The Quick Read: The line size caps the draw, and the deposit itself is only a small slice of it. On a rental that still carries a first mortgage, a DSCR HELOC reaches up to 70% combined loan-to-value (CLTV) at a 720 score or better, on lines from $50,000 to $500,000, subject to underwriting. The rent must clear a 1.10x coverage test on the whole line. At least 80% of the line is drawn at closing, so the deposit comes out of a funded line.
- Max line = value × the lender’s CLTV ceiling, minus the first mortgage balance.
- A first lien on a paid-off rental reaches 75% LTV at 740 or better, or 70% from 700 to 739.
- The line must be open and funded before the offer, not applied for afterward.
- The purchase lender decides whether borrowed funds count, and they rarely count toward reserves.
- Deposit forfeited means the line balance is still owed. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
What Sets the Borrowing Limit?
The limit is a formula, not a feeling. Value of the rental times the maximum CLTV, minus every lien already on it. The CFPB’s HELOC booklet shows the same arithmetic in its worked example, which multiplies appraised value by a percentage and subtracts the mortgage balance. Use it for the formula only. The booklet is old, and the percentages in it are not this program’s.
On a DSCR HELOC, the percentages are set by the lien position. A second lien sits behind the first mortgage the owner keeps. It reaches up to 70% CLTV at 720 or better. There is no second-lien tier below 720. A first lien exists only on a rental with no mortgage, and it reaches 75% LTV at 740 or better, 70% LTV from 700 to 739, and 65% LTV on lines above $500,000, up to $1,000,000. All of this is subject to underwriting and varies by property and borrower. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Lenders count the full credit limit toward CLTV, not just the amount drawn. A line you plan to draw lightly still uses up the leverage on day one.
Three Limits, One Binds First
Three tests apply at once, and the tightest one wins.
1. The leverage ceiling. Value times 70% CLTV (second lien), less the first mortgage. On a thin-equity rental this is usually the binding limit.
2. The dollar band. Second-lien lines run $50,000 to $500,000. A rental with a lot of equity hits the dollar cap before the percentage.
3. The rent test. Minimum 1.10x. Gross monthly rent is divided by a qualifying payment, which is a fully amortizing payment on the entire credit limit at a stress rate above the start rate. Taxes and insurance are not part of that qualifying payment. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
The rent test is the one investors forget. A rental with plenty of equity can still shrink its line if the rent does not cover a payment on the full limit. Confirm on the file how the lender treats the first-mortgage payment on a second lien, since the coverage calculation is the lender’s own.
How Big Is the Deposit Next to the Line?
Small. Market references put typical U.S. deposits at 1% to 3% of the agreed purchase price, higher in some contested markets. On a rental purchase, that is a fraction of what the line is built to carry.
So the deposit rarely sets the line size. The full cash need sets it: down payment, closing costs, and any rehab. Reserves are a separate pot. The deposit is also not an extra cost. It is credited toward the down payment or closing costs at settlement.
Here is the catch with this program’s draw rules. At least 80% of the line is drawn at closing, and later draws are at least $5,000 each. You cannot open a large line and pull only a few thousand dollars at the start. Interest is charged on the drawn balance, so a big closing draw that sits idle in a bank account costs money. Size the line to the real cash need, not to the maximum available.
The Sequence That Works
A DSCR HELOC cannot be closed together with a purchase. It is a standalone lien on a rental you already own, so the order matters.
1. Open the line first. Before you write an offer, the line should be closed and drawn. Applying after you go under contract usually does not fit the contract’s deposit deadline.
2. Keep the cash in your account. The draw lands like any deposit. Leave it there.
3. Wire the deposit when the contract calls for it. Agent-side guidance puts the typical window at 1 to 3 business days after acceptance. The contract sets the actual deadline.
4. Keep the paper trail. Save the line statement showing the draw, the account statement showing the deposit, and the escrow receipt. The purchase lender will ask where the money came from.
5. Run the purchase file separately. The DSCR purchase loan reads the new property’s rent against its own payment. Confirm with that lender whether the line payment enters its calculation.
The CFPB’s HELOC explainer describes a HELOC as an open-end line you draw on during a draw period. On this program the draw period is 5 years interest-only, followed by a 25-year repayment period and a 30-year maturity, with a variable rate.
Does the Purchase Lender Accept Borrowed Funds?
Not always, and this is the failure point worth checking before you draw.
