The Quick Read: It depends on the rental, not the severance: on a DSCR HELOC the line size comes from the property’s equity and rent coverage, so a severance package neither raises the limit nor counts against you, and the line runs up to $500,000 at 70% combined loan-to-value on a second lien, subject to underwriting. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your severance matters in a different way: it is the cash that carries you if the rent stops.
- A second lien reaches 70% combined loan-to-value (CLTV) at a 720 credit score or better, on lines from $50,000 to $500,000.
- A first lien on a rental with no mortgage reaches 75% loan-to-value (LTV) at 740 or better, and 70% from 700 to 739, on lines up to $500,000.
- First-lien lines above $500,000 run to $1,000,000 at a 65% ceiling.
- The rent must cover a stress payment on the whole line at 1.10x or better.
- Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
How Large a Line Can the Rent and Equity Support?
Two tests set the ceiling, and the smaller one wins. The first is equity: value times the leverage cap, minus what is already owed. The second is coverage: the rent has to clear 1.10x against a stress payment on the entire line.
Start with equity. On a second lien, the first mortgage balance plus the new line, divided by value, cannot exceed 70%. That cap applies at a 720 score or better. Below 720 there is no second-lien tier at all. If the first mortgage already uses 55% of value, only 15 points of CLTV remain for the line. On a rental with no mortgage, the line is a first lien. There the cap is 75% LTV at 740 or better and 70% from 700 to 739, on lines up to $500,000. Above $500,000, lines run to $1,000,000 but the ceiling drops to 65%. Lines start at $50,000. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower. These are ceilings through select programs, never offers.
Now coverage. The qualifying payment is a fully amortizing payment on the entire credit limit at the start rate plus 2 percentage points. It is principal and interest only, and taxes and insurance are not in it. Because the test runs on the full limit, a bigger line makes the test harder even if you never draw all 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. A lease must be in place. A two-to-four-unit property can have at most one vacant unit. On a second lien, confirm on the file how the lender treats the first-mortgage payment, because the lender’s own coverage calculation governs.
The practical result: the maximum line is whichever is lower, the equity room or the line the rent can support at 1.10x. Neither number involves your paycheck, your severance, or a debt-to-income ratio.
Does Severance Count as Income on a DSCR HELOC?
No. The line is not underwritten on your personal income, so severance is not counted for you or against you. There is no traditional personal-income documentation: no W-2s, pay stubs or debt-to-income ratio. The file still has documents: the lease, the credit report, the valuation and the title work.
That is the sharp difference from an income-based investment HELOC, where the lender underwrites your income. Severance is a weak input there because it ends. A lump sum or a short run of payments is hard to treat as a lasting source of repayment. A DSCR line avoids that problem by putting the rental’s rent at the center of the file, and the owner’s employment status stops being the test.
Qualification is not unlimited, though. The program reads your credit directly:
- 720 minimum on a second lien, 700 on a first lien, using the lender’s own credit report.
- No 30-day mortgage late in the last 12 months.
- 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu.
- At most 5 loans or $2,500,000 per borrower with the program.
- U.S. citizens, permanent residents and non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible.
No reserves and no cash to close are required, so severance does not need to be shown to qualify. Job loss also does not change a clean credit file. A missed payment while you are between jobs does, and that is where severance earns its place.
Qualifying Amount vs. Prudent Amount
The program will size the line to the rent and equity. Your cash runway should size what you actually take. These are different numbers, and the gap between them is the real decision.
Three mechanics create the gap:
1. Most of the line is drawn at closing. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000. On the smallest lines, that means the whole line. You cannot open a large line and leave most of it as a standby reserve. If you want a cushion, the cushion is the part of a smaller line you size to fit.
2. The draw period is interest-only, then the payment steps up. The draw period is 5 years interest-only on the drawn balance. Then a 25-year fully amortizing repayment period begins, with a 30-year maturity. The step-up at the end of the draw period is the largest payment change in the life of the line. The rate is variable, so the payment can move while you have no paycheck.
3. Vacancy stops the cash, not the payment. The test is passed on paper, using the lease and market rent. In a duplex, one vacancy removes half the rent while the full payment continues. The program allows one vacant unit in a two-to-four-unit property. A line sized to just clear 1.10x gives you almost no room for that.
A simple sizing habit helps. Take the severance after tax, not the gross figure. Set aside the months of carrying cost you want to cover on every property you own, including this one. Then size the line so the interest-only payment on the drawn balance fits inside what the rent still covers when one unit sits empty. If the rent clears 1.10x with only a hair to spare, the number may qualify, but it is thin.
A larger line gives more capital to reinvest, while a smaller line leaves more room when income is uncertain. The choice depends on what the money does. Capital that buys or improves a rental with its own lease behaves differently from capital that sits unused.
Where Severance Helps and Where It Doesn’t
Severance plays a different role in each product. The table separates them.
| Product | What qualifies the file | Role of severance |
|---|---|---|
| DSCR HELOC (this program) | Rent coverage, equity, credit, valuation | Not counted; personal cash cushion only |
| DSCR cash-out refinance | Rent coverage on a new first mortgage | Not counted; replaces the existing first mortgage |
| Income-based investment HELOC | Personal income and debt-to-income | Weak input because it ends |
| Primary-home HELOC | Personal income; owner-occupied | Weak input; a different, owner-occupied product |
Two points follow from the table. A DSCR HELOC is never offered on the home you live in or on a second home, so a laid-off owner who wants to borrow against the primary home is in a different product with different rules. And a DSCR cash-out refinance reaches equity by replacing the first mortgage, while the DSCR HELOC sits behind the first mortgage you keep. For an owner with a first mortgage worth keeping, the standalone second lien leaves it untouched. Lendmire’s piece How to Qualify for an Investment Property HELOC While Living on a Severance Package covers the income-based path in more depth.
