The Quick Read: On a rental you keep financed, you can borrow up to 70% combined loan-to-value (the first mortgage plus the new line, divided by value), at a 720 credit score or better, with line sizes from $50,000 up to $500,000, through select programs and subject to underwriting. Your final number is the smaller of that equity room and what the rent supports at 1.10x coverage.
- A second lien (a line behind your existing first mortgage) needs a 720 score and is the only option while a first mortgage stays in place.
- A first lien (a rental with no mortgage) reaches 75% LTV at a 740 score and 70% LTV at 700 to 739 on lines up to $500,000, then 65% LTV at 720 or better on lines above $500,000 up to $1,000,000.
- The rent qualifies the line, tested against a stress payment on the entire credit limit.
- Most of the line is drawn at closing, as the draw rules later in this article explain.
- Availability covers 15 of Lendmire’s 16 licensed states. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
“Richmond Hill” is a name shared by several towns, so treat it here as a reader label, not a market. The sizing math below is the same wherever your rental sits, as long as the property is in one of the program’s states.
How Do You Size the Line Step by Step?
Your maximum line is the CLTV ceiling times the property value, minus every lien already recorded. Then the program’s line limits apply, and then the rent test. Whichever of those three is smallest controls. Run them in this order.
1. Set the ceiling. On a second lien at a 720 score or better, the ceiling is 70% CLTV.
2. Subtract what you owe. Take 70% of the property’s value and subtract your first mortgage balance. What is left is your equity room.
3. Check the line limits. Lines start at $50,000 and a second lien tops out at $500,000. If your room is under $50,000, there is no line to write.
4. Run the rent test. The rent has to cover a stress payment on the whole line at 1.10x. A bigger line means a bigger test payment.
5. Take the smallest answer. Equity room, line cap, or rent coverage, whichever is lowest, is your borrowing power.
Picture a rental where your first mortgage sits at 50% of value. The room under a 70% ceiling is 20% of value. If the first mortgage sits at 65% of value, the room is only 5% of value, which on most rentals falls short of the $50,000 minimum. Same property, very different outcome.
Lenders have long set a line limit as a percentage of the home’s value less what you owe, and the CFPB’s HELOC booklet walks through that same logic with an illustrative percentage. The ceiling on a rental line is its own number, set by the investor program, and it is lower than what many owners assume from their raw equity.
Key Terms Defined
DSCR (debt service coverage ratio) is the rent divided by the payment the lender tests it against. A result of 1.10x means rent is 10% above that payment.
CLTV (combined loan-to-value) is every loan secured by the property, including the new line, divided by the property’s value.
Lien position is where a loan stands in line for repayment. A second lien sits behind your first mortgage. A first lien has nothing ahead of it.
Draw period is the stretch when you can borrow from the line. Here it lasts 5 years, with interest-only payments on the drawn balance.
Seasoning is the waiting period a lender wants after a purchase or refinance before it will lend again on the property.
Stress payment is a test payment set above the line’s starting cost, used only to qualify you. It is not what you will actually pay.
What Are the Leverage Tiers?
Leverage depends on lien position, credit score and line size. These are ceilings, never offers, and every file is underwritten individually.
| Position | Credit score | Ceiling | Line size |
|---|---|---|---|
| Second lien | 720+ | 70% CLTV | $50,000–$500,000 |
| First lien | 740+ | 75% LTV | Up to $500,000 |
| First lien | 700–739 | 70% LTV | Up to $500,000 |
| First lien | 720+ | 65% LTV | Over $500,000 to $1,000,000 |
Two points trip people up. First, a first lien exists only on a rental with no mortgage. If you keep a first mortgage, your line is a second lien, and that tier starts at a 720 score. Second, the leverage tiers apply to every eligible property type, so a condominium does not get its own special figure.
A declining-market flag on the property lowers the ceiling by 5 points. Some locations carry lower ceilings still. The lender’s valuation decides all of this, so treat your own estimate of value as a starting point.
Banks that lend on rentals often ask differently. NerdWallet reports that a typical investment-property HELOC at a bank calls for at least 20% equity and that not every lender offers one. Across Lendmire’s wholesale network, the DSCR HELOC works from the tiers above instead, and the rent drives lender review.
How Does the Rent Test Limit What You Borrow?
The rent test caps the line even when the equity is there. The program divides gross monthly rent by a qualifying payment, and the result must reach 1.10x. That payment is a fully amortizing payment on the entire credit limit at the starting rate plus 2 percentage points. It covers principal and interest only. Taxes and insurance are not part of it.
Notice what that means. The test runs on the whole line, not on the amount you plan to draw. Double the line and the test payment roughly doubles, so coverage falls as the line grows. A rental with thin rent can have plenty of equity and still support only a smaller line.
Rent is the lesser of the appraisal’s market rent (Form 1007) 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 1 vacant unit.
On a second lien, confirm on the file how the lender treats the first-mortgage payment in the coverage calculation. The lender’s own calculation governs, and any worked example here is illustrative only.
