Banks That Offer a HELOC With Payment Deferment or Interest-Only Options

The Quick Read: Interest-only payments are the standard draw-period setup on a home equity line, so the real question is which program fits your property, credit and leverage. True payment deferment, where payments pause entirely, is not a feature of the lines Lendmire brokers.

• Interest-only means principal is deferred, not interest. Interest accrues on the drawn balance.
• When the draw ends, payments step up as principal begins to amortize.
• On the network’s lines, investment properties run a 5-year interest-only draw with a 25-year repayment, capped at 70% CLTV.
• The available lender pool depends on occupancy and credit, and rentals narrow it further.
• Lendmire is a broker. It matches the file to a wholesale program and does not lend or name banks.

What Does “Payment Deferment” Mean on a HELOC?

It almost never means a payment holiday. On a HELOC, “deferment” usually describes interest-only payments during the draw period, when no principal is required. Experian notes that interest-only and traditional HELOCs are often the same product, because most lines skip principal payments while you can still borrow.

Nothing is forgiven. The balance stays flat and interest keeps running on what you drew. The principal comes due later, when the draw period closes.

A hardship deferral is a different thing. It is a servicer’s discretionary decision after a borrower runs into trouble, and it is not a product feature you shop for. Anyone asking for a pause should read the existing agreement and ask the servicer directly. It is not something to build a rental purchase around.

Key Terms Defined

Draw period: The window when you can borrow against the line. On the network’s investment lines, it lasts five years.

Repayment period: The stretch after the draw closes, when the balance amortizes. New borrowing stops.

Interest-only payment: A payment that covers interest on the drawn balance and no principal.

CLTV: Combined loan-to-value. It adds the new line to all existing liens and divides by the property’s value.

Balloon: A structure that requires the full remaining balance at the end of the draw. Some market plans work this way. The network’s lines amortize instead.

Payment shock: The jump in the monthly obligation when repayment starts and principal is added.

How an Interest-Only Draw Works, Step by Step

1. Collateral is chosen. The lender needs to write on the property type and occupancy. Rentals narrow the field. NerdWallet says an investment-property HELOC means a smaller lender pool, stricter requirements and less borrowing power than a primary home. It also lists at least 20% equity as a requirement. That is a market-wide figure. On the network’s investment lines, the ceiling is 70% CLTV.

2. The file is underwritten on the borrower. A HELOC is a personal-credit product. The lender looks at credit, equity and debt-to-income. It does not look at the rent. On the network’s lines, DTI tops out at 50%, drops to 45% for scores from 600 to 679, and is calculated on the interest-only payment at the maximum draw. That means the qualifying payment assumes the line is fully drawn.

3. The line is set up. The network requires at least 75% of the line to be drawn at closing, so the line is not an unused safety net. Draws after closing carry a $1,000 minimum, with Texas at $4,000.

4. The draw period runs. You pay interest on the drawn balance. Extra principal payments are usually allowed. Pricing floats during the draw and the repayment period on the network’s lines.

5. Repayment begins. Borrowing stops and the balance amortizes. Experian’s draw-period guide describes market lines with five to 10-year draws followed by 20-year repayment, and says payments can more than double. On the network, an investment line gets a 25-year repayment after the 5-year draw.

Which Banks Offer This? Answering as a Broker

The honest answer depends on your situation: the property, occupancy, credit, leverage and how you hold title. Any list of lender names goes stale. Big retail lenders change what they write on non-owner-occupied collateral, and local credit unions differ widely. Lendmire does not publish a roster.

What Lendmire does is shop the file across wholesale HELOC lenders and match it to the program that fits. The lines Lendmire places are standalone, in first or second lien position. They are available only in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA and WA. That is narrower than the 41-market DSCR footprint, so confirm the property’s state before planning around a line.

Two draw structures exist on primary residences and second homes:

• A 3-year interest-only draw with a 17-year repayment.
• A 5-year interest-only draw with a 25-year repayment.

Tennessee shortens them to 3 and 12 years, and 5 and 10 years. Investment lines use only the 5-year draw and 25-year repayment.

The 90% ceiling exists only at a 720-or-better credit profile, on lines up to $500,000. Lower scores step down: a 640 primary residence tops out at 80%, and a 600 at 60%. Primary lines above $500,000 need a 700 score, or 720 on the 5-year-draw structure. They cap at 75% CLTV and require a full appraisal. Lines up to $500,000 usually use an automated valuation.

Where the Rule Breaks

Balloon plans. Some market HELOCs require the whole balance when the draw ends. The federal consumer regulator’s HELOC explainer says some plans require the whole balance at once, and that repayment often runs 10 or 20 years at higher payments. That is the closest thing to real deferment, and the riskiest. The network’s lines amortize fully, so the step-up is predictable.

Selling the property. The HELOC brochure says you generally must pay the line off in full when you sell. An interest-only balance never shrinks, so every dollar drawn is owed at the sale.

Title held in an entity. This is the sharpest difference from a DSCR loan. The network’s lines require title in the individual borrower’s name or 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 instead.

Property types. Single-family, 2-4 unit, PUD, townhome and condominium (including non-warrantable) are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use and agricultural zoning are not offered. Modular homes are eligible on the 5-year-draw structure only.

Credit history. A bankruptcy needs 4 years of seasoning. Foreclosure history splits by program on primary residences and second homes. One program seasons a foreclosure at 7 years and a deed-in-lieu or short sale at 4. The other declines that history regardless of age. Investment files follow the 7-and-4-year path.

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

State rules. A Texas primary residence is a homestead and caps at 80% combined loan-to-value. Texas second homes and investment properties follow the standard tables. A property listed for sale, or listed within the past 60 days, is ineligible in NC, PA, TN, TX and WA. New Mexico and Ohio apply CLTV caps tied to the credit profile.

What the Investor Decision Looks Like

Interest-only draws lower the carrying cost while you build or renovate. The trade-offs are plain:

• The balance does not shrink unless you pay extra principal.
• Pricing floats, so the payment can change during the draw itself.
• The step-up at repayment can break a cash-flow plan built on interest-only math.
• The line counts as personal debt and shows up in your DTI.

A HELOC and a DSCR loan answer different questions. A line is underwritten on you and your equity. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, and it can close in an entity’s name, subject to program eligibility. DSCR is the better route when title sits in an LLC or personal DTI is tight. Most programs start at 1.00 coverage, and select lenders in the network go lower with leverage and terms adjusted. Clearing 1.00 does not mean positive cash flow, since repairs, vacancy and management sit outside the calculation. Cash-out refinances top out around 75% LTV, with about six months of seasoning typical. The complete DSCR loans guide covers the structures in full.

A companion guide covers whether a bank statement HELOC with a 10-year interest-only draw can fit.

Compare any quote on four points before committing:

• Does the line fully amortize, or is there a balloon?
• How is the payment qualified, on the drawn balance or the full limit?
• Is the minimum draw at closing workable, given the network requires at least 75% of the line drawn at closing?
• Can the lender write on this occupancy and this vesting?

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. Every figure above is subject to lender guidelines and full file review, 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. Experian

2. NerdWallet

3. Experian’s draw-period guide

4. CFPB – What is a HELOC

5. CFPB – HELOC Brochure (PDF)