The Quick Read: No single provider is the top choice for every investor, because the right equity line for funding a second property depends on which property secures it, how much equity that property holds, your credit profile, and how the purchase lender treats borrowed down payment funds.
- A HELOC (home equity line of credit) supplies cash for the down payment. It does not finance the new property.
- On an investment property, the network ceiling is 70% CLTV (combined loan-to-value, all liens against the property).
- Lines on a primary residence or second home can reach higher CLTV tiers, but only with stronger credit.
- The new rental is usually financed with a separate DSCR loan, which looks at the rent, not your paycheck.
- Lendmire is a broker. It matches your file to a wholesale lender instead of pointing you at one company.
Why This Article Does Not Hand You a Ranked List
Most searches for this topic want a list of company names. Here is the honest problem with a list: the best program for your situation depends on your equity, your credit, and the property that will secure the line. A ranking can’t see any of that.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
Lendmire works as a mortgage broker. It places files with select lenders in its wholesale network, and each lender sets its own rules. So this article does something more useful. It shows how those lenders’ programs work, who fits, and what to prepare before you ask.
Lendmire’s HELOC programs are available only in its 16 full-service states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. That is narrower than its 41-market DSCR footprint. If your property sits outside those 16, the DSCR side of the plan still may apply, subject to program terms.
How a HELOC Actually Funds a Second Property
A HELOC is a revolving credit line secured by property you already own. You can’t pledge a house you haven’t bought yet, so the line sits on something else: your primary home, a second home, or an existing rental.
The money then becomes your down payment and, in some cases, reserves. The new property gets its own mortgage.
Here is the sequence in plain steps:
1. Open the line on the property you own, before you go under contract on the new one.
2. Draw the funds you need for the down payment.
3. Document where that money came from, since the purchase lender will ask.
4. Close the purchase loan on the new property, usually a DSCR loan for a rental.
5. Pay the line down, or refinance it out, on a plan you set in advance.
Step one matters because the line is its own loan, with its own appraisal or valuation rules and its own credit review. Opening it in the middle of a purchase adds a moving part nobody needs.
What Underwriting Does at Each Step
Underwriting treats the two loans as separate files that touch each other. Both lenders care about the other loan, but they check different things.
The HELOC lender looks at the property securing the line
Across Lendmire’s wholesale network, the line lender checks equity, credit, and debt load. Here are the main program figures:
- Credit: The program floor is 600. A second-home line needs at least 640, and an investment-property line needs at least 700.
- Debt-to-income (DTI): The maximum is 50%, and 45% for credit profiles from 600 to 679. A ratio above 45% needs a 680 minimum. The lender reviews your file on the interest-only payment calculated on the maximum draw.
- Valuation: Lines at or below $500,000 ordinarily run an automated valuation instead of a traditional appraisal. A higher CLTV may require a secondary valuation. Every line above $500,000 needs a full appraisal, and you can always ask for one.
- Line size: Lines run from $25,000 to $750,000, with a Michigan floor of $10,000.
Note the DTI test. The HELOC lender does count your other debts, so it is an income-and-debt review of you. That is the opposite of how a DSCR purchase loan works.
The purchase lender looks at the new property
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. DSCR means debt service coverage ratio. You get it by dividing the monthly rent by the monthly PITIA (principal, interest, taxes, insurance, and HOA dues if any).
Your HELOC payment is not inside that ratio. The ratio only compares the new property’s rent to the new property’s payment. But your bank account still pays the HELOC, so the line still has to fit your real finances.
Clearing a coverage ratio of 1.00 is also not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses all sit outside the calculation.
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.
On the purchase loan, most files land at 75%–80% LTV, which means 20%–25% down. Select programs reach 85% LTV with roughly a 700+ score. A coverage ratio of 1.00 is where many select programs start, while a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Stronger ratios open better leverage and pricing. Reserves commonly run around 6 months of PITIA, though they vary by lender, leverage, and loan size.
The complete DSCR loans guide walks through the full qualification picture.
The question borrowed funds raise
Purchase lenders want to know where the down payment came from. Some accept funds drawn from an equity line, and some add conditions, such as documentation or extra reserves. Treatment differs by lender and program.
Conventional lending is more settled on this point. The Fannie Mae Selling Guide treats borrowed funds secured by an asset as an acceptable down payment source. DSCR loans are non-agency, so that rule does not govern them. It does explain why you hear conflicting stories from other investors.
The practical move is simple. Ask the purchase lender, in writing, how it treats line-funded down payments before you draw a dollar. A broker who shops several wholesale lenders can ask that question of more than one program at once.
Which Type of Provider Fits Which Borrower?
