The Quick Read: A HELOC is a credit line you repay with interest. A home equity agreement is a lump sum you repay from a share of your property’s future value. For investors with solid credit, a HELOC usually costs less, while an agreement mostly helps when monthly payments or credit are the obstacle.
- A HELOC adds a monthly payment and leaves all your appreciation with you. An agreement has no monthly payment and gives up part of the appreciation.
- Most agreement providers focus on owner-occupied homes, so far fewer providers will take a rental.
- On Lendmire’s network, an investment-property line tops out at 70% CLTV and $500,000, with a 700 minimum credit profile, subject to lender guidelines.
- Title matters. An LLC-held rental cannot carry a HELOC on this network, and a DSCR cash-out refinance is the usual fallback.
What Is a HELOC, and What Is a Home Equity Agreement?
A HELOC is a revolving line secured by your property. You draw what you need and pay interest on the drawn balance. A home equity agreement (HEA) is not a loan in the usual sense. A provider hands you cash today and takes a share of the property’s value later.
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.
HEAs also go by home equity investment, shared-equity agreement, or home equity contract. You make no monthly payment. You settle in one lump sum when you sell, refinance, or reach the end of the term. Money.com notes that settlement windows typically run 10 to 30 years depending on the provider. It also lists upfront costs such as service fees and appraisal charges.
On a rental, a HELOC leaves your existing first mortgage in place and sits behind it as a second lien. A cash-out refinance replaces the first mortgage with a new loan. BiggerPockets lays out that structural split for rental owners. The network’s investment line can also stand alone in first position, so the first-versus-second question depends on your file.
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. Keep that in mind, because a HELOC on a rental sits closer to consumer-style underwriting than a DSCR loan does.
Key Terms Defined
CLTV (combined loan-to-value): Every loan secured by the property, added together, divided by the property’s value.
Lien position: Your place in line for repayment if the property is sold or foreclosed. A first lien is paid before a second.
Draw period: The stretch when you can borrow from the line, usually paying interest only.
Settlement: The moment an HEA comes due, when you pay back the original amount plus the provider’s agreed share of value.
DSCR (debt service coverage ratio): Monthly rent divided by the monthly obligation of principal, interest, taxes, insurance, and any association dues. It qualifies a loan primarily on property-level rental income, subject to lender guidelines.
Vesting: The name that legally holds title to the property, such as an individual, a trust, or an LLC.
How Each One Works, Step by Step
An HEA is underwritten mostly on the property. A HELOC is underwritten mostly on you and the property together. That difference drives almost everything else.
How an HEA works:
1. The provider orders a valuation or appraisal of the property.
2. Qualification centers on equity, property type, occupancy, and condition. Income verification is often light or absent.
3. The provider records a lien. You still pay your mortgage, taxes, insurance, and upkeep.
4. At settlement, you owe the original amount plus the agreed share of value, in one lump sum.
5. Many contracts are written so the provider still recovers its original amount if the home loses value. Read that clause closely.
How a HELOC on an investment property works on this network:
1. Credit comes first. An investment-property line needs at least a 700 credit profile, and the report must be no more than 90 days old at closing.
2. Title is checked. The individual borrower or a revocable living trust must hold it.
3. Leverage is set. The ceiling on an investment property is 70% CLTV, and the line runs up to $500,000.
4. Debt-to-income (DTI) is tested. The maximum is 50%, calculated on the interest-only payment at the maximum draw.
5. Value is confirmed. Lines at or below $500,000 ordinarily use an automated valuation, though a borrower may request a full appraisal.
6. The structure is set. Investment lines run a 5-year interest-only draw followed by a 25-year repayment period. Pricing floats the whole way and never converts to fixed. At least 75% of the line is drawn at closing.
After closing, the minimum subsequent draw is $1,000, with Texas at $4,000. These minimums come from the program with the 5-year draw and 25-year repayment structure, the longer-runway program that investment lines use.
Primary residences and second homes get more room. A primary-residence line can reach 90% CLTV, but only at a 720-or-better credit profile and up to $500,000. A second-home line can also reach 90% CLTV at 720 or better, up to $500,000. Those tiers do not apply to investment properties. A primary-residence line above $500,000 caps at 75% CLTV, requires a full appraisal, and needs a credit profile of 700 or better (720 on the 5-year draw structure). The maximum line is $750,000. Every figure here is subject to lender guidelines and full file review.
