The Quick Read: The line is the rental’s value times 70% combined loan-to-value, minus the first mortgage balance, and it cannot exceed $500,000 on a second lien. Rent must also cover a stress payment on the whole line at 1.10x or better, subject to underwriting.
- Second-lien leverage starts from a 70% CLTV base, at a 720 credit score or better.
- Lines run from $50,000 to $500,000 behind your first mortgage.
- At least 80% of the line is drawn at closing, so this is a poor fit for a small, uncertain need.
- Only the first mortgage balance counts in the sizing math. Its rate and payment do not.
- The program is available in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
The first question is usually how much equity you have. The better question is which of three limits binds first: equity room, the line cap, or rent coverage. Lendmire is a broker. It arranges these lines through a wholesale lender in its network, and the lender underwrites each file on its own guidelines.
How Is the Maximum Line Calculated?
Take the rental’s value and multiply by 70%. Subtract the first mortgage balance. What remains is the equity room, before the $50,000 floor, the $500,000 cap, and the rent test.
The CFPB’s HELOC booklet shows the same method in generic form: value times a percentage, less the balance owed. Its example uses 75%, which is an illustration, not a DSCR program figure. On this program the base combined ceiling is 70%, and “combined” means the first mortgage balance plus the new line, divided by value.
Run it in percentages. Say a first mortgage sits at 55% of value. That leaves 15% of value as room under the 70% ceiling. On a rental worth $400,000, that is 15% of $400,000, and the result must still clear the $50,000 minimum line. If the room falls below the minimum, the product does not work on that property. Convert the percentage to dollars yourself, then compare it to the floor.
Now a high-balance first. At 65% of value, only 5% is left. On most rentals that is under the minimum line. Nothing to borrow.
A few points that move the number:
- Any other second lien counts toward the combined figure. The line is never a third lien.
- A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower than the base.
- The first mortgage’s low payment is a reason to keep it. It does not create room.
Which Limit Wins: Equity, Line Cap, or Rent?
The smallest of the three controls. Equity room usually binds on thin-equity rentals. The $500,000 cap binds on high-value, low-balance properties. Rent coverage binds when the rental barely pays for itself.
| Limit | What sets it | Where it binds |
|---|---|---|
| Equity room | 70% CLTV less first balance | Recent purchases, high-balance firsts |
| Line cap | $500,000 on a second lien | High-value, low-leverage rentals |
| Rent coverage | 1.10x on stress payment, full line | Thin-rent or high-price rentals |
| Valuation | Automated valuation or appraisal | Properties with weak comps |
Coverage deserves a closer look because it surprises borrowers. DSCR here is gross monthly rent divided by the qualifying payment. That payment is a fully amortizing principal-and-interest payment on the entire credit limit, at the start rate plus 2 percentage points. Taxes and insurance are not part of it. Because the test runs on the whole limit, drawing less later does not help. Sizing the limit down does.
Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A lease in place is required, and a two-to-four-unit property may have at most 1 vacant unit.
One open item: whether the first mortgage payment joins the qualifying payment on a second lien is not published. Confirm on the file how the lender treats it, because the lender’s own coverage calculation governs.
What Does a Short-Term Borrower Actually Owe?
This is where the structure matters more than the size. The line has a 5-year interest-only draw period on the drawn balance, then a 25-year fully amortizing repayment period, with a 30-year maturity. The rate is variable.
Two rules shape a temporary need. 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. So you cannot open a large line and leave most of it idle. You will carry interest on most of it from day one.
The CFPB’s explainer describes HELOCs generally as open-end lines you can borrow against repeatedly, and notes that some plans require a minimum draw at setup. That matches what this program does.
Picture an investor who needs a bridge for a few months while a sale closes. Interest-only payments during the draw period keep the monthly cost low, but principal never falls unless the borrower pays it down. If the exit slips, the balance simply stays there. If the exit slips for years, the repayment period begins and the payment steps up. Plan the exit before you open the line, not after.
Here is the plain read. A true one-time need under $50,000 does not fit. A need that is certain, sized above the floor, with a clear payoff source, fits well. In between, compare a closed-end second lien or a cash-out refinance.
Keep the First or Replace It?
Keep it when the first mortgage balance, term and payment are worth protecting. A standalone second lien prices only the new money, and the first mortgage stays exactly as it is.
| Factor | DSCR HELOC (second lien) | DSCR cash-out refinance |
|---|---|---|
| First mortgage | Stays in place | Paid off and replaced |
| Max leverage | 70% CLTV (second lien, investment property) | Up to 75% LTV on standard rentals; 70% on short-term rentals |
| How cash arrives | Revolving line, 80%+ drawn at closing | One lump sum |
| Best fit | Low-balance first worth keeping | Large equity need, no attractive first |
The cost of keeping the first is leverage. A cash-out refinance reaches higher on a standard rental than the line’s 70% combined ceiling. If you need the most cash possible and the first mortgage has no special value, replacement may produce more. Lendmire’s complete DSCR loans guide walks through how the two structures compare.
