The Quick Read: Banks and credit unions that write home equity lines generally decide on your equity, credit, and debt load rather than on what you buy, while the lender on the vacation home decides whether borrowed funds count toward the down payment, so the answer depends on both lenders and on whether the property is a second home or a rental. No published list of approving banks exists, and this article does not offer one. A broker that shops several wholesale HELOC lenders can match the line to the file.
- A line on a home you already own can fund a down payment when the purchase lender accepts documented borrowed funds. The borrowed share and the reserve treatment vary by program.
- On a second-home line in Lendmire’s wholesale network, combined loan-to-value (CLTV) reaches 90% only with a 720-or-better credit profile, and the line tops out at $500,000.
- On an investment-property line, the ceiling is 70% CLTV, with a 700 minimum credit profile.
- Down payment funds and reserves are separate tests, and borrowed funds are commonly excluded from reserves.
- A line is a lien on a home, so missed payments put that home at risk.
Who Decides: The HELOC Lender or the Purchase Lender?
Both lenders decide, but on different questions. The bank or credit union writing the equity line looks at your equity, credit, and debt load. The lender financing the vacation home sets the rules on borrowed funds, and those rules are where files succeed or stall.
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.
That split is why “which banks offer this” is the wrong first question. A lender can approve your line and still find the purchase lender will not count the draw. The reverse also happens. A purchase lender may accept a documented draw, but you may not qualify for the line.
Expect one of two outcomes on the purchase side for the down payment itself:
- Some programs accept a documented draw as the full down payment.
- Some cap the borrowed share and want part of the cash to be your own seasoned funds.
Reserves are a separate test from the down payment, and borrowed money is commonly excluded from them.
Ask the purchase lender before you draw anything.
How a HELOC Works Before You Spend It
A HELOC is an open-end line of credit secured by the equity in a home. Equity is the home’s value minus what you owe on it. The Consumer Financial Protection Bureau describes a draw period during which you can borrow up to your limit, followed by a repayment period that is often ten or 20 years. It also warns that falling behind could cost you the home.
On a home that already has a mortgage, the line typically is a second mortgage. The same agency notes that HELOC payments usually move with an adjustable rate and the balance. Yahoo Finance confirms the line can be used toward a second home or investment property and that interest-only payments are typical during the draw period.
Two structure points matter for a down payment plan. The network’s lines are standalone, in first or second lien position. They also draw at least 75% of the line at closing, so interest starts on most of the balance right away. The pricing floats through both the draw and repayment periods and never converts to fixed.
What Lenders Look For on the Line
Equity, credit, and debt load decide the line. SmartAsset lists the same three factors. Here is how the network’s wholesale lenders treat each one.
- Credit. The program floor is 600, but second-home lines start at 640 and investment lines at 700, so the lowest scores apply only to primary residences. The score model is single-bureau, keyed to the primary wage earner. The report can be no more than 90 days old at closing, and rescores are not allowed.
- Debt load. The maximum debt-to-income ratio (DTI) is 50%. It drops to 45% for credit profiles from 600 to 679, which on a second-home line means the 640 to 679 profiles. A ratio above 45% requires a 680 minimum. The test uses the interest-only payment calculated on the maximum draw, not on what you plan to borrow.
- Valuation. Lines at or below $500,000 ordinarily use an automated valuation with no traditional appraisal. A higher CLTV may call for a secondary valuation. Every line above $500,000 needs a full appraisal, and a borrower can request one in any case.
- Derogatory history. On both wholesale programs, a bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure-family history splits by program on primary residences and second homes, and one program declines it entirely regardless of age. Investment files follow the seasoning path of 7 years for a foreclosure and 4 for a deed-in-lieu, pre-foreclosure, or short sale.
Programs and guidelines change, and every file is underwritten individually by the lender.
Second-Home Line Limits in the Network
On a second-home line, the credit tier sets the CLTV ceiling. These are program ranges, subject to lender guidelines and full file review.
| Credit profile | Max CLTV (second home) | Max line |
|---|---|---|
| 720+ | 90% | $500,000 |
| 700+ | 85% | $500,000 |
| 680+ | 85% | $500,000 |
| 660+ | 80% | $500,000 |
| 640+ | 75% | $500,000 |
An investment-property line is capped at 70% CLTV and runs only on the 5-year interest-only draw with a 25-year repayment. Lines over $500,000 are for primary residences only, so they sit outside the second-home table above. They need a credit profile of 700 or better (720 on the longer-runway program), cap at 75% CLTV, and require a full appraisal. That 75% cap applies to the larger line even where a smaller primary-residence line could reach a higher ceiling.
