Banks That Offer a HELOC for the Down Payment on a Construction Loan

The Quick Read: A HELOC is never written for a construction down payment as such: the line comes from one lender, the construction loan comes from another, and the construction lender alone decides whether borrowed equity counts toward your required contribution, so the practical work is choosing a line that fits that lender’s review.

• The line is secured by a property you already own. On this network, an investment property line tops out at 70% CLTV, while higher ceilings apply only to primary residences and second homes.
• Ask the construction lender whether it accepts borrowed funds before you open the line. Policies on borrowed contributions, caps, and reserves differ from lender to lender.
• Lines placed through Lendmire’s wholesale network require that at least 75% of the line be drawn at closing, so most of the cash lands in your account as one lump of borrowed money.
• Title matters. The equity property must be held by you personally or by a revocable living trust, not by an LLC.
• If the finished build is a rental, a DSCR loan can serve as the takeout. It tests rent against the monthly obligation, not your personal income.

Two Lenders, Two Decisions

Most investors ask which bank offers this as a package. None does, because the two products answer different questions. A HELOC lender asks whether your equity and credit support a revolving line. A construction lender asks whether you have enough skin in the project and whether the borrowed part of it is acceptable.

That split is why the question “which bank?” has no single answer. Lendmire is a mortgage broker, not a lender. It works with a network of wholesale HELOC lenders and matches the equity property, credit profile, and combined leverage to the program that fits. The right program depends on your situation, and every figure below is subject to lender guidelines and full file review.

The HELOC lender does not care what you do with the cash. The construction lender cares a great deal. It reviews the money as borrowed funds, which raises three questions:

• Will it count toward the required contribution at all?
• Will the lender cap the borrowed share?
• Will it ask for some of your own cash on top?

Lenders also differ on whether borrowed money can count toward reserves. Your first call goes to the construction lender, not the HELOC lender.

How Underwriting Treats a HELOC-Funded Contribution, Step by Step

1. Pick the equity property. The line is written against a property you already own. It can be your primary residence, a second home, or a seasoned rental. Combined loan-to-value counts every lien on that property, so an existing first mortgage uses up part of the ceiling before the line starts.

2. Check the line against the property type. Single-family, 2-4 units, PUDs, townhomes, and condominiums, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not.

3. Confirm the title. The property must be held by the individual borrower or an inter vivos revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on these lines. A rental already deeded to an LLC needs a vesting change first, or a DSCR cash-out refinance instead, which is subject to lender program eligibility.

4. Qualify on personal income. A HELOC underwrites you. Maximum DTI is 50%, and 45% for credit profiles from 600 to 679. A ratio above 45% requires at least a 680 score. The payment used is interest-only, calculated on the maximum draw, not on a partial balance.

5. Value the property. Lines at or below $500,000 ordinarily run automated valuation with no traditional appraisal. A higher CLTV can trigger a secondary valuation, and you can request a full appraisal at any time. Every line above $500,000 needs a full appraisal.

6. Draw and document the deposit. At least 75% of the line is drawn at closing, so the cash arrives together. Keep the line agreement, the draw statement, and the bank statements showing the deposit. The construction lender will want to trace where the contribution came from.

7. The construction lender applies its own overlays. It may accept the funds with documentation, cap the borrowed share, require a minimum of unborrowed cash, or leave borrowed money out of reserves. Some lenders credit equity in land you already own toward the contribution, and the measure is usually total project cost or completed value, not just the build budget.

Step seven is where timing matters. Open the line before the construction file is final, but only after the construction lender has said borrowed funds are acceptable. A line you cannot use is a closing cost for nothing.

Key Terms Defined

CLTV (combined loan-to-value): the total of every loan secured by a property, divided by the property’s value.

Draw period: the stretch when you can borrow against the line, usually paying interest only.

Repayment period: the stretch after borrowing ends, when the balance amortizes and payments rise.

Borrowed funds: down payment money that came from a loan instead of your savings, which many construction lenders review separately.

DSCR (debt service coverage ratio): monthly rent divided by the monthly principal, interest, taxes, insurance, and any HOA dues on a rental.

Takeout: the permanent loan that pays off the short-term construction loan once the build is complete.

What the Equity Line Looks Like on This Network

A HELOC is a revolving line secured by home equity. The CFPB explains that borrowing continues through a draw period, then a repayment period begins in which payments are often significantly higher. Market-wide, consumer education from Experian describes a typical 5-10 year draw followed by a 20-year repayment. The network’s figures are different and more specific.

Lendmire’s wholesale network places two draw structures on primary residences and second homes:

• The 3-year-draw program runs a 3-year interest-only draw and a 17-year fully amortizing repayment.
• The 5-year-draw program runs a 5-year interest-only draw and a 25-year fully amortizing repayment. This is the longer-runway option.

Investment property lines run the 5-year-draw structure only. On both programs the pricing floats across the draw and repayment periods and never converts to fixed.

The ceiling depends on which property carries the line. The table summarizes it.

Lower credit tiers step the ceiling down. A 700-credit primary residence reaches 85% up to $500,000, and a 640 reaches 80%. A primary residence line above $500,000 requires a credit profile of 700 or better (720 on the 5-year-draw program), caps at 75% CLTV, and needs a full appraisal. All figures are subject to lender guidelines.

The occupancy tiers change the investor’s strategy. A borrower who owns a primary residence with solid equity has far more room than one who relies on a rental. On an investment property the line stops at 70% CLTV no matter the credit score. Anyone who wants to borrow against a rental and also sits near the cap should size the construction budget with that ceiling in mind.

