The Quick Read: It depends on two ceilings, and the lower one sets your line: the lease rent counts when it sits under market, so a discounted tenant shrinks the rent-supported limit even when the property has plenty of equity, and the equity limit may then not be the one that binds. Through select programs and subject to underwriting, the points below apply:
- Rent must reach 1.10x on a stress payment over the entire credit limit, not just the drawn balance.
- A smaller line lowers the qualifying payment and lifts the ratio without changing the rent.
Which Rent Does the Lender Count?
The lender counts the lesser of the appraiser’s market rent and the lease, unless three months of rent receipts support a lease above market. A below-market lease therefore stays at the lease figure. An above-market lease is the one exception: it can count when three months of rent receipts support it.
A few lenders lean on actual rent, and a few programs lift a discounted lease toward market. On the DSCR HELOC lane, the lease controls when it is low. A vacant rental or a market-rent study alone does not fit this product.
Here is how the three cases play out:
| Lease vs. market | Rent counted | Effect on the line |
|---|---|---|
| Below market | The lease | Rent-supported limit shrinks |
| At market | Either figure | No haircut |
| Above market | Market, unless receipts support the lease | Receipts can lift the count |
Future rent bumps do not count. Underwriting looks at the rent as it stands, not the rent you plan to charge at renewal.
How Does a DSCR HELOC Size the Line?
Coverage 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 used only for the test. Taxes and insurance are not part of it.
To size the line backward, divide the rent the lender will count by 1.10. That gives the largest qualifying payment. The largest line that payment supports is your rent-supported limit.
Because the payment scales with the line, the limit scales with the counted rent. Take a rental where the lease runs 10% under market. The rent-supported limit lands roughly 10% lower than it would at market rent, all else equal. This is an illustration, and the lender’s own calculation governs.
The test runs on the whole limit, not on the amount you actually draw, so borrowing less than the limit does not help if you apply for a large line. Applying for a smaller line does help, since it lowers the qualifying payment and raises the ratio on the same rent.
On a second lien, confirm on the file how the lender treats the first-mortgage payment in its coverage calculation. That treatment sits with the lender, and it can change the math.
The Second Ceiling: Equity
The equity ceiling is the maximum combined leverage minus what you already owe. A second lien is a standalone line behind the first mortgage you keep. Its limit is CLTV, meaning the first-mortgage balance plus the new line, divided by value. At a 720 score or better, that tops out at 70% CLTV, on lines from $50,000 up to $500,000. Below 720 there is no second-lien tier.
A first lien exists only on a rental with no mortgage. Those tiers are written as loan-to-value (LTV):
| Lien | Score | Ceiling | Line range |
|---|---|---|---|
| Second lien | 720+ | 70% CLTV | $50,000 to $500,000 |
| First lien | 740+ | 75% LTV | Up to $500,000 |
| First lien | 700 to 739 | 70% LTV | Up to $500,000 |
| First lien | 720+ | 65% LTV | Above $500,000, to $1,000,000 |
All of it is subject to underwriting. A declining-market flag lowers the ceiling 5 points, and Philadelphia lines carry a ceiling 10 points lower.
Your line is the smaller of the two ceilings. Picture a rental with a first mortgage equal to 50% of value and a 720 score. The equity ceiling leaves about 20 points of value on the table. If the lease is well under market, the rent test may allow less than that. When it does, the lease is the constraint, not the equity.
Run the other case too. A rental with a thin gap between value and the first mortgage hits the equity ceiling first. A renewal at market rent will not help there.
Fixing a Below-Market Lease Before You Apply
The cleanest fix is a renewal at market rent before the valuation. A below-market tenant who renews at market lifts the counted rent without any extra paperwork. A discounted lease signed only to fill a unit does the opposite. It locks in the lower number.
If the tenant is mid-term, you have four moves:
1. Shrink the line. Ask for a smaller limit and rerun the 1.10x test. This is the quickest lever to pull, and it costs nothing.
2. Wait for expiry. A lease that ends soon can be renewed at market. The cost is delay and the risk the tenant leaves.
3. Document the lease. Gather the signed fixed-term lease with every amendment, and disclose any concessions. Free months or credits lower effective rent.
4. Switch the structure. A DSCR cash-out refinance replaces the first mortgage rather than sitting behind it. It can fit better when the line ceiling is too low. It is a separate program, and its rent treatment follows its own rules.
Coverage is not cash flow. The coverage test is one gate, and your bank account is another. A line drawn to the limit starts payments right away, since at least 80% is drawn at closing.
