The Quick Read: It depends on how much equity the property has once the construction loan is paid off or converted and the rent covers the stress test. The amount is based on the property’s current appraised value, less any first mortgage balance. All of it is subject to underwriting.
- The line is sized on the property’s current appraised value, not what the build cost.
- Second lien: up to 70% CLTV, 720 minimum, lines from $50,000 to $500,000.
- First lien (no mortgage): 75% LTV at 740 or better, 70% at 700 to 739, 65% on lines above $500,000.
- Minimum DSCR is 1.10x on a stress payment across the whole line.
- Offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee.
How Is the Line Size Set?
Two limits decide the number: a value limit and a coverage limit. The lower one wins.
The value limit is simple math. Take the maximum leverage for your tier, multiply by the current appraised value, and subtract every lien already on the property. The CFPB’s HELOC booklet shows the same method: a percentage of appraised value, less the mortgage balance. Across the wholesale network, the percentage differs by lien position and credit score.
The coverage limit is the rent test. Gross monthly rent divided by the qualifying payment must reach 1.10x. 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 payment, and it runs on the full line, not just the drawn amount. Taxes and insurance are not part of it.
So a bigger line lowers coverage. On a modest-rent property, the coverage test can cap the line well below what the value limit allows. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. The lender’s own calculation governs the final figure.
What Has to Happen to the Construction Loan First?
The construction loan has to be gone before a line can be sized. A HELOC is a revolving line against existing equity. It does not fund a build. The CFPB describes available equity as the home’s value minus what is owed on the mortgage. A construction balance still sitting on the property eats that equity.
There are three common paths:
1. Construction-to-permanent loan. The construction loan converts to a long-term first mortgage. You keep that first mortgage, and the line can sit behind it as a standalone second lien.
2. Construction-only loan. It must be paid off or refinanced into an end loan. If a new first mortgage takes its place, the line is a second lien. If the build is paid off with no new mortgage, the line can be a standalone first lien.
3. Cash-funded build. No mortgage exists, so a first-lien line is possible once the seasoning clocks are met.
A line is never closed together with a purchase, and it is never a third lien. If your plan needs the line to be the payoff source for the construction loan, it has to take first position and the property has to qualify on its own.
Do You Have to Wait After Completion?
Yes. 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).
For a builder-owner, the clock questions get practical. A construction-to-permanent conversion or a payoff refinance sets a new note date. Plan the draw around those dates, and keep the closing documents from both events handy. A lease in place is also required, so the unit has to be rented before the file goes in. On a two-to-four-unit property, at most one unit can be vacant.
How Does Value Get Set on a New Build?
The value is today’s appraised value. A banker quoted on BiggerPockets says a HELOC uses the current appraisal, not the after-repair value; renovation loans are the products built on projected value. Cost basis does not set the line either.
On the network’s program, lines up to $400,000 can use an automated valuation (confidence score of 85 or better) with a property inspection report, or a full interior appraisal. Lines above $400,000 take a full interior appraisal. Appraisal waivers are not accepted. An automated valuation can lag on a brand-new property, so a full appraisal is often the cleaner route for a recent build. The appraiser’s rent schedule also feeds the coverage test.
Worked Scenarios by Payoff Status
These are illustrative, not offers. Leverage and coverage are shown as ratios, and the lender’s calculation governs.
| Situation | Lien position | Leverage ceiling | Next step |
|---|---|---|---|
| Construction-to-perm, first mortgage kept | Second | 70% CLTV at 720+ | Subtract first balance from the CLTV cap |
| Construction paid off, no mortgage | First | 75% LTV at 740+, 70% at 700-739 | Confirm both six-month clocks |
| Large line above $500,000 | First | 65% LTV at 720+ | Full appraisal; lines run to $1,000,000 |
| Credit 700-719, first mortgage kept | Second not available | None | Consider a different structure |
Run the second-lien case on a property valued at $600,000 with a $300,000 first mortgage. At 70% CLTV, combined debt tops out at $420,000, so room under the value limit is $120,000. If rent covers the stress payment on that full line at 1.10x or better, the line works. If it lands at 1.02x, the borrower shrinks the line until coverage clears. Whether the first-mortgage payment joins the qualifying payment on a second lien is something to confirm on the file, because the lender’s coverage calculation governs.
A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower.
HELOC, Cash-Out Refinance, or Both?
