Bank Statement HELOC Lenders With a Five-Year Draw Period

The Quick Read: A five-year draw period (the window when you can borrow) is a feature of a specific program, not a legal category. The program lets you borrow interest-only for five years, then repay principal over 25. Your income comes from 12 to 24 months of bank deposits instead of tax returns.

• On an investment property, the five-year draw with a 25-year repayment is the only structure offered. It carries a 70% combined loan-to-value (all liens on the property compared with its value), a $500,000 line cap and a 700 minimum credit score.
• Primary residences and second homes can choose between a 3-year and a 5-year draw.
• Pricing floats through the whole life of the line and never converts to fixed, so payments can change.
• Availability is limited to a set of states narrower than the DSCR footprint. Every figure is subject to lender guidelines and is not a commitment to lend.

What Is a Bank Statement HELOC?

A bank statement HELOC is a home equity line of credit where the lender builds your income from bank deposits instead of tax returns. A HELOC is an open-end line you can borrow against, repay and borrow against again. It sits in first or second lien position and leaves your existing mortgage alone.

Self-employed borrowers use these lines because tax returns often show small income after write-offs. The deposits tell a different story, and the program reads them.

The five-year draw is the long-runway structure. Market-wide, Experian reports that draw periods typically run five to 10 years, followed by a repayment period of about 20 years, and that length varies by lender. Across the wholesale network that Lendmire brokers through, the figures are tighter. The program’s structure is a 5-year draw followed by a 25-year repayment. A shorter 3-year draw with a 17-year repayment also exists, but only on primary residences and second homes.

Lendmire is a mortgage broker, not a lender. It works with select wholesale lenders and matches your scenario to the program that fits. The best program for your situation depends on the property, credit profile, leverage need and how you document income.

Key Terms Defined

• Repayment period: The stretch after the draw ends. You can no longer borrow, and each payment includes principal.
• Expense factor: A percentage a lender subtracts from business deposits to estimate real earnings. The lender sets it, not you.
• DTI (debt-to-income ratio): Your monthly debts divided by your monthly income. It measures how much of your income is already spoken for.
• Lien position: Where the line ranks for repayment. First lien means it is the only loan on the property. Second lien means it sits behind a mortgage.
• Revocable living trust: A trust you can change or cancel while alive. It can hold title on these lines. An LLC cannot.

How Do Lenders Turn Bank Deposits Into Income?

Lenders total your eligible deposits over a 12- to 24-month window, strip out the non-income items, and divide by the months in the window. The result is your monthly qualifying income. Each step below follows the same logic across most programs in the network.

1. Pick the statement type. You can use personal statements or business statements.

2. Remove non-income credits. Transfers between your own accounts, loan proceeds and refunds do not count.

3. Apply the expense factor on business accounts. Business deposits are gross revenue, so the lender subtracts a factor. Personal-statement programs often skip this step. Some programs accept a CPA-prepared profit-and-loss statement in place of the default factor.

4. Divide by the months in the window. That gives the monthly figure the lender uses.

5. Test the file. Credit, combined leverage, DTI, title and valuation still apply.

“Bank statement” does not mean skipping underwriting. It means income is documented a different way.

On these lines, DTI tops out at 50%. It drops to 45% for credit scores from 600 to 679, and a ratio above 45% requires at least a 680 score. The 600 to 639 range reaches primary residences only, because second homes start at a 640 score and investment lines at 700. The test also uses the interest-only payment on the maximum draw, meaning the full line rather than the balance you plan to carry. A big line you never fully use can still weigh on your ratio.

Three-Year Draw vs. Five-Year Draw

On primary residences and second homes, you choose between two structures. On investment property, you get only the five-year draw. Both programs draw at least 75% of the line at closing, and pricing floats on both.

The Tennessee row applies only to loans secured by property in that state, where both repayment periods are shortened. Everywhere else, the repayment lengths in the first row apply.

The five-year draw gives you a longer interest-only runway and a longer repayment to spread principal over. That suits a borrower who expects to hold a balance and wants a lower principal step-up later. The three-year draw suits someone who plans to pay the line down soon and wants to be done sooner. Neither is better on its own. The right pick depends on how long you expect to carry the balance.

Two other facts matter. On the five-year structure, a borrower is limited to three lines, with combined exposure capped at $750,000. The minimum subsequent draw after closing is generally $1,000.

What Happens at the End of Year Five?

When the draw ends, borrowing stops and payments start to include principal. The jump can be steep. The CFPB’s HELOC brochure notes that payments can change even if you do not draw more, and that they often rise significantly when repayment begins.

Picture an investor who draws the full line at closing and pays only interest for all five years. On day one of repayment, that entire balance begins to amortize over 25 years. The payment goes from interest only to interest plus principal on the same balance. Because pricing floats, a rise in pricing at that moment stacks on top of the step-up.