Two draw structures exist on primary and second-home lines. The first pairs a 3-year interest-only draw with a 17-year repayment. The second is a 5-year interest-only draw followed by a 25-year fully amortizing repayment. Some states shorten both. Any quoted figure belongs to its own program’s draw and repayment structure.
Which Home Carries the Line?
The line usually sits on your primary residence. That is where most borrowers hold their equity, and the primary-residence ceiling reaches 90% CLTV with a 720-or-better profile. Run the numbers on an owner with a first mortgage at 60% of home value and a 720-plus profile. A 90% CLTV ceiling on a primary residence leaves room for a line up to 30% of value, before the line-size limit and the DTI test apply.
A line can also sit on a second home you already own, or on a rental, under the tables above. Lenders that write lines secured by rentals are scarcer. An investor discussion on BiggerPockets describes banks and credit unions pulling back from investment-property lines. Some lines also restrict renting out the home that secures them, so read the occupancy terms before you sign.
Banks, Credit Unions, and Online Lenders: What to Ask
No list of approving institutions answers this question for your file. Large banks, credit unions, and online lenders all write equity lines, and each sets its own limits on second homes, rentals, and borrowed-fund use. The lenders that write your line depend on your equity, credit, state, and property.
A broker that works with several wholesale lenders matches the scenario to the program. Before you apply anywhere, ask these questions:
1. Do you allow the line on my primary residence when the draw goes toward another property?
2. What CLTV ceiling applies to my credit profile and occupancy?
3. Is the line quoted on a 3-year or 5-year draw, and what is the repayment term?
4. Does any rule limit renting out the home that secures the line?
5. What share of the line is drawn at closing?
6. Does the lender require a full appraisal, or will an automated valuation do?
Then ask the purchase lender three more:
1. Do you accept a documented HELOC draw as down payment funds?
2. Must any share of the down payment be my own seasoned money?
3. How do you source reserves, and do borrowed funds count?
The Sequence, Step by Step
1. Pick the occupancy first. A vacation home you will use as a second home and one you will rent out are underwritten as different loans. Write the loan as the occupancy you will actually use.
2. Ask the purchase lender about borrowed funds. Get the answer before you open the line.
3. Open the line. The HELOC lender reviews credit, DTI, and equity, then orders a valuation.
4. Draw and move the cash to your own account. Keep the line agreement, the draw record, and statements showing the money landing. The purchase lender will trace the funds.
5. Submit the purchase file. The purchase lender tests the down payment, closing costs, and reserves as separate buckets. Borrowed funds are commonly accepted for the first two with documentation and often excluded from reserves.
6. Carry three obligations. You now owe the first mortgage, the line, and the new loan. The line’s payment is interest-only during the draw, then it steps up when repayment begins.
Vacation Home vs. Rental: Where the Rule Changes
The loan has to match how you will use the home. A true second home is generally reviewed on personal income and debt, so the line’s payment counts in your DTI. A rental purchase can run on a DSCR loan. 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.
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. The line’s payment does not enter that ratio the way it enters a personal DTI. The purchase lender still decides how borrowed down payment funds are treated.
DSCR purchase guidance across the network runs along these lines:
- Select programs reach 85% LTV on a purchase with roughly a 700-plus score.
- A 1.00 coverage ratio is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- Most programs want a credit score around 660. A 620 floor exists in parts of the network, and 700-plus opens the strongest leverage tiers.
- Reserves vary by lender, leverage, loan size, and transaction type. They commonly run around 6 months of PITIA.
A DSCR ratio compares rent to principal, interest, taxes, insurance, and any HOA dues. It does not measure cash flow. Repairs, vacancy, management, utilities, and capex all sit outside the calculation. Clearing 1.00 does not mean the property pays for itself.
A bigger down payment lowers the loan payment and can lift the ratio. It does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. The complete DSCR loans guide walks through those tests in full.
Edge Cases Where the Rule Breaks
A fully borrowed down payment. Borrowing the whole down payment stacks a second loan on top of the purchase loan, with none of your own cash in the deal. Some purchase lenders cap the borrowed share or decline the structure.
Unused line balance as reserves. Unused availability on the line generally does not count as reserves. If reserves matter on the file, hold them in your own accounts.
Entity titles. Equity lines must be held by an individual borrower or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. DSCR loans can go to an LLC-titled borrower, subject to lender program eligibility. A property already deeded to an LLC needs a vesting change or a DSCR cash-out instead of a line.