The Valuation and Property File
The valuation path depends on line size. Lines to $400,000 use an automated valuation with a confidence score of 85 or better plus a property inspection report, or a full interior appraisal. Lines above $400,000 take a full interior appraisal on Form 1004, 1073 or 1025. Appraisal waivers are not accepted. Title work is a full policy on a first lien and on second liens above $400,000, with an owner-and-encumbrance report on smaller second liens. Hazard insurance covers both liens, and flood coverage is added where required.
Seasoning is where a recent buyer or refinancer gets stuck. 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).
Eligible properties are single-family, PUD, townhome, two-to-four-unit and condominiums (warrantable and non-warrantable), plus lots up to 10 acres. These are outside the program:
- rural-designated property
- row homes
- condotels
- commercial or agricultural property
- leaseholds
- land trusts
- age-restricted communities
- hobby farms
- modular and log homes
- land contracts
- mixed-use property
- a property listed for sale in the prior 2 months
- a property with a solar lien
The line can be vested in your LLC, subject to lender guidelines. The members sign as guarantors, and a title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. Lendmire’s complete DSCR loans guide walks through how the broader rent-based programs fit together.
Why Business Purpose Matters More When Income Is Down
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. That is the reason the line is sized on rent instead of pay.
The same point cuts the other way for a borrower living on severance. The federal rule that exempts business-purpose credit, Regulation Z as published by the CFPB, turns on the primary purpose of the credit. The official commentary, reproduced in Bankers Online’s annotated text of the rule, says the creditor decides in each case whether a transaction is primarily for an exempt purpose. A label on a form does not settle it. Drawing the line to pay household bills is the clearest way to undercut the business purpose of the loan. Use draws for the rental business: improvements, a down payment on the next rental, or paying down other investment debt. Tax treatment varies; consult a qualified professional.
Timing and Common Mistakes
Since personal income is not calculated, the order of events matters less than it would on a paycheck-based file. What matters is the property, so the timing questions are about the rental’s file. A lease must be in place before you apply, and seasoning clocks must have run.
These mistakes cause the most avoidable friction:
1. Counting gross severance as a cushion. Use the after-tax amount.
2. Sizing to the minimum. A ratio just above 1.10x leaves nothing for one empty unit.
3. Forgetting the stress payment runs on the whole limit. Asking for a larger line than you need makes the coverage test harder.
4. Assuming the line is a free standby reserve. At least 80% is drawn at closing.
5. Using draws for living costs. That weakens the business-purpose character of the loan.
6. Applying on the home you live in. The program covers non-owner-occupied rentals only.
7. Skipping the lease. A lease in place is required, and rent used for lender review is the lesser of market rent and the lease, unless three months of receipts support a lease above market.
Key Terms Defined
DSCR (debt service coverage ratio): The property’s gross monthly rent divided by the qualifying payment, which must reach 1.10x on this program.
CLTV (combined loan-to-value): The first mortgage balance plus the new line, divided by the property’s value.
Draw period: The 5-year interest-only stretch during which the drawn balance carries interest-only payments.
Stress payment: A fully amortizing payment on the entire credit limit at the start rate plus 2 percentage points, used only to test coverage.
Second lien: A loan recorded behind the first mortgage you keep, written as a standalone line on the rental.
Frequently Asked Questions
Can severance pay count toward the rent coverage ratio?
No. The coverage ratio is gross monthly rent divided by the qualifying payment, and personal income does not enter it. Severance does not raise the line, and it does not lower it. It stays your own cash for carrying costs, subject to lender guidelines.
Can I use a DSCR HELOC on the home I live in?
No. The program is for non-owner-occupied one-to-four-unit rentals only, and it is never offered on your own home or a second home. A home equity line on a primary residence is a different, owner-occupied product, and income decides that file.
How soon after buying or refinancing a rental can I open 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). Both clocks must be satisfied, and the settlement statement or note documents each one.
Does the line stay open if I take a new job or lose rent?
The line has a 5-year interest-only draw period, then a 25-year repayment period, with a 30-year maturity. A new job does not change those terms. Line agreements can also let a lender freeze or reduce an open line, so read that section of the agreement before relying on future draws.
Where is this program offered?
It is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington. Lendmire is a broker that places the line through a wholesale lender, and every file is underwritten individually.
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. Call 828-256-2183 or request a quote. Program details change, and nothing here is a commitment to lend.
For current guidelines and terms, see Lendmire’s DSCR HELOC programs page.
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, Regulation Z § 1026.3 (exempt transactions)
2. Bankers Online’s annotated text of the rule
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 as a Co-Owner Who Is on the Deed? · How Much Can You Borrow on a DSCR HELOC for Landlords Choosing a Lender? · How Much Can You Borrow on a DSCR HELOC With an Appraisal Below the Purchase Price?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- 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.