The balance you carry on the last day of the draw is the balance that amortizes. A five-year draw brings this step-up sooner than a 10-year draw would. Stress-test the repayment payment before you sign, not in year five.

Some plans also carry a balloon feature that makes the whole balance due when the draw ends. The CFPB’s HELOC explainer flags this risk, and its own example uses a 10-year draw. Experian lists a new HELOC or a home equity loan as common ways to refinance out of the line at the end of the draw. In the network’s programs, the structure is a fully amortizing repayment with no conversion to fixed pricing, so read each quote for the exact terms.

Where the General Rule Breaks

The five-year draw comes with several edge cases that change who can use it.

Occupancy decides the draw length. Investment lines run the 5-year draw and 25-year repayment only. A primary residence or second home gets the choice.

Title blocks many rentals. The line must be held by you as an individual or by a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind or land trusts cannot hold title. A rental already deeded to an LLC needs a vesting change or a DSCR cash-out refinance instead. DSCR loans can be made to LLC-titled properties, subject to lender program eligibility.

Size caps are tight. An investment line is capped at $500,000 and 70% combined loan-to-value. A line above $500,000 is primary-residence only and requires a full appraisal. For investment lines at or below $500,000, lenders ordinarily use an automated valuation instead of a traditional appraisal.

Credit floors differ by occupancy. The program floor is 600. Second homes floor at 640 and investment properties at 700.

Property types matter. Single-family, 2-4 units, PUDs, townhomes and condos, including non-warrantable condos, are eligible. Modular factory-built homes are eligible on the five-year structure only. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use and agricultural zoning are not offered. On the five-year structure, 2-4 unit properties carry a 640 minimum score.

Portfolio size matters. A borrower with more than 15 financed properties is not eligible.

Credit history has seasoning. A bankruptcy needs 4 years from discharge or dismissal. Investment files follow a 7-year path for foreclosure and 4 years for a deed-in-lieu, pre-foreclosure or short sale. The five-year structure also asks for two tradelines seasoned 12 months, or one seasoned 24.

A long draw is a contract term, not a promise. A five-year label tells you how long the draw window is meant to run. Access still depends on the loan agreement, so read the conditions under which the lender can suspend or reduce the line. If you sell the property, the line generally has to be paid off.

Availability is narrower than DSCR. The HELOC product is offered in a limited set of states. Lendmire’s DSCR investor programs are available in 40 states plus Washington, D.C., which makes 41 markets in all.

How to Compare Lenders on a Five-Year Draw

A broker cannot hand you one lender that wins for everyone. What a broker can do is shop several wholesale lenders and match the scenario. The choice of lender depends on the file. When you compare quotes, check that each one states the following in writing:

• The draw length and the repayment length, together. A quoted figure always belongs to its own program’s structure.
• Whether the draw is interest-only and whether pricing floats or converts.
• The share drawn at closing. In this network, at least 75% of the line is drawn up front, which means interest starts on most of the line immediately.
• The minimum subsequent draw and any initial-draw requirement.
• The combined loan-to-value ceiling for your occupancy and credit tier.
• The qualifying payment basis, meaning whether DTI uses the full line or the drawn balance.
• The vesting requirement, if the property sits in an LLC.
• Whether a full appraisal or an automated valuation will be used.

Be wary of any quote that gives a draw length but leaves out the repayment length. A five-year draw followed by a short repayment is a very different loan from one followed by 25 years.

Gather your documents before you apply. That means 12 to 24 months of personal or business statements, a CPA-prepared profit-and-loss if you plan to use one, your current mortgage statement and proof of how title is held.

HELOC or DSCR Loan?

A HELOC underwrites you. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. That is the sharpest difference, and it drives which product fits which deal.

A bank statement HELOC tests your deposits and your DTI, so every added debt stacks on one income base. A DSCR loan reviews each property on its own rent, and it is reviewed as a business-purpose investor loan, not a standard owner-occupied mortgage. A cash-out refinance on a standard rental tops out around 75% LTV, with about six months of seasoning. Standard loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), well above the $500,000 investment-line cap. Credit floors start at 620 in parts of the network, with most programs asking for around 660.

DSCR coverage compares rent to the full monthly obligation. It is not the same as positive cash flow, because repairs, vacancy, management and utilities sit outside the calculation. The complete DSCR loans guide walks through the math.

An investor can use both on different deals. The line fits a borrower whose deposits are strong and who wants flexible access to equity. DSCR fits a borrower who wants each rental to stand on its own.

A bank statement HELOC is probably the wrong tool for these borrowers:

• Investors with a credit score below 700 who want a line on a rental, since the investment floor is 700.
• Anyone who needs a line above $500,000 on a rental property, because that is the investment-line cap.
• Borrowers whose property is held in an LLC and who cannot change vesting.
• Borrowers who could not absorb the payment step-up in year six.

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.

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.

References

1. Experian – Draw period on a HELOC

2. CFPB – HELOC brochure

3. CFPB’s HELOC explainer