The Quick Read: Usually up to 70% combined loan-to-value (CLTV) on a second lien behind your existing first mortgage, at a 720 score or better. On a rental with no mortgage, a first lien runs up to 75% loan-to-value (LTV) at a 740 score, or 70% LTV at 700 to 739. Lines run from $50,000 to $500,000 at those tiers, subject to underwriting and lender guidelines. The line borrows against equity you already own, so it can fund the down payment on your next rental. It does not remove a down payment from the purchase itself.
- Sizing: value times the allowed leverage, minus every lien already recorded, then capped at the program’s line limit.
- Qualification: the rental’s income has to cover a stress payment on the entire line at 1.10x or better. No traditional personal-income documentation, W-2s or personal income calculation are part of the file, subject to lender guidelines.
- Condos: warrantable and non-warrantable condominiums are eligible property types. Condotels are not.
- Title: the condo can stay in your LLC, subject to program terms.
- Footprint: the program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee.
Lendmire is a broker. It arranges these lines through a wholesale lender in its network, and the lender underwrites each file on its own terms. Programs change, so treat every figure below as a ceiling or floor, not an offer.
What “Skipping a Down Payment” Really Means
A DSCR HELOC never replaces the down payment on a purchase. It unlocks cash from a rental you already own, and you spend that cash wherever you like, including as down payment money on the next deal. The down payment is still paid. Your equity in the condo pays it.
Searchers often fold two different ideas into one phrase. The table separates them.
| Question | Purchase loan on a new condo | Line on a condo you own |
|---|---|---|
| Is a down payment required? | Yes | Not applicable |
| What is the collateral? | The condo being bought | The rental you keep |
| What limits the amount? | Price and leverage cap | Value, leverage cap, existing liens |
| Where does the cash come from? | Your savings or other equity | A draw against your equity |
Two points follow from the structure. First, the line is never closed together with a purchase, so you set it up on the property you already hold. Second, the program is for non-owner-occupied one-to-four-unit rentals only. A condo you live in, or a second home, is outside it.
Borrowers who want the purchase-side view can read Lendmire’s dscr loans guide. It covers how down payments work when you buy the next rental outright.
How the Maximum Line Gets Sized
The maximum line equals the condo’s value times the allowed leverage, minus every lien already recorded, then limited by the line cap. The CFPB defines available equity the same way: the home’s value minus what you owe on the mortgage. This program adds its own leverage ceilings on top.
Follow it in steps.
1. Estimate value. Lines up 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.
2. Apply the leverage tier. Which tier applies depends on whether a first mortgage stays in place.
3. Subtract every recorded lien. On a second lien, the first mortgage balance plus the new line is measured against value.
4. Check the line cap and the coverage test. Either one can bind before the leverage tier does.
The tiers
| Lien position | Credit score | Leverage ceiling | Line range |
|---|---|---|---|
| Second lien (first mortgage stays) | 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 |
CLTV means combined loan-to-value, so the first mortgage counts toward it. A first lien exists only on a rental that has no mortgage on it. Condominiums follow these same tiers. A declining-market flag on the property lowers the leverage ceiling by five percentage points.
Two worked examples, in percentages
A condo with a mortgage. Suppose the first mortgage sits at 50% of the condo’s value and your score is 725. At 70% CLTV, the room for a new line is 20% of value. If that room is worth less than $50,000, there is no line to write. If the first mortgage sits at 65% of value, the room is 5 points of value, which is too thin for most condos.
A condo with no mortgage. Suppose a 745 score. The ceiling is 75% LTV on a line up to $500,000. Past that size, the ceiling steps down to 65% at 720 or better, and the line can run to $1,000,000. A bigger line is not automatically a better line. Crossing $500,000 cuts the leverage on the whole balance.
Both examples are illustrative. The lender’s own calculation governs the actual file.
The coverage test can cap the line first
The rental’s gross monthly rent must cover the qualifying payment at 1.10x or better. That payment is a fully amortizing payment on the entire credit limit, at the start rate plus 2 percentage points. It is a stress payment, and it counts the full line even if you never draw it all.
Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A lease must be in place. A two-to-four-unit property can have at most 1 vacant unit.
Taxes and insurance are not part of the qualifying payment, which is principal and interest on the full line. Whether the first-mortgage payment joins that payment on a second lien is not something this page can state, so confirm on the file how the lender treats it. The lender’s coverage calculation governs.
For a high-value, low-rent condo, this makes the coverage test the real ceiling. A smaller line can clear 1.10x where a larger one cannot, even when the leverage tier allows more.
Condo Rules That Change the Outcome
Condos are welcome here, with a short list of exclusions. Warrantable and non-warrantable condominiums are both eligible property types. Warrantability is a Fannie Mae and Freddie Mac concept, and it does not decide eligibility on this lane. Expect to supply HOA information and a lease.
Several property types are outside the program on this lane:
- Condotels
- Row homes
- Rural-designated property
- Leaseholds and land trusts
- Age-restricted communities
- Mixed-use property
- A property listed for sale in the prior 2 months
- A property carrying a solar lien
HOA dues are not in the qualifying payment as the program defines it. They still reduce the cash flow you keep, so run your own numbers before borrowing against a condo with heavy dues. Hazard insurance must cover both liens, and flood coverage applies where required.
How recent purchases fit
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).
This matters for the plan in the title. A condo bought recently with a standard investor down payment has little equity room, and it also has not aged enough to qualify. If you are reading this before a purchase, use a different property’s equity or wait.
