Banks That Offer a HELOC to Buy a New House Using Current Home Equity

The Quick Read: Banks will write a line of credit against the home you own now, but the bank that opens the line and the lender that funds the new house make two separate decisions, so the line only helps if the purchase lender accepts borrowed cash as part of your down payment.

• The line has to be open, and mostly drawn, before the purchase contract. An undrawn line is not cash, and a lender can freeze or reduce it.
• On the wholesale network Lendmire works with, the CLTV ceiling depends on occupancy. It is 70% on an investment property, and it reaches 90% only on a primary residence or second home with a 720-or-better credit profile.
• A DSCR purchase loan is a separate file. It tests the new property’s rent against its own payment, and the HELOC payment sits outside that ratio.
• Clearing a coverage ratio is not the same as positive cash flow. You will carry the line payment and the new mortgage together.
• Whether borrowed funds count as down payment, closing costs or reserves is the purchase lender’s call, and it differs from lender to lender.

Who Decides What: Two Approvals, Two Lenders

The HELOC lender decides how large a line you receive. The purchase lender decides what that money can be used for.

The line lender looks at your current home, your credit, your income and your debts. It does not care much that the money is headed toward a rental. The purchase lender looks at the new property, where your cash came from, and whether you can carry everything you now owe.

Using equity in a primary residence for the down payment on an investment property is common enough that consumer-finance outlets describe it plainly. Yahoo Finance notes that the funds can cover a down payment, closing costs or other expenses up to the approved limit. It is a common strategy, not a loophole.

No version of this gives you a zero-down purchase. The new property still needs its own down payment, and the HELOC only changes where that cash comes from. DSCR purchase loans generally run 75% to 80% LTV on most files, which means roughly 20% to 25% down. Select programs reach 85% LTV with about 15% down and a 700-plus credit score. All of this is subject to lender guidelines and a full file review.

Key Terms Defined

HELOC: An open-end line of credit secured by the equity in a home, which you can draw on, repay and draw on again during a set draw period.

Equity: The home’s value minus what you still owe on the mortgage.

Combined loan-to-value (CLTV): Your first mortgage balance plus the new line, divided by the home’s value.

Draw period: The early years when you can borrow from the line, usually paying interest only.

DSCR: Monthly rent divided by the property’s full monthly payment, meaning principal, interest, taxes, insurance and any HOA dues.

Seasoning: The length of time funds have sat in your account or a property has been owned before a lender will count it.

How Underwriting Treats It, Step by Step

Step 1: Measure the room. The maximum line is roughly your home’s value times the lender’s maximum CLTV, minus your first mortgage balance. The CFPB’s HELOC booklet describes the same method: a percentage of appraised value, less what you owe. Some of that room is also lost to the credit tier you land in.

Step 2: Qualify the line personally. A line on your own home is underwritten on your credit, your income and your debt-to-income ratio. On the network’s HELOC programs, DTI tops out at 50%, and it is calculated on the interest-only payment at the maximum draw, not on what you plan to borrow. A lower score cuts that to 45%. Lines at or below $500,000 usually use an automated valuation instead of a traditional appraisal, though a higher CLTV can trigger a second valuation.

Step 3: Close the line before you list or contract. Timing matters for two reasons. In several of the 16 states where the HELOC programs operate, a home that is listed for sale, or was listed within the past 60 days, is ineligible. And the CFPB describes the line as open-end credit, with the lender setting the draw and repayment terms. A line you have not drawn is a promise the lender can still change.

Step 4: Draw, document and season. At least 75% of the line is drawn at closing on the network’s programs, so plan for interest to accrue on that balance from day one. Move the money into your own account and keep the paper trail from the line to your account to the closing table. Purchase lenders ask where every dollar came from.

Step 5: Run the purchase loan on its own file. The DSCR loan is tested on the new property’s rent against its own payment. The HELOC payment does not enter that ratio. Your credit, the leverage tier and the reserves still apply. The coverage number is a gate, not a result.

Step 6: Sort the money into three pots. The down payment, the closing costs and the reserves are treated separately. Whether borrowed funds count toward the first two or toward reserves is the purchase lender’s call. Reserves commonly run around 6 months of PITIA, though they vary by lender, leverage, loan size and transaction type. Keep them in your own seasoned accounts. An approved but undrawn line generally does not count as reserves.

What the Network’s HELOC Programs Actually Allow

Lendmire is a mortgage broker, not a lender, and it places lines through select wholesale partners. Those partners run two draw structures on primary residences and second homes: a 3-year interest-only draw with a 17-year repayment period, and a 5-year interest-only draw with a 25-year repayment period. Investment lines use the 5-year draw and 25-year repayment structure only. Pricing on every line floats through both the draw and the repayment period and never converts to fixed. Everything here is subject to lender guidelines, and none of it is a commitment to lend.

The 90% tier exists only at a 720-or-better credit profile, and on lines up to $500,000. Lower scores step down the ladder. A primary residence at 700-plus tops out at 85% on lines up to $500,000, or 75% on lines up to $750,000. A line above $500,000 is primary-residence only, caps at 75% CLTV and requires a full appraisal. The minimum draw after closing is $1,000.

