The Quick Read: Usually up to 70% combined loan-to-value (CLTV) on a second lien, with lines from $50,000 to $500,000, subject to underwriting. Your rental’s value times that percentage, minus the first mortgage already on it, sets the ceiling. The line size cap is the second limit, and the lower of the two applies.
- A second lien reaches 70% CLTV at a 720 credit score or better, on lines up to $500,000.
- A first lien on a rental with no mortgage reaches 75% LTV at 740 or better, and 70% LTV from 700 to 739.
- A first-lien line above $500,000 (to $1,000,000) tops out at 65% LTV at 720 or better.
- The rental qualifies the line at a minimum 1.10x coverage on a stress payment over the whole line.
- The line works best when the purchase is already identified. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Everything here is a ceiling or floor from select programs, never an offer. Every file is underwritten individually.
What Is a DSCR HELOC, Exactly?
A DSCR HELOC is a revolving line of credit secured by a rental you already own. The rent, not your personal income, carries the qualification. DSCR stands for debt service coverage ratio: the rent divided by the payment the lender tests.
The term is not standardized across the industry. Many banks skip investment-property lines entirely. NerdWallet notes that these lines are not offered by every lender, that qualification is strict, and that availability is limited.
Across Lendmire’s wholesale network, the structure is specific. It is a standalone second lien behind the first mortgage you keep. Or it is a standalone first lien on a rental with no mortgage. It is never closed together with a purchase, never a third lien, and never a line on your own home. Your LLC can stay on title, subject to program terms.
The program qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. There is no traditional personal-income documentation, such as W-2s or personal income calculations. The rent, the lease, the credit report, and the valuation are all documented.
How Is the Maximum Calculated?
The maximum is the property value times the CLTV cap, minus every lien already recorded. Then the program’s line limits apply. Whichever number is lower wins.
Here is the formula in four steps:
1. Get the value. The lender sets it through an automated valuation or an appraisal.
2. Apply the cap. Value times 70% on a second lien gives total allowed debt.
3. Subtract the first mortgage. What is left is the room for the line.
4. Check line limits. Lines run from $50,000 up to $500,000 on a second lien.
Think in percentages of value. Say a rental has a first mortgage at 50% of its value. A 70% CLTV cap leaves roughly 20% of value as the line ceiling. A rental with a first mortgage at 65% of value leaves only about 5% of value. That falls short of the $50,000 minimum on most properties, so no line would be available.
The CFPB booklet makes the same basic point: lenders let you borrow only up to a set percentage of your equity. Lenders keep a cushion. Equity is not borrowing capacity.
Which Limit Binds First: Equity, Rent, or the Line Cap?
Equity usually binds first on a leveraged rental. Rent coverage decides whether you qualify, not how large the line can be, so it acts as a pass/fail test rather than a sizing limit. The line cap binds on a free-and-clear property worth a lot.
Consider a rental with no mortgage. On a first lien, the ceiling is 75% LTV at 740 or better, or 70% LTV from 700 to 739. Lines up to $500,000 use those tiers. Larger lines, up to $1,000,000, drop to 65% LTV at 720 or better. So a very valuable free-and-clear property can hit the line-size tier before it hits its equity. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Now the coverage test. Rent must be at least 1.10x the qualifying payment. That payment is a fully amortizing principal-and-interest payment on the entire credit limit, at the start rate plus 2 percentage points. It is a stress test. Taxes and insurance are not part of it. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
Here is the catch. The test runs on the whole line, not just what you draw. A bigger line means a bigger stress payment. A rental with thin rent may clear equity and still fail coverage. Whether the first-mortgage payment joins the qualifying payment on a second lien is something to confirm on the file, because the lender’s own coverage calculation governs.
What Credit Score and Property Types Qualify?
A second lien needs a 720 credit score. A first lien needs 700, with better leverage at 740. The tier comes from the lender’s own credit report. The file also needs no 30-day mortgage late in the last 12 months. And 48 months must have passed since a bankruptcy, foreclosure, short sale, or deed-in-lieu. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Eligible properties include:
- Single-family homes, PUDs, and townhomes
- Two-to-four-unit rentals (at most one vacant unit)
- Warrantable and non-warrantable condominiums
- Lots up to 10 acres
A lease must be in place. Outside this program: rural-designated property, condotels, row homes, leaseholds, land trusts, age-restricted communities, mixed-use, and a property listed for sale in the prior two months. A declining-market flag lowers the ceiling by 5 points. Borrowers must be US citizens, permanent residents, or non-permanent residents with a Social Security number.
Can You Use Your Rental’s Equity to Fund the Down Payment?
Yes, the proceeds can go toward the next purchase. But the line is secured by the rental you already own, not by the new property. Its rules are separate from the purchase loan’s.