Borrower and file requirements
- Borrowers are U.S. citizens, permanent residents and non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible.
- No 30-day mortgage late in the last 12 months.
- 48 months must have passed since a bankruptcy, foreclosure, short sale or deed-in-lieu.
- No reserves and no cash to close are required.
- Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
- The condo can be titled in an LLC, subject to program terms. The members sign as guarantors, and a title holder who is not a borrower signs a non-borrowing owner acknowledgment.
Draw Rules You Should Plan Around
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 comes out at closing. Later draws are at least $5,000 each.
The draw period is 5 years, interest-only on the drawn balance. A 25-year fully amortizing repayment period follows, for a 30-year maturity. The rate is variable. The CFPB explains the draw-then-repayment structure of home equity lines, and the lender’s own HELOC disclosures set out the pricing terms.
Line, Cash-Out Refinance or a Different HELOC?
If the line is too small or the title or income rules don’t fit, there are neighboring programs. The comparison below describes each program’s own structure, not this one’s.
| Factor | DSCR HELOC | DSCR cash-out refinance | Personal-income investment HELOC |
|---|---|---|---|
| Reviewed on | Rent coverage | Rent coverage | Borrower’s personal income |
| First mortgage | Stays in place | Replaced | Stays in place |
| LLC title | Allowed | Generally allowed | Often individual or trust title |
| Best for | Keeping an existing first loan | Larger sums, one new loan | Borrowers with a clean income file |
For investors who keep their first mortgage and want income-based underwriting, Lendmire’s piece How to Qualify for a Bank Statement HELOC for Condo Owners Skipping a Down Payment covers the self-employed alternative.
A cash-out refinance suits a borrower whose first mortgage is not worth protecting, or who needs more than a line can supply. It replaces the first lien, so the existing loan’s terms go away. A second lien suits the borrower who wants to leave a favorable first mortgage alone. The choice depends on your existing loan and how much cash you need.
One risk applies to any home equity line. The line is secured by the property, so a default puts that property at risk. A consumer HELOC may also prohibit renting out the home under its terms, according to a credit-union copy of the federal HELOC booklet. That is why a rental needs a business-purpose investor line, not a primary-residence line used on a rental without the lender’s consent.
Using the Line Toward the Next Purchase
The order of operations matters more than the headline number.
1. Check the condo first. Confirm lien position, equity room, title and the 6-month clocks.
2. Size for the cash you need. Remember 80% or more is drawn at closing and the full limit sets the stress payment.
3. Open the line before you write offers. A purchase lender will want to see where the down payment came from.
4. Ask the purchase lender how it treats borrowed funds. Guidelines vary by lender and by program, so confirm before you depend on it.
5. Check portfolio caps. The line counts toward the program’s 5-loan and $2,500,000 limits.
A DSCR purchase loan on the new property is judged on that property’s rent. The line’s payment does not enter that coverage test. It does add a second obligation against the condo you borrowed on, and your total leverage across both properties goes up. That is the real cost of recycling equity.
Where This Fits, Where It Doesn’t
| Situation | Read |
|---|---|
| Free-and-clear condo, 700+ score, LLC title | Fits |
| Condo with a first mortgage under 70% of value, 720+ score | Fits, if the leftover room clears $50,000 |
| Rent only just covers the payment on the full line | Caution: a smaller line may clear where a bigger one cannot |
| Condo bought or refinanced in the last 6 months | Skip for now |
| Condotel, row home or rural-designated property | Skip |
| Investor needs more than a line can supply | Consider a cash-out refinance |
If you are reaching for this loan because a purchase deal doesn’t pencil, look hard at the deal first. A line on a condo with thin equity room is not a substitute for a down payment you do not have.
Key Terms Defined
- DSCR HELOC: a revolving line on a rental, qualified on the property’s rent instead of your personal income.
- CLTV: combined loan-to-value, which adds the first mortgage and the new line, then divides by the property’s value.
- Coverage ratio (DSCR): gross monthly rent divided by the qualifying payment, which must be 1.10x or better here.
- Second lien: a loan recorded behind the first mortgage you keep.
- Draw period: the stretch when you can take money from the line, 5 years and interest-only on the drawn balance.
- Seasoning: how long you have owned or last refinanced the property before applying.
Frequently Asked Questions
Can I use a DSCR HELOC as the down payment on another property?
Yes, the proceeds are yours to spend, including as down payment funds on a separate purchase. The line itself is never closed together with a purchase. Purchase lenders have their own rules on borrowed funds, so confirm with the purchase lender before you rely on it.
Do I need tax returns or pay stubs?
No. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The rent, the lease, the credit report and the valuation are all documented, but there is no personal income calculation.
How long must I own the condo first?
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). A recent purchase fails both tests.
Which states offer this line?
The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington. Philadelphia lines carry a ceiling 10 points lower.
What if my condo is held in an LLC?
That is allowed on this program, subject to program terms. The members sign as guarantors. If your lender or product requires individual title, a DSCR cash-out refinance is the usual alternative.
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. Qualification is subject to lender guidelines, credit approval and property review, and nothing here is a commitment to lend.
Condo equity is sized against the value, the first lien and the rent test together.
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
2. uspsfcu.org: What You Should Know About Helocs
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a DSCR HELOC Before Probate Ends? · DSCR HELOC Requirements in a Declining Market · DSCR HELOC Requirements and Borrowing Power for a Condo Rental
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.