The Quick Read: Interest-only payments during the draw are a feature each lender sets, not a standard every home equity line carries, and on rental properties only a thin slice of lenders write the line at all, so the real question is which program fits your property, your credit, and how you hold title. Across Lendmire’s wholesale network, the investment-property line pairs a 5-year interest-only draw with a 25-year fully amortizing repayment. Lendmire is a mortgage broker, so it matches your file to a lender in that network rather than writing the loan itself.
- On an investment property, lines in the network cap at 70% CLTV (combined loan-to-value), need a 700 credit profile, and top out at $500,000.
- At least 75% of the line is drawn at closing, so interest starts on most of it right away.
- Pricing floats through both the draw and the repayment and never converts to fixed, so even an interest-only payment can move.
- An LLC cannot hold title on these lines. The borrower or a revocable living trust must.
What Does an Interest-Only Draw Period Actually Mean?
An interest-only draw period is the early stretch of a home equity line when your required payment covers only the interest on what you have borrowed. Principal stays untouched unless you choose to pay it down. When the draw ends, borrowing stops and the full balance begins amortizing, which means each payment now includes principal.
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.
A HELOC (home equity line of credit) is an open-end line. You borrow, repay, and borrow again up to a limit, secured by the property. The draw period is the borrowing window. The repayment period is what follows.
Lenders set these windows differently. Opendoor’s HELOC explainer describes a 10-year draw followed by a 20-year repayment as a commonly cited structure. That is a market description, not a rule. The structures in Lendmire’s network are shorter, and they are covered below.
One point trips up many first-time borrowers. Interest-only is a payment choice built into the plan, and it is not a discount. You owe the same balance on the last day of the draw that you owed on the first, unless you paid extra.
Key Terms Defined
Draw period: the window when you can borrow from the line and your minimum payment may cover only interest.
Repayment period: the stretch after the draw ends, when borrowing stops and the balance amortizes.
CLTV: combined loan-to-value, meaning all liens on the property added together and divided by its value.
Interest-only payment: a payment equal to the interest owed on the drawn balance, with no required principal.
Lien position: whether the line sits first or second in line for repayment if the property is sold or foreclosed.
Vesting: the legal way title is held, such as an individual, a revocable living trust, or an LLC.
Amortizing: paying down principal and interest together on a schedule until the balance reaches zero.
Which Banks Offer This? The Straight Answer
Availability depends far more on the collateral than on the interest-only feature. Many lenders write lines only against the home you live in. Once the collateral is a rental, the pool of lenders shrinks. Investor discussion on BiggerPockets points to community banks and credit unions as the usual source of lines on non-owner-occupied properties.
This article does not name or rank institutions. Programs change, and the lender that fits one borrower can be wrong for the next. The lenders that write investment-property lines with an interest-only draw depend on your state, your credit profile, your equity, and how the property is titled.
That is where a broker earns its keep. Lendmire shops a network of wholesale HELOC lenders and matches the scenario to the program whose guidelines fit. The best program for your situation is the one whose limits your file clears. Headline terms matter less.
Lendmire places these lines in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. That is narrower than its DSCR investor footprint of 41 markets, including Washington, D.C. Confirm your property’s state before building a plan around a line.
How the Network’s Programs Work
On primary residences and second homes, the network offers two draw structures. The shorter-draw structure runs a 3-year interest-only draw and a 17-year fully amortizing repayment, while the longer-draw structure runs a 5-year interest-only draw and a 25-year repayment. Both are standalone lines in first or second lien position, and both are subject to lender guidelines and full file review.
In Tennessee, both structures are shorter: 3 years plus 12 years, and 5 years plus 10 years. Investment properties use the longer-draw structure only.
| Occupancy | Max CLTV | Draw / repayment |
|---|---|---|
| Primary residence | 90% (720+ credit) | 3/17 or 5/25 |
| Second home | 90% (720+ credit) | 3/17 or 5/25 |
| Investment property | 70% (700+ credit) | 5/25 only |
Treat the 90% figure with care. It exists only at a 720-or-better credit profile, and only for lines up to $500,000. Lower credit tiers step down from there. The investment-property ceiling stays at 70% CLTV with no higher tier. Market surveys may show higher figures for equity lines in general. Those describe the broader market, not this network.
Other features that shape an investment-property file:
- Line size: $25,000 to $500,000 on an investment property. Lines above $500,000 are primary-residence only, require at least a 700 credit profile (720 on the longer-draw structure), cap at 75% CLTV, and need a full appraisal.
- Debt-to-income: 50% maximum, and 45% for credit profiles from 600 to 679. A ratio above 45% requires a 680 score.
- Valuation: lines at or below $500,000 ordinarily use an automated valuation, though a higher CLTV may call for a second look.
- Property types: single-family, 2-4 units, PUD, townhome, and condominium, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural properties are not offered.
- Exposure: a borrower may hold up to three lines, and anyone with more than 15 financed properties is not eligible.
How the Payment Works: Draw Versus Repayment
The draw-period payment is the interest on your drawn balance for the month. The repayment-period payment spreads that same balance, plus interest, across the remaining term. Because principal enters the picture, the payment steps up when the draw ends.
Run it with percentages instead of dollars. Say you draw 75% of an investment line at closing and the remaining 25% a year later. You pay interest only until the 5-year draw ends. At the start of repayment, you owe 100% of everything you borrowed. That balance now amortizes over 25 years.
The step-up comes from two sources. First, principal enters the payment. Second, pricing floats on these lines, so the interest portion can drift up or down along the way. The CFPB’s HELOC booklet notes that variable pricing is typical for these plans.
