The Quick Read: A HELOC carries no spending restriction, so the approval that matters is the purchase lender’s, and no published list of banks that approve this exists because each bank and each purchase program sets its own rules on borrowed down payment funds. Lendmire is a mortgage broker, so it does not lend or rank banks. This article explains how the pieces fit and what the equity lines in its wholesale network look for.
- You need two approvals: one to open the line, and one from the lender financing the new property.
- Borrowed money is often accepted for the down payment but not for reserves.
- On an investment property, the network’s equity line tops out at 70% combined loan-to-value (CLTV). Primary homes and second homes can reach higher.
- A DSCR purchase loan tests the new rental alone, but your real cash flow carries both payments.
- Lines run on a variable rate, so the cost of the plan can change after you close.
Why Is There No List of Banks That Approve This?
There is no reliable list because “which bank offers the HELOC” and “which lender accepts the cash” are two different questions with two different answers.
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.
The first lender underwrites you and the equity in the collateral home. It generally does not police where the money goes. The second lender, the one financing the new property, decides whether drawn funds count as your down payment.
Large retail lenders vary widely on this. Some resist borrowed down payments, while many investors do it routinely, as this BiggerPockets discussion shows. Appetite for lines on investment properties also shifts, which is why a name that worked for one investor can stop working for the next.
That is the practical reason to work through a broker. Lendmire shops a network of wholesale HELOC lenders and matches the property, equity, credit profile, and combined leverage to a program. The lenders that write your file depend on your situation, and the best program for you is the one that fits it.
Key Terms Defined
HELOC: A home equity line of credit, a revolving loan secured by a property you already own, which you draw on as needed.
CLTV: Combined loan-to-value, the total of all loans on a property divided by its value.
DSCR: Debt service coverage ratio, which compares a rental’s monthly rent to its monthly principal, interest, taxes, insurance, and HOA dues (PITIA).
Seasoning: The time money must sit in your account before a lender treats it as your own.
Reserves: Cash left after closing that a lender wants to see as a cushion, separate from the down payment.
Collateral property: The property that secures the line, which is not the property you are buying.
How Does the Plan Work, Step by Step?
The sequence matters more than any single product: open the line first, confirm the purchase lender’s rules, then draw and document.
1. Open the line before you shop. The limit comes from equity, which is the property’s value minus what you owe, and a federal consumer-finance regulator booklet on HELOCs describes the line as a loan you borrow, spend, and repay as you go with your home as collateral. Lenders take a percentage of value and subtract your existing mortgage.
2. Expect the HELOC lender to review you. Valuation, credit score, and debt-to-income ratio (DTI) set your limit and pricing.
3. Ask the purchase lender before you draw. Ask three separate questions: is borrowed money acceptable for the down payment, for closing costs, and for reserves? A program can pass one test and fail another.
4. Draw and move the cash to your own account. Keep a clean paper trail. Some purchase lenders want the funds to sit for a period, which is a seasoning rule that varies by program.
5. Close the purchase on a separate loan. The DSCR loan judges the new property’s rent against that property’s own payment. The line stays a separate debt on the other property.
6. Document the source. Expect to provide the line agreement, a statement showing the draw, and statements from the account that received it.
On a home that already has a mortgage, the line typically is a second mortgage that sits on top of the first, as the CFPB’s home equity explainer lays out. Each draw adds to what you owe, and repayments replenish the available credit.
What Do the Network’s Equity Lines Look For?
The ceiling depends on what kind of property secures the line. Here is how the select wholesale lenders in Lendmire’s network treat each type, subject to lender guidelines and full file review.
| Collateral property | Top CLTV | Minimum credit | Maximum line |
|---|---|---|---|
| Primary residence | 90% (720+ score) | 600 | $500,000 at 90% CLTV; $750,000 at 75% CLTV, 700+ (720 on the longer-runway program) |
| Second home | 90% (720+ score) | 640 | $500,000 |
| Investment property | 70% | 700 | $500,000 |
Those 90% figures exist only at a 720-or-better credit profile, and on a primary residence the 90% tier applies to lines up to $500,000. A primary home line above $500,000 caps at 75% CLTV and requires a full appraisal. Lines at or below $500,000 ordinarily use an automated valuation instead, though a higher CLTV may require a second valuation.