Property type. The network’s equity lines accept single-family homes, 2-4 units, PUDs, townhomes, and condominiums, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not eligible. Modular homes qualify on one program only.
Borrower exposure. A borrower is limited to three lines, and anyone with more than 15 financed properties is not eligible. Combined exposure caps depend on the program.
Listed properties and state rules. A property listed for sale, or listed within the past 60 days, is ineligible in six of the network’s states. Some states add waiting periods, one-lien-at-a-time rules, or lower homestead CLTV caps on primary residences. Confirm the rules for your state before you plan around a number.
Tax. 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.
The Cash Preservation Trade-Off
SmartAsset notes that a line keeps your cash free for investing or an emergency fund. That is the case for it. The case against is the risk to the home securing the line. If you sell the home, you generally must pay off the line in full right away.
Three more exposures belong on the plan:
- The payment moves with the balance and the adjustable pricing.
- The draw period ends, and the line shifts to full repayment.
- The three-payment load has to hold through a vacancy, not just a full-occupancy month.
A common exit is to refinance the new property later and use part of the proceeds to pay the line down. That depends on the property’s value and the lender’s guidelines at that time.
Key Terms Defined
HELOC: A revolving line of credit secured by the equity in a home you own.
CLTV (combined loan-to-value): All loans secured by the home, added together, divided by the home’s value.
Draw period: The stretch when you can borrow from the line, usually with interest-only payments.
DTI (debt-to-income ratio): Your monthly debt payments divided by your monthly income.
DSCR (debt service coverage ratio): A rental property’s income divided by its monthly PITIA.
Seasoning: The period funds have been in your account or a line has been open before a lender counts them.
Who This Fits and Who Should Skip It
A line fits an owner with real equity, a clean credit profile, and a purchase lender that has confirmed it accepts borrowed funds. It also fits an owner with a rental that will cover its own payment.
Skip it if the draw would leave no reserves in your own accounts, if the vacation home will not carry its costs through a slow season, or if you would be pushing past the DTI ceiling. Skip it too if the property sits in an LLC or is an ineligible property type.
Next Step
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. Lendmire is a mortgage broker, not a lender. It arranges HELOC financing through select wholesale partners, and every figure is subject to lender guidelines and full file review. The HELOC programs are available in 16 full-service states. Lendmire’s DSCR investor programs cover 41 markets, including Washington, D.C. For related reading, see Lendmire’s piece Banks That Offer an Investment Property HELOC to Cover a Down Payment on Another Home.
Frequently Asked Questions
Do I have to tell the purchase lender the down payment came from a HELOC?
Yes. The purchase lender traces the source of every down payment dollar, so a HELOC draw shows up in your statements either way. Provide the line agreement, the draw record, and the account statement showing the funds landing. Documenting the trail up front gives the lender fewer gaps to question.
Can a HELOC cover the entire down payment on a vacation home?
It depends on the purchase program. Some programs accept a documented draw as the whole down payment, and others cap the borrowed share and want part of the cash to be your own seasoned money. A fully borrowed down payment means no personal cash sits in the deal, so confirm the rule before you draw.
Does the unused part of my line count toward reserves?
Generally not. Reserves are tested separately from the down payment, and borrowed funds are often excluded from them. DSCR reserves vary by lender, leverage, loan size, and transaction type, and they commonly run around 6 months of PITIA. Keep reserves in your own accounts.
Can an LLC take out an equity line to fund the purchase?
No. Equity lines in the network must be held by an individual borrower or a revocable living trust. DSCR loans can go to LLC-titled borrowers, subject to lender program eligibility.
Where are these lines available, and which properties qualify?
The HELOC programs are available in 16 full-service states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. Eligible properties include single-family homes, 2-4 units, PUDs, townhomes, and condominiums. Manufactured homes, co-ops, condotels, and log homes are not offered.
For current guidelines and terms, see Lendmire’s investment-property HELOC programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and real estate investors in its 16 full-service states. Home equity lines of credit are arranged through wholesale lending channels; Lendmire brokers the line and the lender underwrites each application under its occupancy-based 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. The Consumer Financial Protection Bureau
3. Yahoo Finance: Using a HELOC for a down payment
4. SmartAsset: HELOC for a down payment
5. BiggerPockets: HELOC on investment property
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Banks That Offer a HELOC for a Special Assessment · Banks That Offer a HELOC for a Lock-in Homeowner · Banks That Offer a DSCR HELOC to Fund Down Payments on Several Rental Properties
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.