Qualification uses the harder version of this math. The network qualifies the borrower on the interest-only payment calculated on the maximum draw. A line you plan to use at 40% still gets underwritten as if you borrowed all of it. That choice is conservative, and it lowers the borrowing room some investors expect.
Where the Rule Breaks
LLC-titled rentals. This is the sharpest difference from a DSCR loan. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on these lines. A property already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance instead.
Frozen or reduced lines. The CFPB notes that a lender may stop further draws if the home’s value falls significantly. The draw window is also not permanent. It ends on schedule whether or not you are ready.
Required initial draw. At least 75% of the line is drawn at closing. That surprises borrowers who expect a quiet line for emergencies and rehab costs. Later draws on the longer-draw structure carry a $1,000 minimum.
Listed properties. In NC, PA, TN, TX, and WA, a property listed for sale, or listed within the past 60 days, is ineligible.
Credit history. A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure history splits by structure. One structure seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4. The other declines the history regardless of age. Investment files follow the 7-and-4-year path.
Questions to Ask Before You Apply
Whether you work with a broker or go direct, these questions separate a workable line from a problem. Ask them in this order.
1. Does the lender write lines on non-owner-occupied property in your state?
2. Is the minimum payment interest-only, or principal plus interest, during the draw?
3. How long is the draw, and how long is the repayment?
4. How much must you draw at closing?
5. Does the pricing stay variable through both phases?
6. Is the interest-only payment tested on the full line or only the drawn balance?
7. Can the property be vested in your name or a revocable trust, and is that what the deed says today?
8. What combined LTV does the lender allow with your credit profile, and what valuation method will it use?
9. Can you pay principal during the draw without penalty?
Get the answers in writing. A product page and a loan officer can describe the same line differently, and the plan disclosure controls.
Planning for the End of the Draw
The end of the draw is a date you can see years ahead. Treat it that way. Four paths exist.
Pay down principal early. Extra principal during the draw shrinks the balance that eventually amortizes. Confirm the lender accepts it without penalty.
Refinance into a DSCR cash-out loan. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Cash-out tops out around 75% LTV across most of the network, and about 6 months of seasoning is the common expectation. Title in an LLC can work, subject to lender program eligibility.
Sell or refinance with a different lender. Possible, but it depends on equity, credit, and market conditions at that point.
Let the repayment run. This works only if rents and reserves absorb the higher payment. Test that before the draw ends, not after.
Who This Fits, and Who Should Skip It
An interest-only draw fits an investor who needs a short-term bridge: a down payment, a rehab, or an early-stage hold with a defined exit. It also fits a borrower who owns the property personally, has equity, and holds a 700 credit profile or better. The low early payment is a cash-flow tool, and it works best with an exit plan attached.
It fits poorly in four situations:
- You hold the rental in an LLC and do not want to move title.
- You want a fixed payment for a long hold.
- You need more than 70% CLTV on an investment property.
- You will not be able to absorb the step-up when repayment begins.
Remember what a DSCR ratio measures. It compares rent to the property’s full monthly obligation, and clearing 1.00 does not mean positive cash flow. Repairs, vacancy, management, and utilities sit outside that math. A HELOC payment comes out of the same rent. On a rent-based DSCR loan, the HELOC payment generally stays outside the ratio, though stacked debt still affects your reserves and your real margin.
DSCR programs also have their own interest-only options. Extended terms and interest-only periods exist through select lenders in the network. Coverage of 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. The complete DSCR loans guide covers those structures in full.
Self-employed investors who document income through bank statements may also want Lendmire’s explainer Banks That Offer a Bank Statement HELOC With a 10-Year Interest-Only Draw Period.
Frequently Asked Questions
Is every HELOC interest-only during the draw?
No. The interest-only minimum is set by each lender and plan. Some require principal plus interest from day one. Read the plan disclosure and ask the question directly before you apply.
Can I get an interest-only HELOC on a rental property?
Sometimes. Fewer lenders write lines on non-owner-occupied property, and the ones that do apply tighter limits. In Lendmire’s network, an investment-property line runs a 5-year interest-only draw and a 25-year repayment. The ceiling is 70% CLTV with a 700 minimum credit profile, subject to lender guidelines.
Does the payment stay the same during the draw?
Not necessarily. Pricing floats through both the draw and the repayment on these programs and never converts to fixed. An interest-only payment can rise or fall with the balance and the pricing. Draws and extra principal payments change it too.
What happens when the draw period ends?
Borrowing stops, and the full outstanding balance amortizes over the repayment term. On the investment-property structure that is 25 years. The payment usually rises because principal is now included. Plan for that step-up before the draw begins, not after.
Can an LLC borrow on one of these lines?
No. Title must sit with the individual borrower or a revocable living trust. An LLC-owned rental needs a vesting change or a different product, such as a DSCR cash-out refinance, subject to program terms.
Next Step: See How the Numbers Fit
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 mortgage broker that arranges financing through select lenders in its wholesale network, with DSCR investor programs. An illustrative calculator on the site can give a rough sense of scale before you talk to anyone. Then match the program to the property. Compare the draw’s end date against your plan for the rental, because that is the date that decides whether the line helped.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program 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
2. BiggerPockets – HELOC on rental properties
4. CFPB
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: Banks That Offer a HELOC With Steady Employment and Income · Banks That Offer an Investment Property HELOC for LLC-Held Rentals · How Much Can You Borrow on an Investment Property HELOC When Switching Banks?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.