The Side-by-Side Comparison
| Factor | HELOC | Home equity agreement |
|---|---|---|
| Monthly payment | Yes, interest-only during draw | None |
| What it costs | Interest on drawn balance | Share of future value |
| Who keeps appreciation | You | You and the provider |
| Qualification | Credit, DTI, equity | Equity, property, occupancy |
| Rental properties | Varies by lender | Few providers |
| Repayment | Draw, then amortizing | One lump sum at settlement |
| Main risk | Payment burden, line terms | Large payoff, lost upside |
The table hides one point. The HEA’s no-payment feature is real, but the bill arrives all at once.
What Does Each One Cost When the Property Appreciates?
An HEA gets more expensive the better your property performs. A HELOC costs what its pricing and your balance dictate, regardless of how the property does. Neither fact is obvious from the sales pitch for either product.
The CFPB’s issue spotlight on home equity contracts modeled the comparison. It found an HEA would be more expensive overall than a HELOC if the home appreciates. In the strongest-appreciation scenarios it modeled, the consumer would repay more than twice as much on the HEA. The spotlight also notes these contracts were designed around owner-occupied homes.
Here is a directional picture. It is hypothetical and carries no dollar figures, because provider terms vary.
| Property outcome | HELOC | HEA |
|---|---|---|
| Value flat | Interest on balance | Roughly original amount |
| Value up modestly | Same cost as flat | Share of gain added |
| Value up strongly | Same cost as flat | Share grows sharply |
| Value falls | Balance still owed | Often original amount owed |
For a rental investor who expects the property to appreciate, this matters most. An HEA is a bet that the property will not outperform. A HELOC is a bet that you can carry the payment.
The HEA also has a time dimension. The longer you hold and the more the property climbs, the larger the provider’s share grows. A HELOC does not grow that way. This is the core reason investors with decent credit and a short-term need tend to land on the HELOC side.
Where the General Rule Breaks
The general rule says a HELOC is cheaper and an HEA is easier. The edge cases below can flip or erase that rule.
Occupancy. This is the big one. Most HEA providers focus on owner-occupied homes. A minority will consider second homes or rentals, usually with extra criteria. If you own only rentals, the HEA door may be closed before you apply. Providers that accept investment property can also decline certain titling or unit counts, so ask first.
LLC title. Many investors hold rentals in an LLC for liability reasons. On this network, LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on a HELOC. Title must sit with an individual or an inter vivos revocable living trust. Some HEA providers that accept rentals also decline LLC-held property. A property already deeded to an LLC needs a vesting change or a DSCR cash-out refinance instead, subject to lender program eligibility.
Multi-unit buildings. On this network, 2-4 unit properties are eligible for the line, with a 640 minimum on the 5-year draw structure. HEAs treat multi-unit differently. Owner-occupancy typically has to cover a unit, and fully tenant-occupied multifamily is usually ineligible.
Property type. The network’s line accepts single-family, PUD, townhome, and condominium properties, including non-warrantable condos. It does not offer lines on manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, or agricultural-zoned property.
Portfolio size. A borrower is limited to three lines on this network. Combined exposure across those lines caps at $2,000,000 on the higher-leverage program and $750,000 on the longer-runway program, and the maximum single line is $750,000. Borrowers owning more than 15 financed properties are not eligible. Investors with big portfolios hit this wall before they hit a leverage cap.
Availability. HELOC availability on rentals varies by lender. Some banks and credit unions decline non-owner-occupied lines, and some call the product something else. Lendmire’s HELOC placements cover a narrower set of states than its DSCR footprint, so check your state first.
Using a primary-residence HELOC to fund a rental purchase. This is a different structure from a line on the rental itself, where the line is secured by the home you live in. Treat it as short-term debt with a defined exit, such as a refinance of the new property, because the payment keeps running while the rental stabilizes.
Where Do the Rules Stand?
The regulatory status of HEAs is still moving. The legal hinge is whether an HEA counts as credit. The industry says no, since the provider risks losing its capital. The CFPB has disputed that framing, so treat any claim that an HEA is simply not debt as unsettled.
