The Quick Read: It depends on three limits, and the smallest one wins. The first is equity: on a second lien, the first mortgage balance plus the new line cannot pass 70% combined loan-to-value. The second is the line cap, which tops out at $500,000 and requires a 720 credit score or better. The third is rent, which must cover a stress payment on the whole line at 1.10x, all subject to underwriting.
- Equity ceiling: on a second lien, the first mortgage balance plus the new line cannot pass 70% of value.
- Rent ceiling: gross monthly rent divided by a stress payment on the entire credit limit must reach 1.10x.
- Line size: lines start at $50,000, and at least 80% of the line is drawn at closing.
- Owner income: the line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Tax returns and a personal debt-to-income ratio are not part of the test.
- Location: Michigan is one of the states where the program is offered, subject to underwriting.
Dearborn is only the example here. The same math applies to any eligible rental in the program’s states. Lendmire arranges these lines as a broker through a wholesale lender in its network, and every figure below is a ceiling or a floor, not an offer.
What Is a DSCR HELOC on a Rental?
A DSCR HELOC is a revolving line of credit secured by a rental you keep. It is written as a standalone second lien behind your existing first mortgage. If the rental has no mortgage, it is written as a standalone first lien.
Several features set it apart from the home equity line your bank offers on a primary residence:
- The rent qualifies the line. The test is the property’s rental income, not your paycheck.
- Your first mortgage stays put. A second lien leaves its terms alone, which matters when that loan is hard to replace.
- An LLC can stay on title. This applies to investment property only, and the LLC’s members sign as guarantors, subject to program terms.
A DSCR HELOC is never closed together with a purchase, never placed as a third lien, and never opened on your own home or a second home.
How Is the Maximum Line Calculated?
The maximum line is the lowest of three numbers: the equity ceiling, the program’s line cap, and the amount the rent can support. The equity ceiling comes first because it is simple arithmetic.
Combined loan-to-value (CLTV) means the first mortgage balance plus the new line, divided by the property’s value. On a second lien, the program tops out at 70% CLTV for a 720 score or better. The line cap on a second lien is $500,000.
Here is an illustrative case. Say a rental’s first mortgage sits at 45% of value. The 70% ceiling leaves room for a line of up to 25% of value. If the first mortgage is paid down to 30% of value, the room grows to 40%, though the $500,000 cap still limits the line.
The ceiling can drop. A declining-market flag on the property lowers it by 5 points. Hazard insurance must cover both liens, with flood coverage where required.
Which Limit Binds First: Equity or Rent?
Rent binds first on expensive properties that rent for modest amounts. Equity binds first on properties with strong rent relative to value.
The rent test works like this. Gross monthly rent is divided by the qualifying payment, and the result must be at least 1.10x. The qualifying payment is a fully amortizing principal-and-interest payment on the entire credit limit, at a stress rate above the start rate. Taxes and insurance are not part of it.
Two details move the number:
- The size of the line, drawn or not. The test uses the full limit. A larger line means a larger stress payment and a lower coverage ratio.
- The rent used. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
Now run a modeled example. Say a line sized at the equity ceiling tests at 1.25x. It clears the 1.10x floor. Ask for a line twice as large, and coverage falls to roughly 0.6x, so the request fails on rent even though the equity might allow it. The request would have to be cut until the coverage ratio reaches 1.10x, or the file does not work as a rent-qualified line.
One more point. A second lien sits behind a first mortgage that also has a payment. The lender’s own calculation governs, and the arithmetic above is illustrative.
What Credit Score Sets Your Ceiling?