Down payment, closing costs, and reserves are tested as separate pots. Across the wholesale network, many programs accept documented line draws for the first two. Borrowed funds are commonly excluded from reserves. A few programs cap the borrowed share, and the strictest overlays want some unborrowed cash in the deal. A down payment that is entirely borrowed can fail on that point alone.
Seasoning is the other quiet issue. A draw wired out the day after it arrives has no history in the account. Some purchase lenders want funds sitting for a period before they count. Get the purchase lender’s position in writing before you draw. Describe the deposit source plainly on the file.
What the Rental Must Look Like
The rental securing the line has to fit the program, or no amount of equity matters. Eligible: single-family, PUD, townhome, two-to-four units, and warrantable and non-warrantable condos, with lots up to 10 acres. Not eligible on this lane: rural-designated property, condotels, row homes, leaseholds, land trusts, age-restricted communities, mixed-use, a property listed for sale in the prior 2 months, and a property with a solar lien. A lease must be in place, and a two-to-four-unit property may have at most 1 vacant unit.
Valuation depends on line size. Lines to $400,000 use an automated valuation with a property inspection report, or a full interior appraisal. Larger lines take a full interior appraisal. Appraisal waivers are not accepted.
Seasoning has two clocks. 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). A recent purchase can’t fund the next deposit right away.
Credit, Entity, and Exposure
Credit minimums are 720 on a second lien and 700 on a first lien. Mortgage history shows no 30-day late in the last 12 months, and 48 months must have passed since a bankruptcy, foreclosure, short sale, or deed-in-lieu. No reserves and no cash to close are required on the line itself. Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. No traditional personal-income documentation, W-2s, or personal income calculation. The LLC can hold title, subject to program terms, with members signing as guarantors. Borrowers must be U.S. citizens, permanent residents, or non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible.
The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Lendmire is a broker arranging this through a wholesale lender in its network.
Key Terms Defined
CLTV: Combined loan-to-value, the first mortgage balance plus the new line, divided by the property’s value.
Draw period: The stretch when you can borrow from the line; here it is 5 years, interest-only on the drawn balance.
Earnest money deposit: Cash posted with the contract to show good faith, later credited at settlement.
Seasoning: The time funds or ownership must exist before a lender counts them.
DSCR: Debt service coverage ratio, gross monthly rent divided by the qualifying payment.
The Risk If the Deal Dies
This is where the borrowed deposit hurts. A financing, inspection, or appraisal contingency can protect a deposit, per the same earnest payment summary. Outside those contingencies, the deposit can be forfeited, and the line balance stays on a rental you keep. A default on that line puts the rental itself at risk.
Plan for both payments. The line payment and the new loan payment both need to be serviceable, even if the purchase falls through. There is also no zero-down path here. The DSCR purchase loan still needs real equity in the deal. The line changes where the cash comes from, not whether it is needed.
If the line can’t be open in time, the alternatives are a cash-out refinance on the rental, which resets the first mortgage, or using cash on hand. A cash-out refinance has its own seasoning and leverage rules. For the full picture, see the complete DSCR loans guide.
Frequently Asked Questions
Is the deposit the most I can draw?
No. The deposit is a small piece of a line sized by value, CLTV, and the first mortgage balance. Market references put deposits at 1% to 3% of price. The line is sized for the whole cash need.
Can I draw only the deposit amount?
Not at closing. At least 80% of the line is drawn at closing, with the closing draw never under $50,000, and later draws are at least $5,000. Size the line close to what you will actually spend.
Do I need the line open before I make an offer?
Yes, in practice. The line is a standalone lien and is never closed together with a purchase. The deposit is usually due shortly after acceptance, so the funds should already be in your account.
How soon after buying a rental can I open the line on it?
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 are subject to underwriting.
Will the purchase lender accept the borrowed deposit?
Often for down payment and closing costs, subject to the lender’s guidelines. Borrowed funds are commonly excluded from reserves, and some programs cap the borrowed share. Ask for the position in writing before you draw.
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. Call 828-256-2183 or request a quote.
Nothing here is a commitment to lend; every file is underwritten individually and programs change.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. It arranges DSCR home equity lines of credit on rental property through wholesale lending partners in 15 of its 16 licensed states (every licensed state except Tennessee); each line is written on a non-owner-occupied one-to-four-unit rental and reviewed individually by the lender under the program’s credit and leverage guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
3. 1 to 3 business days after acceptance
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?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.