Investors often ask who writes these lines. The answer sorts by provider type, not by brand:
| Source type | Often fits | Watch for |
|---|---|---|
| Big banks | Existing customers with a primary-home line | Strict limits on investment collateral |
| Credit unions, local banks | Borrowers with a local relationship | Product limits vary by institution |
| Digital lenders | Straightforward primary-home equity | Narrow property and occupancy rules |
| Broker with wholesale network | Mixed profiles, several property types | Program availability by state |
No row is the winner. A borrower with a strong primary-home equity position and a long banking history may do well with their current bank. A borrower with a second home, a condo that isn’t warrantable, or a multi-property portfolio may need a lender matched to that specific property. That is where a broker’s multiple-lender view helps.
The Structures and Variations That Exist
HELOC programs differ in how the draw and repayment work, and the differences change your risk.
The market-wide picture comes first. The CFPB’s HELOC brochure describes two phases: a draw period, then a repayment period. Some plans allow interest-only payments during the draw. With a variable rate, payments can change even if you borrow nothing more.
When the draw ends, a lender may set a schedule to repay the full balance, often over ten or 15 years. Or the whole balance may come due, which can force a refinance. Experian says draws usually run five to 10 years with a repayment period commonly around 20 years, and it warns that some lines carry a balloon payment.
Here are the structures in Lendmire’s network, on primary residences and second homes:
- The 3-year draw structure: a 3-year interest-only draw, then a 17-year fully amortizing repayment. Tennessee shortens it to 3 years and 12 years.
- The 5-year draw structure: a 5-year interest-only draw, then a 25-year fully amortizing repayment. Tennessee shortens it to 5 years and 10 years.
Investment-property lines run the 5-year draw structure only. On both structures, at least 75% of the line is drawn at closing. Pricing floats across the draw and repayment periods and never converts to fixed. Each quoted figure carries its own structure’s terms, so compare like with like.
That fixed-draw-at-closing rule changes how you think about the line. You aren’t opening a dormant safety net. You are taking most of the line on day one, so the borrowed balance is real from the start.
Leverage Limits by Occupancy
CLTV caps depend on occupancy, and they are the part people most often get wrong.
On an investment property, the network ceiling is 70% CLTV. There is no tier above it.
On a second home, the CLTV ceiling steps up with credit, with a maximum line of $500,000:
| Credit score | Max CLTV (second home) |
|---|---|
| 720+ | 90% |
| 680 to 719 | 85% |
| 660 to 679 | 80% |
| 640 to 659 | 75% |
The 90% CLTV tier on primary residences and second homes exists only at a 720-or-better credit profile. A line above $500,000 is for primary residences only. It needs a credit profile of 700 or better (720 on the 5-year draw structure), caps at 75% CLTV, and requires a full appraisal.
Texas adds a wrinkle. A Texas primary residence is a homestead and caps at 80% combined loan-to-value, so the higher tiers never apply there. Texas second homes and investment properties follow the standard tables. New Mexico and Ohio also tie their CLTV caps to the credit profile.
Treat any other CLTV figure you see for those states as a broader-market number, not a Lendmire network rule. Use the network figures above for planning.
Where the General Rule Breaks
The basic plan is a line on one property and a DSCR loan on another. These edge cases break that tidy picture.
The LLC problem. Many investors hold rentals in an LLC. The HELOC programs here require title held by the individual borrower or an inter vivos revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A property already deeded to an LLC needs a vesting change, or a DSCR cash-out instead. DSCR loans, by contrast, can be made to LLC-titled entities, subject to lender program eligibility.
Property types. Single-family, 2–4 units, PUDs, townhomes, and condos, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, and commercial, mixed-use, or agricultural-zoned property are not eligible on either structure. Modular factory-built homes are eligible on the 5-year draw structure only.
Listed properties. A property listed for sale, or listed within the past 60 days, is ineligible in NC, PA, TN, TX, and WA.
Credit history. A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure history splits by program: one seasons a foreclosure in 7 years and a deed-in-lieu, pre-foreclosure, or short sale in 4. The other declines that history entirely. Investment files follow the 7-and-4-year path.
Portfolio size. You are limited to three lines. Combined exposure caps at $2,000,000 on the 3-year draw structure and $750,000 on the 5-year draw structure. An owner with more than 15 financed properties isn’t eligible.
Lien position. The line can sit in first or second lien position. If you plan to pull equity from a property that you are also refinancing, the order of liens matters, so settle it with both lenders before either loan moves forward.
Foreclosure exposure. Because your own property secures the line, missed payments put that property at risk. Benzinga notes that failing to pay can mean foreclosure on the property securing the line. That is the main trade you’re making, and it is worth saying plainly.