The line is never closed together with a purchase. So the order matters: close the line on the existing rental first, then use the funds. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000. On smaller lines, that means the whole line is drawn at closing. Later draws must be at least $5,000 each.
This shapes how you size it. Draw interest accrues from day one on most of the line. Size the line to the purchase you actually have in view, rather than a large line you hope to use someday.
Two things to check with your purchase lender. First, whether they accept borrowed down-payment funds. Second, how they treat the new line payment in your overall obligations.
A BiggerPockets Rookie Reply episode walks through recycling home equity across several rental purchases. It is useful background on the strategy.
How Do the Draw and Repayment Periods Work?
You get a 5-year interest-only draw period on the drawn balance. Then a 25-year fully amortizing repayment period follows, for a 30-year maturity. The rate is variable.
A variable rate means the payment can move. The CFPB also warns that you could lose the property if you fall behind. When the repayment period starts, the payment jumps because principal joins the bill. Plan for that step-up before you draw.
The rate and pricing terms come with the lender’s disclosures. Lendmire, as a broker, does not set them.
What Does the File Look Like?
Valuation depends on line size. Lines up to $400,000 use an automated valuation with a property inspection report, or a full interior appraisal. Larger lines require a full interior appraisal. Appraisal waivers are not accepted.
The seasoning rule has two clocks. 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).
There are no reserve requirements and no cash to close. A borrower can have at most 5 loans or $2,500,000 with the program. Hazard insurance covers both liens, with flood coverage where required. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
For the full picture of how these loans work, see the complete DSCR loans guide.
Key Terms Defined
- DSCR: Gross monthly rent divided by the payment the lender tests. This program’s floor is 1.10x.
- CLTV: Combined loan-to-value. The first mortgage plus the new line, divided by property value.
- Draw period: The 5-year stretch when you pay interest only on what you have drawn.
- Seasoning: The waiting period a lender wants after a purchase or refinance.
- Second lien: A loan that sits behind the first mortgage and is paid second if the property is sold.
Line, Cash-Out Refinance, or Something Else?
| Factor | DSCR HELOC | DSCR cash-out refinance |
|---|---|---|
| First mortgage | Stays in place | Replaced |
| Structure | Revolving line, variable rate | New fixed-term loan |
| Best for | Keeping a good first mortgage | Larger proceeds or a reset |
| Lien position | Second (or first if no mortgage) | First |
A DSCR cash-out refinance replaces the first mortgage and generally allows larger proceeds. Market surveys report cash-out limits on investment properties of roughly 70% to 75% of value, per NerdWallet. The line instead leaves your first mortgage untouched. If your existing first mortgage is a good one, that is the point. If you are near the cap already, a refinance may reach further.
A line on your own primary home is a different, owner-occupied product. This program is never offered on an owner-occupied home.
Who Should Skip This?
Skip it if you cannot repay the draw quickly or comfortably. Otherwise a fixed-term refinance can be steadier.
Skip it if the new purchase would leave you with no equity in it and thin cash after closing. Funding the whole purchase with borrowed money leaves no cushion if rents dip or the variable payment rises. Skip it if the rental sits in a state outside the program. It is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee.
Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
If an LLC holds title, Lendmire’s article on LLC-titled HELOC rules covers the title mechanics.
Frequently Asked Questions
Can I get a DSCR HELOC on a rental I just bought?
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). A fresh purchase usually has to wait. Subject to lender guidelines.
Does the HELOC payment count against my next DSCR loan?
It depends on the purchase program. Some DSCR purchase loans qualify mainly on the new property’s rent, but the line payment can still matter to a lender reviewing your overall obligations. Confirm how the purchase lender treats it before you draw.
Can my LLC hold the property?
Yes, vesting in your LLC is allowed on this investment-property line, subject to program terms. The members sign as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument.
Do I need tax returns or pay stubs?
No. The lease, rent figures, credit report, and valuation are still documented.
What if my first mortgage uses most of the equity?
Then little or no line is available. The CLTV cap counts the first mortgage plus the new line. If the first mortgage already sits near the cap, a cash-out refinance may be the better route to cash.
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 broker arranging financing through select lenders in its wholesale network, and nothing here is a commitment to lend.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) arranging DSCR home equity lines of credit — standalone first or second liens on non-owner-occupied one-to-four-unit rentals, qualified on rent — through a wholesale lending network in 15 of its 16 licensed states (every licensed state except Tennessee). Eligibility is determined by the lender on each file. 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. NerdWallet – HELOC on an investment property
3. BiggerPockets Rookie Reply – Use home equity to buy your next rental
4. CFPB
5. NerdWallet – cash-out refinance alternative
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 for Landlords Choosing a Lender? · How Much Can You Borrow on a DSCR HELOC on That Property? · DSCR HELOC Requirements on Investment Property for Landlords
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
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.