Credit decides which tier you land in, and the tiers differ by lien position. A second lien requires a 720 score. A first lien starts at a 700 score, and higher scores open up more leverage on lines up to $500,000. Larger lines above that amount require a 720 score and carry a lower maximum leverage. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
| Lien position | Credit score | Maximum leverage | Line size |
|---|---|---|---|
| Second lien | 720 or better | 70% CLTV | $50,000 to $500,000 |
| First lien (no mortgage) | 740 or better | 75% LTV | Up to $500,000 |
| First lien (no mortgage) | 700 to 739 | 70% LTV | Up to $500,000 |
| First lien (no mortgage) | 720 or better | 65% LTV | Above $500,000, to $1,000,000 |
Notice what the table says about a landlord who keeps a first mortgage. That landlord can only take a second lien, and there is no second-lien tier below 720. A first lien exists only on a rental with no mortgage. First-lien figures are loan-to-value, and second-lien figures are combined loan-to-value.
Mortgage history matters too. The program looks for no 30-day mortgage late in the last 12 months. It also wants 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu. No reserves and no cash to close are required, subject to underwriting.
Valuation, Seasoning and Exposure
Value drives the equity ceiling, so the valuation path matters. Lines up to $400,000 use an automated valuation (confidence score 85 or better) with a property inspection report, or a full interior appraisal. Lines above $400,000 need a full interior appraisal. Appraisal waivers are not accepted.
The appraisal also produces the rent figure. Agency form names are a handy reference: Form 1007 is the single-family comparable rent schedule, and Form 1025 covers small residential income properties of two to four units. Those forms describe what the appraiser reports. They do not set this program’s terms.
Seasoning is the rule that catches recent buyers. A rental bought or refinanced inside the last 6 months is not eligible (that clock runs from the last note date to the new note date), and the owner must have held title for 6 months (settlement date to note date).
There is also a cap on exposure. A borrower can have at most 5 loans or $2,500,000 with the program, and a two-to-four-unit property may have at most 1 vacant unit. A lease in place is required.
Where the Rule Breaks
Several situations fall outside the normal path. Check them before you build a plan around a number.
- Recent purchase at high leverage. Picture a rental financed at a loan-to-value close to the 70% CLTV ceiling. That leaves little or no room for a second lien. Only paydown or appreciation changes it, and the seasoning clocks apply regardless.
- Property types outside the lane. Rural-designated property, row homes, condotels, leaseholds, land trusts, mixed-use, hobby farms, and modular or log homes are not eligible. A property listed for sale in the prior 2 months or carrying a solar lien is out too. Single-family, townhome, planned unit developments, condominiums, and two-to-four-unit properties are eligible property types.
- Borrower status. US citizens, permanent residents, and non-permanent residents with a Social Security number can apply. Foreign nationals and ITIN borrowers cannot.
- Small equity cushions. A line must be at least $50,000. A landlord with 15% of value in available room on a modest property may find the minimum line is more than the equity allows.
- The first mortgage’s own terms. Check that the first mortgage documents permit a second lien.
How Do the Draw Rules Change the Plan?
The draw rules turn this into a planned borrowing tool, not a standby fund. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000. On the smallest lines, that means the whole line is drawn at closing.
After closing, later draws are at least $5,000 each. You get 5 years of interest-only payments on the drawn balance. Then comes a 25-year fully amortizing repayment period, for a 30-year maturity. The rate is variable.
That shape has a real risk. The Consumer Financial Protection Bureau explains that a HELOC is an open-end line you can borrow against repeatedly. It also warns that payments are often significantly higher once repayment begins. Plan for that step-up while you are still in the interest-only years.
Use the proceeds with care. A line drawn to cover the entire down payment on the next rental leaves little cushion if values soften. The new lien also counts toward your exposure cap. Tax treatment varies; consult a qualified professional.
HELOC, Cash-Out Refinance or Bank Line?
The right tool depends on whether you want to keep the first mortgage and how much cash you need at once. Each option below is described under its own rules, not as this program’s.
| Factor | DSCR HELOC | DSCR cash-out refinance | Bank HELOC on personal income |
|---|---|---|---|
| Reviewed on | Rental income | Rental income | Personal income and debt ratios |
| First mortgage | Kept in place | Replaced by a new first lien | Kept in place |
| Funds | Revolving line, draw rules apply | One lump sum | Revolving line |
| Best fit | Keeping a low first mortgage | Large lump sum needs | Landlords with strong personal income |
A cash-out refinance replaces your first mortgage with a new, larger one. A line leaves the first mortgage untouched. If the old first mortgage has terms you cannot replace, the line usually deserves a look. If you need a large lump sum and the old loan is not worth keeping, a refinance may fit better.