The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. There is no traditional personal-income documentation: no W-2s or personal income calculation. The rent, lease, credit report and valuation are all documented. Because these are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
What Shrinks the Number?
Five things commonly pull the figure below what you expected.
Valuation. Lines up to $400,000 use an automated valuation with a confidence score of 85 or better, paired with a property inspection report, or a full interior appraisal. Lines above $400,000 take a full interior appraisal (Form 1004, 1073 or 1025). Appraisal waivers are not accepted. If the value lands below your estimate, the equity room falls with it.
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). A recent BRRRR refinance can therefore put the line on hold.
Credit tier. The score is the lender’s own report, and the floor depends on the lien: 720 on a second lien, 700 on a first lien. There must be 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.
Rent. A low appraisal rent or a lease below market lowers the supportable line, as covered above.
Exposure. The program allows at most 5 loans or $2,500,000 per borrower. Equity does not pool across properties. Each rental gets its own line sized on its own value, lien and rent.
Which Properties and Borrowers Are Eligible?
Eligible properties include single-family homes, PUDs, townhomes, two-to-four-unit buildings, warrantable and non-warrantable condominiums, and lots up to 10 acres. The program is for non-owner-occupied rentals only. It is never offered on your own home or a second home.
Not eligible on this 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 buildings, a property listed for sale in the prior 2 months, and a property with a solar lien.
Borrowers can be U.S. citizens, permanent residents, or non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible. Vesting in your LLC is allowed, subject to program terms, with the members signing as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. No reserves and no cash to close are required.
The program is offered in Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington. Check that your property sits in one of them before you run any numbers.
What Do the Draw Rules Mean for Your Plan?
You cannot open a line and leave it idle. 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 is drawn at closing. Later draws are at least $5,000 each.
The structure runs on a 5-year interest-only draw period on the drawn balance. Then comes a 25-year fully amortizing repayment period, for a 30-year maturity. The rate is variable.
The CFPB describes a HELOC as an open-end line of credit you can borrow against repeatedly, and warns that falling behind can cost you the property. On a rental line, that property is your rental. Two features deserve respect. The variable rate can move your cost. And when the interest-only period ends, principal payments begin.
Should You Borrow the Maximum?
Not by default. Maximum borrowing leaves the thinnest cushion in exactly the places a rental gets squeezed: a vacancy, a repair, a variable-rate adjustment. Because the program requires most of the line drawn up front, size the line to a purpose you can name, such as a down payment on the next rental or a renovation.
Run your own test with a margin. If the rent only just clears 1.10x at the stress payment, picture a month of vacancy and ask whether the rental still carries both loans.
The line also uses up equity you might want later. A line behind your first mortgage reduces what a future refinance can pull. If your first mortgage is already a good one, a line leaves it alone. A cash-out refinance replaces it.
Checklist for Landlords Before You Apply
- Is the property a one-to-four-unit non-owner-occupied rental in one of the 15 states?
- Do you know your first mortgage balance and whether the property is a second-lien or first-lien case?
- Is your lender-reported credit score at or above the tier you need (720 for a second lien, 700 for a first lien)?
- Has the rental cleared both 6-month seasoning clocks?
- Do you have a lease in place, and if rent is above market, three months of receipts?
- Is the property free of the exclusions: rural designation, condotel, solar lien, recent listing?
- Is the line big enough to meet the $50,000 minimum and sensible enough that the 80% closing draw fits your purpose?
For the wider picture on how these programs fit together, see the complete DSCR loans guide.
Frequently Asked Questions
How long must I own a rental before I can open a DSCR HELOC?
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 or cash-out refinance on the property therefore delays eligibility.
Can my LLC be the borrower?
Vesting in your LLC is allowed on investment property, subject to program terms. The members sign as guarantors. If a title holder is not a borrower, that person signs a non-borrowing owner acknowledgment and the security instrument. The borrowers on the line also do not have to match the borrowers on the first mortgage.
Does a condo or small multifamily qualify?
Warrantable and non-warrantable condominiums and two-to-four-unit properties are eligible property types. Condotels, row homes and rural-designated property are not. For two-to-four units, at most 1 unit may be vacant. The same leverage tiers apply to every eligible property type, subject to underwriting.
Can I draw only part of the line at closing?
At least 80% of the line must be drawn at closing, and the closing draw is never under $50,000. On the smallest lines, the whole line is drawn. After that, you can make later draws of $5,000 or more during the 5-year draw period.
Is the interest deductible?
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.
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, so the lender reviews eligibility and approves each file.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges DSCR home equity lines of credit on rental property in 15 of its 16 licensed states (every licensed state except Tennessee) through wholesale lenders. The line is qualified on the rental’s rent rather than the owner’s personal income, and every line is subject to the lender’s guidelines and full underwriting. 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 home equity lines of credit (booklet)
2. NerdWallet
3. CFPB
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a DSCR HELOC Works for Using Home Equity on College Tuition · DSCR HELOC Requirements in a Declining Market · DSCR HELOC Rules for Landlords Who Relocate Overseas
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.