. If the old home has not sold by then, you decide in advance whether to cut the price, rent the home or pay the line down from other cash. Deciding that in advance beats deciding it under pressure.
Equity is also spent. Whatever you draw is gone from the rental’s equity cushion. That matters if you plan to sell the rental or refinance it later.
Key Terms Defined
DSCR: the debt service coverage ratio, which is gross monthly rent divided by the qualifying payment.
CLTV: combined loan-to-value, which adds the first mortgage balance and the new line, then divides by property value.
Draw period: the first 5 years of this program, when payments cover interest on the drawn balance only.
Seasoning: the time that must pass since a purchase, a refinance or the date you took title before the line is available.
Second lien: a loan that sits behind the first mortgage and is repaid after it if the property is sold.
Frequently Asked Questions
Can I take a DSCR HELOC on the home I’m selling?
No. The line is only for a non-owner-occupied rental you keep, never your own home or a second home. If you own no rental, a standard HELOC on your residence is the different product to look at, and it is underwritten on your income and credit. Open it before you list, since many lenders restrict a line on a home already on the market.
How much can I borrow against a rental that has a first mortgage?
Up to 70% CLTV at a 720 credit score or better, on lines from $50,000 to $500,000, subject to underwriting. The ceiling is value times 70%, minus the first mortgage balance. A declining-market flag lowers it by 5 points. A score below 720 leaves no second-lien option. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
How long must I own the rental before opening the line?
Two six-month clocks apply: the line is not available on a rental bought or refinanced in the last 6 months (last note date to new note date), and title must have been held for 6 months (settlement date to note date). The first clock resets after a refinance. The second counts from settlement.
Will my purchase lender treat the draw as my down payment?
It depends on that lender’s guidelines. Some accept a fully borrowed down payment, while others limit the borrowed share or want unborrowed cash. Closing costs and reserves are tested separately, and borrowed funds are often excluded from reserves. Get the lender’s position before you draw.
Does the line require the rent to cover more than the drawn amount?
Yes, because the stress payment is calculated on the entire credit limit, not just the drawn balance. Rent must cover that payment at 1.10x or better. A large line on a modest rent can fail even if you plan to draw only part of it.
Running the Numbers on Your Own Rental
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. The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee, and Lendmire acts as a broker placing the file with a wholesale lender, not as the lender. Terms change, every file is underwritten individually, and nothing here is a commitment to lend. The best next step for most investors is a call to 828-256-2183, or a request through the quote form, before any draw is made or any listing goes live.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. DSCR home equity lines of credit — revolving lines on non-owner-occupied one-to-four-unit rentals, qualified on the property’s rent instead of the owner’s personal income — are arranged through wholesale lenders, 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.
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. CBS News – How much equity can you borrow with a HELOC
2. Experian – How much can you borrow with a HELOC
3. Benzinga – Can you use a HELOC for a down payment
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: DSCR HELOC Requirements to Fund the Down Payment on the Next Rental · How to Qualify for a DSCR HELOC for Switching the Collateral to a New Home · How to Qualify for a DSCR HELOC for a Home With a Solar Lien or HOA Suit
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.