One more structural point matters for investors. Title must sit with an individual or a revocable living trust. An LLC, a corporation or a land trust cannot hold title on these lines. A property already deeded to an LLC would need a vesting change first, or a DSCR cash-out refinance instead.

Which Kinds of Banks Offer This

Availability depends on the lender, not the logo. Large depository lenders, credit unions and online lenders all offer home equity lines. They differ on maximum CLTV, minimum credit, whether they allow an investment-property purchase use, and whether they offer a line on a rental at all. Big retail lenders tend to be the most cautious about borrowed down payments on the purchase side.

The best program for your situation depends on your occupancy, credit profile, how much leverage you need and how clean your documentation is. A broker that places files with several wholesale lenders can match the scenario to a program instead of testing one lender’s policy at a time. Lendmire’s HELOC programs are limited to its 16 full-service states, which is narrower than its DSCR footprint of 41 markets, including Washington, D.C.

Before you apply anywhere, ask each lender these questions:

• Is there any restriction on using the proceeds toward an investment purchase?
• What is your maximum CLTV at my credit tier, and on which occupancy?
• How much of the line must be drawn at closing?
• Can you reduce or freeze the line, and under what conditions?
• Will you disclose how the line is treated if I sell the home?

Where the General Rule Breaks

A HELOC on the rental itself. This is a different product from a line on your residence. It is a narrower market with fewer lenders and stricter terms, and on this network the ceiling is 70% CLTV at a 700 minimum credit score. If you already own a rental with equity, a DSCR cash-out refinance is often the cleaner route. The standard cash-out ceiling is 75% LTV, with about 6 months of seasoning.

A fully borrowed down payment. Some purchase programs cap the borrowed share or want part of the cash from unborrowed funds. Even when a program accepts it, two loans now sit behind one rent stream. That makes the real cash-flow test harder than the DSCR number suggests.

Selling the source home. The CFPB warns that falling behind could cost you the home that secures the line. Separately, a line on a home you sell generally must be paid off from the proceeds. Buying before selling is workable, but the line has to be repaid, and the new property has to carry the payments in the meantime.

Credit history. A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure history splits by program: one seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure or short sale at 4 years, while another declines the history entirely.

Exposure limits. A borrower is limited to three lines, and anyone with more than 15 financed properties is not eligible.

Property types. The HELOC programs do not accept manufactured homes, co-ops, condotels, log homes, commercial or mixed-use properties. On the DSCR side, manufactured homes (single- and double-wide), log homes and barndominiums are not offered. Single-family homes, 2-4 unit properties, PUDs, townhomes and condominiums, including non-warrantable condos, are eligible on the HELOC side.

Occupancy intent. A line on your primary residence assumes you live there. Do not misstate occupancy to a lender, and read your line’s terms on renting the home out later.

The Investor Decision in Practice

Picture a homeowner with a 720-plus credit profile and substantial equity in the home they live in. They want to buy a rental at 75% LTV, which means 25% down plus closing costs. The line has to cover that, and 75% of it is drawn at closing regardless of the target. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.

Here is the way to think about it. At the top of the table, the home can support a combined 90% CLTV, but only when the credit profile reaches 720 and the line is $500,000 or less. At 75% CLTV, a homeowner whose first mortgage already uses half the home’s value has about a quarter of the value left to borrow against. A rental buyer who needs 25% of a purchase price may find that thin, especially once closing costs and reserves are counted.

The rental’s coverage might clear roughly 1.2x on its own rent, and the file could still be tight. Coverage compares rent to the new property’s payment. It leaves out repairs, vacancy, management, utilities and capital expenses, and it ignores the line payment entirely. Clearing 1.00 is not positive cash flow.

Some borrowers will want to stress-test a flat-rent scenario with a rising line payment. A variable payment can climb while rent stays still. Some will find that the numbers only work if they sell something first.

Lenders in the network treat a line and a cash-out differently, but the investor’s question is the same in each case. What happens if the new property sits vacant for a stretch? A sub-1.00 coverage path is available through select lenders in the network, with leverage and terms adjusted, but that structure adds risk when the down payment is already borrowed.

For a fuller look at how the DSCR side works, the complete DSCR loans guide covers coverage ratios, leverage tiers and reserves.

A short decision checklist helps:

• Is the line closed, mostly drawn, and seasoned in your account?
• Does the purchase lender accept borrowed funds, and is there a cap on the share?
• Are your reserves unborrowed?
• Does the combined payment still work if rent comes in flat?
• Do you have a plan for repaying the line if the home sells?

If any answer is no, the right move may be to wait, buy a smaller property, or choose a different funding route.

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. Call 828-256-2183 or request a quote.

A line works best as a short bridge with a repayment plan, not as permanent funding for a purchase.

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.

References

1. Yahoo Finance

2. CFPB – What you should know about home equity lines of credit (booklet)

3. CFPB