Lines are available in Lendmire’s 16 full-service states, which is narrower than the 41-market DSCR footprint, so confirm the equity property’s state before planning the build around it.

A Modeled Look at the Leverage Stack

Run the numbers on a modeled assumption, not a market statistic. Say you own an investment property where the first mortgage sits at 50% of value. A line on that property at the network’s 70% combined ceiling would leave 20% of its value available to borrow. A primary residence or second home with a 720-plus profile can reach a higher ceiling, and the available share grows, but the draw is still mostly pulled at closing.

Now add the construction side. The same borrower carries the first mortgage, the HELOC payment, and the construction loan’s interest-only payments at once. Because the HELOC pricing floats, the payment can move during a long build. The borrower’s DTI is measured on the maximum draw, not on a smaller number.

The practical point: the HELOC changes where the contribution comes from. It does not remove the contribution. Total debt across the two properties approaches the full project cost, and the cash-flow risk sits on both loans until the build is done.

Edge Cases Where the Rule Breaks

The line is on the property being built. A second lien on the same collateral changes the construction lender’s combined-LTV math. Construction lenders usually want a first lien on the project, so the equity should come from a different property.

The equity property is one you plan to sell. The CFPB’s HELOC brochure says a HELOC is generally due in full if you sell the home. That is a problem if the plan is to fund the build now and sell the old house midway.

The line is reduced before you use it. Marketplace explainers from Opendoor note that lenders can freeze or reduce a line if home values or credit deteriorate. On the network’s lines, most of the balance is drawn at closing, so this risk is smaller than on a traditional undrawn line. It still matters if you planned to take a subsequent draw for overruns.

The build outlasts the draw. Both network structures have a fixed interest-only window. A long construction schedule plus a lease-up period can push the line into repayment, where payments rise. Count the months from closing the line to the permanent takeout.

The credit file has history. A bankruptcy needs 4 years of seasoning from discharge or dismissal on both programs. A foreclosure history splits: on primary residences and second homes, one program seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4, while the other declines the history entirely. Investment files follow the 7-and-4-year path.

The investor has a large portfolio. A borrower is limited to three lines. Combined exposure caps at $2,000,000 on the 3-year-draw program and $750,000 on the 5-year-draw program. A borrower with more than 15 financed properties is not eligible.

The build is a barndominium, log home, or manufactured home. Manufactured homes, single- and double-wide, log homes, and barndominiums are not offered through the network’s DSCR programs. If the finished property is one of these, the DSCR takeout in the next section is off the table.

Where DSCR Fits After the Build

Once the house is finished and leased, the construction loan is short-term debt looking for an exit. For a rental, a DSCR loan can be that exit. The complete DSCR loans guide walks through the mechanics, and the short version is that the loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.

On most files in the network, purchase leverage lands at 75%-80% LTV, and select programs reach 85% LTV with roughly a 700+ score. A cash-out refinance tops out around 75% LTV across most of the network, and about 6 months of seasoning is the common expectation. The leverage tier follows the transaction type the lender assigns to paying off the construction loan, so settle that question with the lender early.

Coverage works as follows. A 1.00 ratio is where many select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Credit floors begin at 620 in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers. Reserves are commonly around 6 months of PITIA, vary with leverage and loan size, and step up on larger loans.

One caution belongs here. Clearing 1.00 does not mean the property produces positive cash flow. The calculation compares rent to PITIA only, so repairs, vacancy, management, utilities, and capex sit outside it. That matters on a new build with a first lease-up.

The two ideas pair well when they are planned together. A HELOC contribution has to satisfy the construction lender, and the DSCR takeout has to satisfy a rental coverage test. A file works best when the equity is enough for the first and the rent is enough for the second. Lendmire’s piece Banks That Offer an Investment Property HELOC to Cover a Down Payment on Another Home covers the equity side in more detail.

What the Investor Decision Looks Like

The decision comes down to a few questions, asked in order.

1. Does the construction lender accept borrowed funds? If not, no HELOC will fix the file, and the answer is savings, land equity, or a different construction lender.

2. Which property carries the line? A primary residence offers the most room. A second home is next. An investment property is capped at 70% CLTV.

3. Is the property held in the right name? An LLC-titled rental cannot carry the line. Moving title is a project of its own.

4. Does the draw period outlast the project? Build the schedule backward from the takeout.

5. What does the exit need to look like? Size the DSCR takeout before you draw the HELOC, not after.

For borrowers weighing alternatives, Lendmire’s article Banks That Offer a HELOC to Put Down Payment Money on a Second Property covers a similar structure for a purchase.

Finding the Right Fit Through a Broker

Because no single bank covers every borrower, the lender that fits depends on the occupancy, credit profile, leverage need, and property type. A broker that shops several wholesale lenders can match the scenario to a program instead of forcing one lender’s overlays on every file. The matching also works in reverse: if the line does not fit, a DSCR cash-out refinance on a seasoned rental may serve the same goal.

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 DSCR-focused mortgage broker arranging investor financing through select lenders in its wholesale network. It is not a lender, and nothing here is a commitment to lend.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) arranging home equity lines of credit — primary-residence, second-home and investment-property lines — through a wholesale lending network in its 16 full-service states. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB

2. Experian

3. CFPB, HELOC brochure

4. Opendoor, What is a HELOC?