Edge Cases That Move the Number
Month-to-month or expired lease. The program requires a lease in place. Confirm with the lender how a holdover tenancy is treated before you apply, or renew first.
Leases to relatives. Informal or discounted family leases can be reviewed conservatively. Expect the lender to want clean documentation.
Multi-unit property. On a two-to-four-unit rental, units are generally tested one by one at the lesser of lease or market rent, unless three months of rent receipts support a lease above market. An above-market unit usually does not offset a below-market one. The property may have at most one vacant unit. If you hold a rent roll, reconcile it to the leases.
Short-term rental. McKissock explains that Form 1007 documents monthly rent from comparable one-unit rentals, and Class Valuation notes that it cannot support short-term rental income. This lane is reviewed on a lease. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
LLC title. The LLC can stay on title on an investment property. The members sign as guarantors, and a title holder who is not a borrower signs a non-borrowing owner acknowledgment. This is subject to program terms.
What the File Needs Besides Rent
Qualification runs primarily on property-level rental income covering the payment, subject to lender guidelines. There is no traditional personal-income documentation: no W-2s, pay stubs, or debt-to-income ratio. Credit, equity, valuation, and title are all still reviewed.
The rest of the file looks like this:
- Credit: 720 on a second lien, 700 on a first lien. No 30-day mortgage late in the last 12 months. 48 months since a bankruptcy, foreclosure, short sale, or deed-in-lieu.
- Valuation: Lines up to $400,000 use an automated valuation (confidence score of 85 or better) with a property inspection report, or a full interior appraisal. Lines above $400,000 need a full interior appraisal. Appraisal waivers are not accepted.
- Seasoning: 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).
- Reserves: None required, and no cash to close, subject to underwriting.
- Draws: 5 years of interest-only on the drawn balance, then a 25-year repayment period, with a 30-year maturity. The rate is variable. Later draws run at least $5,000 each.
- Exposure: At most 5 loans or $2,500,000 per borrower with the program.
Rural-designated property, row homes, condotels, and leaseholds are outside this lane. The line is available to US citizens, permanent residents, and non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible.
The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Lendmire is a broker. It places the line through a wholesale lender, and the lender’s disclosures carry the pricing terms. For the wider picture, see Lendmire’s complete DSCR loans guide.
Key Terms Defined
Qualifying payment: The stress payment on the whole credit limit, used only to test rent coverage.
CLTV: The first-mortgage balance plus the new line, divided by the property’s value.
Form 1007: The appraiser’s single-family rent schedule, which sets market rent from comparable rentals.
Lesser-of rule: The convention of counting the lower of the lease and market rent, unless three months of rent receipts support a lease above market.
Rent-supported limit: The largest line the counted rent can carry at 1.10x.
Which Path Fits
Pick the path by the ceiling that binds:
- Lease is the constraint: Renew at market, or ask for a smaller line.
- Equity is the constraint: A different structure, such as a cash-out refinance, is the main lever, since a smaller line only trims what you draw.
- Both bind: Fix the equity ceiling first with a different structure, such as a cash-out refinance on the rental, then address the lease.
See how to qualify for an investment property HELOC with that lease in place.
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. Reach the team at 828-256-2183.
Frequently Asked Questions
Does the appraiser’s market rent help if my lease is below market?
Not on this lane. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A low lease stays at the lease figure. Renewing at market before the valuation is the usual way to lift the counted rent.
Can I borrow more by drawing less?
No. The 1.10x test runs on the entire credit limit, not the drawn balance. At least 80% of the line is drawn at closing anyway. Asking for a smaller limit is what lowers the qualifying payment and raises the ratio.
How long must I own the rental first?
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).
Can my LLC hold the property?
Yes, on an investment property, subject to program terms. The members sign as guarantors, and a title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument.
Does an above-market unit offset a below-market one in a duplex?
Generally no. Units are tested at the lesser of lease or market rent, and the lender’s rent roll review governs, unless three months of rent receipts support a lease above market. The property can also have at most one vacant unit.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving landlords and real estate investors in 16 licensed states. DSCR home equity lines of credit on non-owner-occupied one-to-four-unit rentals are arranged through wholesale lending channels in 15 of those states (every licensed state except Tennessee); Lendmire brokers the line and the lender underwrites each application on the property’s rent, credit and leverage. 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. McKissock
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Can You Borrow on a DSCR HELOC on a Vacant Rental Without a Lease? · How Much Can You Borrow on a DSCR HELOC as a Co-Owner Who Is on the Deed? · How Much Can You Borrow on a DSCR HELOC for Refinancing a Balance Into a New HELOC?
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.