Some big retail lenders restrict home equity lines to primary residences, so the personal-income route can be hard to find on a rental. That is one reason a rent-qualified line exists.
Dearborn Landlords: Property Types and Preparation
A Dearborn landlord with a single-family rental, a duplex, or a small multifamily building has an eligible property type, assuming the property meets the other rules and sits in a rental market the appraiser can support with comparable rents. The article does not rely on local statistics, and the appraisal sets value and rent for each file.
Gather these before applying:
1. A current lease for every unit, plus rent receipts if the lease is above market rent.
2. A first mortgage payoff statement showing the balance.
3. LLC documents, if the entity holds title, plus guarantor details for each member.
4. Hazard insurance that can cover both liens, and flood coverage where required.
5. A realistic line size, so you do not request more than the rent test supports.
Lendmire’s complete DSCR loans guide covers how rent-qualified investor financing works across other programs.
Key Terms Defined
DSCR (debt service coverage ratio): the property’s gross monthly rent divided by the qualifying payment.
CLTV (combined loan-to-value): all liens on the property added together and divided by its value.
Lien position: whether the line is paid first (a first lien) or behind another mortgage (a second lien).
Draw period: the stretch when you can borrow against the line, here 5 years of interest-only payments on the drawn balance.
Stress payment: a fully amortizing payment on the whole credit limit at a stress rate, used only to test rent coverage.
Seasoning: the time a property has been owned or refinanced before it is eligible.
Frequently Asked Questions
What is the smallest line available?
The minimum is $50,000. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000, so on the smallest lines the whole line is drawn at closing. Later draws start at $5,000. Landlords with limited equity may find the minimum line is more than their equity allows, subject to underwriting.
Can my LLC stay on title?
Yes, on an investment property, subject to program terms. The LLC’s members sign as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. The borrowers on the line need not match the borrowers on the first mortgage.
How soon after buying a rental can I take a line?
Two six-month clocks apply: the line is not available on a rental bought or refinanced in the last 6 months (last note date to new note date), and title must have been held for 6 months (settlement date to note date). Both must be met.
Can I get a line on a Michigan rental?
Michigan is one of the 15 states where the program is offered. The program runs in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Property type, credit, rent coverage, and the equity ceiling still decide the outcome on each file.
Does a DSCR HELOC replace my first mortgage?
No. A second lien sits behind it, so your existing first mortgage and its terms stay in place. A cash-out refinance does the opposite: it pays off the old first mortgage with a new one.
If you are considering a home equity line on a rental property and want to see how the numbers work, Lendmire can help you compare DSCR HELOC options based on the property, the rent, the equity available, credit profile, combined leverage, and your goals. Reach the team at 828-256-2183 or request a quote.
A landlord’s first move is to write down the first mortgage balance as a percentage of value, subtract it from the CLTV ceiling, and see whether the remaining room is even large enough to justify a $50,000 minimum line.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps landlords and real estate investors open DSCR home equity lines of credit on their rentals — lines qualified on the property’s rent, never on the owner’s own home — through wholesale lenders in 15 of Lendmire’s 16 licensed states (every licensed state except Tennessee). Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its 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
1. CFPB: What Is a Home Equity Line of Credit HELOC
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Can You Borrow on a DSCR HELOC on a Vacant Rental Without a Lease? · How Much Can You Borrow on a DSCR HELOC for Refinancing a Balance Into a New HELOC? · How Much Can You Borrow on a DSCR HELOC on That Property?
Guides: DSCR HELOC in Dearborn, MI · DSCR HELOC in Michigan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.