Investment lines follow a single structure: a five-year interest-only draw followed by a 25-year repayment period. Primary and second-home lines offer either a three-year draw with a 17-year repayment or a five-year draw with a 25-year repayment. At least 75% of the line is drawn at closing, and the pricing floats during both the draw and the repayment period without converting to fixed.
Other terms worth knowing:
- DTI tops out at 50%, and the lender reviews your file on the interest-only payment calculated on the maximum draw.
- Single-family, 2-4 unit, PUD, townhome, and condo properties are eligible, including non-warrantable condos.
- Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not eligible.
- Lines are written in first or second lien position.
- Availability is limited to 16 states, which is narrower than Lendmire’s DSCR footprint of 41 markets, including Washington, D.C.
One structural point catches investors. The line must be titled in your personal name or an inter vivos revocable living trust. An LLC, corporation, or partnership cannot hold title on these lines. If your rental already sits in an LLC, you would need a vesting change, or a DSCR cash-out refinance might be the better tool for pulling that equity.
Which Property Should Secure the Line?
Your primary home usually gives the strongest terms. An existing rental can secure a line too, but at a lower leverage ceiling and a higher credit minimum, as the table shows.
Investors often get stuck here, because lenders treat non-owner-occupied collateral differently from a primary home. Benzinga’s overview of HELOCs on investment properties notes that these lines use the investment property as collateral and that pricing is often higher.
Putting the line on your residence changes the risk. If the new rental underperforms, your home is the collateral, and the lender can take it if the debt goes unpaid. Because at least 75% of the line is drawn at closing, most of that balance starts accruing interest on day one rather than only as you borrow.
Where Does the General Rule Break?
Four areas tend to produce surprises, and a fifth, lender policy by loan type, ties them together.
Fully borrowed down payments. Some purchase programs accept a documented draw as the entire down payment. Others cap the borrowed share or want part of it from your own funds. When all of it is borrowed, you hold no real equity in the new property on day one, because both loans together equal the purchase price. A moderator in this BiggerPockets discussion on borrowing the whole down payment makes the same point.
Reserves. Borrowed funds are often accepted for the down payment and closing costs but excluded from reserves. On DSCR files, reserves vary by lender, leverage, loan size, and transaction type, and they commonly run around six months of PITIA. Because that cushion may need to be your own money, plan it separately from the draw.
Source versus timing. If a lender wants seasoning on borrowed funds, a draw made the week before you write an offer can create a documentation problem. Drawing early and keeping the funds in one account makes the file easier to read.
Tax treatment. 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.
Loan types. Lender policy on borrowed funds is not the same across loan types, so the next section looks at how a DSCR purchase loan treats the money.
How Does the New DSCR Loan Treat the Money?
A DSCR purchase loan reads the new property’s rent against that property’s own PITIA. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal income plays a smaller role than it would on a standard owner-occupied mortgage.
Here is how the pieces line up on a typical purchase through the network:
- Many purchase files sit at 75% to 80% LTV, which means 20% to 25% down.
- Select programs reach 85% LTV on a purchase, roughly a 15% down payment, with about a 700 score or better.
- Coverage of 1.00 is where many select programs start, and stronger ratios open better pricing and leverage.
- Credit floors run from 620 in parts of the network to about 660 on most programs, with 700 and above unlocking the strongest leverage tiers.
The line’s payment usually does not enter the DSCR ratio. A lender may still look at your overall picture, so confirm the treatment program by program. Clearing 1.00 also does not mean the property cash flows. Repairs, vacancy, management, utilities, and capital expenses all sit outside the ratio.