Also note sequencing. A second lien has to be cleared before a cash-out refinance on that same property. A line you open today can complicate a refinance you plan next year.
Who Qualifies, and What Gets a Property Ruled Out?
Credit and property both screen the file. On a second lien the floor is 720, and there is no second-lien option below it. A borrower at 700 to 719 with a first mortgage has no second-lien cell on this program. A score of 720 or better does not buy extra leverage either, because 70% is the ceiling.
Other file points, all subject to underwriting:
- No traditional personal-income documentation, W-2s, pay stubs or debt-to-income calculation. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
- No reserves and no cash to close are required.
- Mortgage history: no 30-day late in the last 12 months, and 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu.
- Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
- U.S. citizens, permanent residents and non-permanent residents with a Social Security number qualify. Foreign nationals and ITIN borrowers do not.
- The rental can be vested in the owner’s LLC, subject to program terms, with the members signing as guarantors.
Eligible properties include single-family, PUD, townhome, two-to-four units, warrantable and non-warrantable condominiums, and lots to 10 acres. Ineligible: rural-designated property, row homes, condotels, commercial or agricultural property, leaseholds, land trusts, age-restricted communities, mixed-use, and a property listed for sale in the prior 2 months or carrying a solar lien.
How Do Valuation, Title and Seasoning Affect the Final Number?
Valuation can change the value input, and so the line. Lines up to $400,000 use an automated valuation with a confidence score of 85 or better plus a property inspection report, or a full interior appraisal. Lines above $400,000 need a full interior appraisal. Appraisal waivers are not accepted.
Title follows the line size. A full title policy applies to a first lien and to second liens above $400,000. Smaller second liens use an owner-and-encumbrance report.
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). Check both dates before you count on any equity room.
One more file item sits outside the program’s published rules: your first mortgage note. Read it for any restriction on junior liens before you apply.
Key Terms Defined
CLTV: Combined loan-to-value, the first mortgage balance plus the new line, divided by the property’s value.
Second lien: A loan recorded behind the first mortgage, paid after it if the property is sold.
Draw period: The 5-year stretch when you borrow and pay interest only on the drawn balance.
Stress payment: The qualifying payment on the full line at the start rate plus 2 points, used only to test coverage.
DSCR: Gross monthly rent divided by the qualifying payment.
When Should You Skip the Line?
Skip it in these cases:
- The need is under $50,000, or you cannot commit to drawing most of the line at closing.
- Rent coverage is thin. A line can mask a property that does not cash flow, and a stress test on the full limit will expose that.
- The exit is unproven. An interest-only balance with no payoff source becomes an amortizing payment later.
- You plan a cash-out refinance on the same rental soon.
- The first mortgage is already near 70% of value. Nothing is left.
Use it when the first mortgage is worth keeping, the equity room clears the minimum, rent clears 1.10x on the full line, and the payoff plan is written down.
A pre-application checklist: pull the first mortgage balance and note, confirm the lease and recent rent receipts, check title and seasoning dates, confirm your credit sits at 720 or better, and confirm the rental is not on the ineligible list. 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.
Frequently Asked Questions
Is a DSCR HELOC a second mortgage?
Yes, on a rental with a first mortgage it is written as a standalone second lien behind the loan you keep. The first mortgage keeps its balance, term and payment. On a rental with no mortgage, the same line is a standalone first lien. It is never a third lien.
Does the first mortgage’s low payment increase how much I can borrow?
No. Only the first mortgage balance enters the sizing formula. A low payment is a reason to keep the loan, but it creates no borrowing room.
How long must I own the rental before applying?
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).
Can I borrow less than the maximum for a short-term need?
Only down to a point. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. Coverage is also tested on the entire limit. Size the limit to the need, because you will carry most of it.
Where is this offered, and can an LLC hold title?
Yes – the line can vest in the owner’s LLC (investment property only), with the members signing as guarantors. Availability also depends on the property type, and the state list appears at the top of this article. Lendmire can compare options on a specific file, and its related pieces on how an investment property HELOC works for a short-term need and HELOC versus home equity loan cover adjacent questions.
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. Every file is underwritten individually, and nothing here is a commitment to lend.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. It arranges DSCR home equity lines of credit on rental property through wholesale lending partners in 15 of its 16 licensed states (every licensed state except Tennessee); each line is written on a non-owner-occupied one-to-four-unit rental and reviewed individually by the lender under the program’s credit and leverage 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. CFPB – What You Should Know About HELOCs (booklet)
2. CFPB – What is a HELOC (Ask 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 Much Can You Borrow With a DSCR HELOC on a Rental With an Existing Mortgage? · How Much Can You Borrow With a DSCR HELOC on a Property With an ADU? · How Much Can You Borrow With a DSCR HELOC for a Vacation Rental Run as a Business?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.