A DSCR cash-out refinance replaces the first mortgage and pays out a lump sum. A DSCR HELOC leaves the first mortgage alone and gives you a revolving line. The NerdWallet explainer notes that investment-property HELOCs are not offered by every lender and typically allow less borrowing than a primary-home line.
| Factor | DSCR HELOC | DSCR cash-out refinance |
|---|---|---|
| First mortgage | Stays in place (second lien) | Replaced |
| Funds | Revolving draws, 5-year draw period | One-time lump sum |
| Reviewed on | Rent, 1.10x stress test | Rent, per program |
| Best fit | Keep a low first mortgage, recycle equity | Need maximum cash in one draw |
If a construction-to-permanent loan carries a first mortgage you want to keep, the line fits. If the first mortgage is unattractive or the property is paid off and you want a lump sum, compare the cash-out path.
What Are the Draw and Repayment Terms?
The structure is a 5-year interest-only draw period on the drawn balance, then a 25-year fully amortizing repayment period, for a 30-year maturity. The rate is variable. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000. Later draws are at least $5,000 each. Lines start at $50,000.
On the smallest lines, that means the whole line is drawn at closing. Don’t plan on a large undrawn cushion. The CFPB also points out that lenders can freeze or reduce a line if value falls or finances change, which matters for anyone treating a line as standing capital.
What Does the File Need?
- Proof the construction loan was paid off or converted (payoff letter or closing statement).
- Settlement statement or title records showing the title-holding date.
- A signed lease in place, plus rent receipts if a lease above market rent is being used.
- Entity documents if vested in an LLC, subject to lender program eligibility. Members sign as guarantors, and a title holder who is not a borrower signs a non-borrowing owner acknowledgment.
- Hazard insurance covering both liens, plus flood coverage where required.
- Valuation access for the inspection or full appraisal.
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 a personal income calculation. Credit still matters: 720 minimum on a second lien, 700 on a first lien, no 30-day mortgage late in the last 12 months, and 48 months since a bankruptcy, foreclosure, short sale, or deed-in-lieu. No reserves or cash to close are required. Borrowers must be US citizens, permanent residents, or non-permanent residents with a Social Security number.
Where Do These Files Break?
Three spots come up in structure, not statistics.
Lien position. The line is only a standalone second lien behind a kept mortgage or a standalone first lien on a mortgage-free rental. A construction loan still open means neither exists.
Property type. Rural-designated property, condotels, row homes, leaseholds, land trusts, modular and log homes, mixed-use, and properties with a solar lien are outside this lane. So is a property listed for sale in the prior 2 months.
Exposure. The program caps a borrower at 5 loans or $2,500,000. A builder with several recent completions should count them.
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. Tax treatment varies; consult a qualified professional.
Key Terms Defined
CLTV: the first mortgage balance plus the new line, divided by the property’s value.
DSCR: gross monthly rent divided by the qualifying payment.
Stress payment: a fully amortizing payment on the entire credit limit at the start rate plus 2 percentage points.
Seasoning: the time rules that keep a recently bought, refinanced, or built property out of the program.
Lien position: whether the line sits first or behind another mortgage.
Frequently Asked Questions
Can I get a DSCR HELOC while the construction loan is still open?
No. The construction loan has to be paid off or converted first, because the line is sized on equity that remains after every existing lien. A construction-to-permanent conversion leaves a first mortgage, and the line can sit behind it as a second lien.
How long do I wait after the build finishes?
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 conversion or payoff refinance can reset the first clock.
Does the cost of the build set my limit?
No. The limit comes from the current appraised value, the leverage tier for your credit score and lien position, and the rent test. Cost and projected value do not count.
Can the LLC that owns the rental hold the line?
Yes, on investment property, subject to lender program eligibility. The members sign as guarantors. That is a difference from many investment HELOCs underwritten on personal income, which can be limited to individual owners, per investor discussion on BiggerPockets.
What if I need more cash than the line allows?
Compare a DSCR cash-out refinance of the finished property. Lendmire’s bank statement HELOC coverage covers the alternative for borrowers who qualify on bank deposits instead of rent. The complete DSCR loans guide lays out the full range.
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; this is not a commitment to lend, and every file is underwritten individually.
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. CFPB – What You Should Know About HELOCs
2. CFPB
3. BiggerPockets – HELOC based on after-renovation value
4. NerdWallet – HELOC on an investment property
5. BiggerPockets – HELOC on an investment property
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 for Refinancing a Balance Into a New HELOC? · How Much Can You Borrow on a DSCR HELOC Past Conventional Loan Limits?
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.