A larger down payment, drawn or not, lowers the new loan’s payment and can lift the coverage number. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
What Does Two Payments, One Rent Check Look Like?
Picture a duplex whose rent clears the purchase loan’s payment at roughly 1.2x. That passes the DSCR test, but the same rent also has to carry the line’s payment. As one BiggerPockets investor puts it, the property must be able to pay the first mortgage and the HELOC funds.
Run the stack through a few filters:
- Rate exposure. Line payments change as the variable rate moves, which the CFPB’s materials note, so a plan that works at closing can tighten later.
- Interest-only draw period. Payments are smaller during the draw, then step up when the repayment period begins. That step is the moment to have the rental stabilized.
- Combined leverage. Borrow most of the down payment on a purchase at the top of the leverage range, and your combined position across both properties sits very near full value.
- Revolving upside. You can repay the line from rental cash flow and reuse it for the next down payment, within the line’s limits.
The decision is a genuine toss-up for some investors. Preserving cash is attractive, but a thin rental and a variable payment on your own home is a stacked risk. Investors with strong coverage and real reserves have more room to use the line comfortably.
Common Misconceptions
A HELOC means zero down. The DSCR loan still needs a down payment. The line only changes where the cash comes from.
If the HELOC lender approves, the purchase lender must accept the cash. The two approvals are independent.
Every bank bars it, or every bank allows it. Experiences differ by lender and program, so the only reliable answer comes from the purchase lender you will actually use.
HELOC cash counts for reserves too. Often it does not.
The line’s payment counts in the DSCR. On most DSCR files, the ratio compares rent to the new loan’s PITIA alone.
What Should You Ask Before You Apply?
- Are borrowed funds acceptable for the down payment, closing costs, and reserves?
- Is there a cap on the borrowed share?
- Do you need seasoning or a specific paper trail on the draw?
- What reserve requirement applies at my leverage and loan size?
- Does the line’s payment enter any part of the review?
- Can the collateral property be titled in a form the line lender accepts? Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
A broker can run these questions across several wholesale lenders at once and match you to the program whose rules fit the plan. The complete DSCR loans guide explains the loan you would use on the new property.
Frequently Asked Questions
Can a HELOC be used as the down payment on an investment property?
Yes, if the purchase lender accepts borrowed funds. The line itself usually has no restriction on use, but the lender financing the new property sets its own rules on the borrowed share, seasoning, and documentation. Confirm those rules before you draw.
Which banks will lend a HELOC on a rental property?
No authoritative list exists, and lender appetite for lines on non-owner-occupied property changes often. Within Lendmire’s network, an investment-property line tops out at 70% CLTV with a 700 minimum score and a $500,000 maximum line, subject to lender guidelines. A broker can compare the programs that fit your property and credit profile.
Does the HELOC payment hurt my DSCR?
On most DSCR files, the ratio compares rent to the new loan’s payment only, so the line is not part of the calculation. The line still affects your real cash flow, and some lenders look at your overall picture, so ask each one how it treats the debt.
Can I use borrowed funds for reserves too?
Often not. Many programs accept borrowed money for the down payment and closing costs but want reserves from your own funds. Reserves commonly run around six months of PITIA, though they vary by lender, leverage, and loan size.
Can an LLC take out the equity line?
No. On the network’s equity lines, title must be held by you personally or by a revolving living trust, and LLCs, corporations, and partnerships cannot hold title. If your property is already in an LLC, a DSCR cash-out refinance may fit better, subject to program terms.
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.
Borrowing against one property to buy the next works best when the second property can carry itself, and that is the test every purchase lender is really running.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program guidelines. 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. BiggerPockets: Bank stated HELOC cannot be used as down payment
3. CFPB: Home equity loan vs. HELOC
4. Benzinga: HELOCs on investment properties
5. BiggerPockets: Using a HELOC for a rental down payment
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: Banks That Offer a DSCR HELOC for Investors Buying More Rentals · Banks That Offer a DSCR HELOC for a Down Payment on Your Next Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.