Worked Example: Two Tests, Two Properties
Picture an investor who owns a primary home with strong equity and a 720+ credit profile. The investor wants a rental priced at a round figure and plans to put 25% down on a DSCR purchase. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
The plan clears two separate tests. The first test is the line: enough equity in the primary home at the occupancy-tier CLTV, plus a qualifying DTI. The second test is the rental: rent that covers the new property’s PITIA at a coverage ratio the DSCR lender accepts, plus reserves.
Suppose the rental’s rent covers its payment at roughly 1.2x. That is a healthy ratio on the DSCR side. But the investor also carries an interest-only HELOC payment on the primary home, paid from personal cash flow. If the rental’s net income after repairs and vacancy can’t help carry that line, the investor’s own budget does.
Now change one input. If the same investor tried to secure the line on an existing rental instead of the primary home, the ceiling falls to 70% CLTV, the credit minimum rises to 700, and the title must be in the individual’s name. Same borrower, same goal, tighter limits.
The strongest files clear both tests: enough equity and enough rental coverage. A bigger down payment lowers the new loan’s monthly payment and can lift the DSCR. It never erases leverage caps, credit floors, reserve rules, or property eligibility.
Key Terms Defined
HELOC: A revolving credit line secured by property you own, with a draw period followed by repayment.
CLTV (combined loan-to-value): All loans secured by a property, added together, divided by its value.
DSCR: Monthly rent divided by the monthly PITIA, used to judge whether a rental covers its own payment.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly obligation on a property.
Draw period: The stretch when you can borrow from the line, often with interest-only payments.
Interest-only payment: A payment that covers only interest, so the balance does not fall.
Reserves: Liquid funds a lender wants you to hold after closing, usually counted in months of PITIA.
Vesting: How title is held, such as an individual, a revocable trust, or an LLC.
What the Decision Looks Like in Practice
A line is a tool for investors with equity and limited cash. It also puts a floating-price balance on a long-term deal, which is the main argument against it.
Before you apply, work through these questions:
- Which property will secure the line, and what is its occupancy type?
- Who holds title? If it’s an LLC, fix that first.
- What CLTV does your credit profile allow for that occupancy?
- Will the purchase lender accept line-funded down payment money, and how does it want it documented?
- Do you have a plan to pay the line down or refinance it?
- Does your own budget carry the line payment, apart from the rental’s coverage ratio?
A short hold, such as a renovate-and-refinance plan, suits a floating balance better than a permanent hold. If you plan to keep the property for years, think about whether a different source of cash fits the goal.
Frequently Asked Questions
Can I use a HELOC as the down payment on a rental?
Often yes, but the purchase lender decides. Some accept line-funded down payments with documentation, and others add conditions. Ask before you draw, and get the answer in writing.
Can a HELOC secure the property I’m buying?
No. The line must sit on property you already own, because you can’t pledge a house before you hold title. On Lendmire’s network, an investment-property line caps at 70% CLTV. Second homes and primary residences allow higher tiers with stronger credit.
Does the HELOC payment count in my DSCR?
No. The ratio compares the new rental’s rent to its own PITIA. Your HELOC payment still comes out of your cash flow, so budget for it separately from the coverage ratio.
Can my LLC take out the line?
No. These programs need title held by the individual borrower or an inter vivos revocable living trust. A property already deeded to an LLC needs a vesting change or a DSCR cash-out instead, subject to program terms.
What happens when the draw period ends?
Repayment begins. On Lendmire’s network, the 3-year draw structure moves to a 17-year amortizing repayment and the 5-year structure to 25 years, with Tennessee shortened. Because the price floats and never converts to fixed, plan for the change before it arrives.
Next Steps
If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Reach the team at 828-256-2183, and every file is reviewed individually, subject to lender guidelines and not a commitment to lend.
For most investors, the cleanest sequence is to settle the equity line first, line up the DSCR purchase second, and keep the second property’s coverage ratio healthy enough that the whole plan still works if the line’s payment changes.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges home equity lines of credit in its 16 full-service states through wholesale lenders, on primary residences, second homes and investment properties. 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. Fannie Mae Selling Guide B3-4.3-15
3. Experian: What Is a Draw Period on a HELOC
4. Benzinga: HELOCs on Investment Properties
This article is part of Lendmire’s HELOC & home equity loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Top Investment Property HELOC Providers Without Taking an Immediate Draw · Top DSCR HELOC Providers in Second Position on a Rental Held in an LLC · Top DSCR HELOC Providers for Using Rental Equity to Buy Another Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.