Regulation is also moving at the state level. Financial Services Perspectives reports that Illinois has adopted shared-appreciation regulations. It reports that a Pennsylvania bill has passed the House and is pending in the Senate. It also describes a federal proposal that would task the CFPB with writing home equity investment rules. Disclosure and contract terms may therefore look different from one state to the next.
What Does the Decision Look Like for a Rental Investor?
For most rental investors, the real decision is not HELOC versus HEA. It is whether to keep the first mortgage and add a line, or replace the first mortgage with a larger loan. HEAs enter the picture only when credit or monthly cash flow is the constraint.
Run these questions in order.
1. Does the title allow it? If the rental sits in an LLC, a network HELOC is off the table without a vesting change. A DSCR cash-out refinance, which can accommodate LLC-held property subject to program terms, becomes the cleaner route.
2. How much cash do you need? Investment lines stop at $500,000. A larger need pushes you toward a refinance.
3. What does your first mortgage look like? If it is one you want to keep, a line behind it preserves it. If it is one you would like to replace anyway, a refinance does both jobs.
4. Are you holding for appreciation? If yes, giving up a share of the upside is the expensive part of a HEA.
5. Can you carry a payment? A HELOC payment hits the property or your personal cash flow. An HEA has no payment, which helps the coverage ratio on that property. Still, the lien adds a future claim on equity. Whether a new DSCR lender would accept an HEA lien behind a new first is a question for that lender’s guidelines, so confirm before layering anything.
A DSCR cash-out refinance qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. On most files across Lendmire’s wholesale network, cash-out tops out around 75% LTV on a standard rental, with about 6 months of seasoning the common expectation. Select lenders in the network go above or below the typical credit and coverage ranges, with leverage and terms adjusted. For short-term-rental collateral, cash-out leverage is lower, around 70%. A 1.00 coverage ratio is where select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 is not the same as positive cash flow, because repairs, vacancy, management, and capital expenses sit outside the calculation.
Frequently Asked Questions
Does an HEA have no interest, so it is free money?
No. An HEA carries no stated interest and no monthly payment, but the cost is the provider’s share of your property’s future value. Weigh it as a price, not a gift.
Can I get a HELOC on a rental property?
Sometimes. Availability varies by lender, and some banks and credit unions decline non-owner-occupied lines. On Lendmire’s network, an investment-property line requires at least a 700 credit profile, goes up to 70% CLTV, and is capped at $500,000. Title has to sit with an individual or a revocable living trust, subject to lender guidelines.
Is an HEA easier to qualify for than a HELOC?
Often on credit, yes. Market surveys report some HEA providers accepting scores as low as 500, according to Money.com. The network’s primary-residence lines start at 600, second homes at 640, and investment properties at 700. The tradeoff for easier approval is usually a higher total cost.
What happens if I cannot settle an HEA when it comes due?
Settlement is one lump sum. If you cannot pay from savings or a refinance, selling the property may become the only way out. Plan the exit before you sign, and keep the term length in mind against your hold period.
What if my rental is in an LLC?
A network HELOC cannot be placed on LLC-held title, and some HEA providers decline LLC title too. A DSCR cash-out refinance is the usual fallback, subject to lender program eligibility. A vesting change to your personal name is another path, but talk with your attorney before moving title.
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. Reach the team at 828-256-2183 or request a quote. Lendmire is a mortgage broker that arranges these loans through select lenders in its wholesale network, across 41 markets including Washington, D.C. Every figure above is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
A HEA’s no-payment feature is easy to price in the first year and hard to price at settlement, which is why a short-hold rental is the situation where the comparison most deserves a second look.
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.
Investors who want the broader program framework can review how DSCR loans work.
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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. Money.com, Home Equity Agreement vs. HELOC
2. BiggerPockets, Rookie Reply
3. CFPB Issue Spotlight: Home Equity Contracts
4. Financial Services Perspectives, state HEI regulation
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: Can You Get an Investment Property HELOC When the Home Has a PACE Assessment? · Banks That Offer an Investment Property HELOC to Pay for Home Improvements · Banks That Offer a HELOC to Fund a Home Remodel
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.