The Quick Read: Usually up to 70% combined loan-to-value on a second-lien line, at a 720 credit score or better, with lines from $50,000 to $500,000, subject to underwriting. The first mortgage stays in place, and the rental’s rent drives lender review instead of your personal income. The ceiling comes from the program, not from Texas’ homestead equity limits, because those limits do not reach rentals.
- The formula: 70% of the property’s value, minus your first-mortgage balance, capped at $500,000.
- The floor: 720 credit for a second lien. Below that, there is no second-lien option in this program.
- The coverage test: rent must cover a stress payment on the whole credit limit at 1.10x or better.
- The draw: at least 80% of the line is drawn at closing, so this is not standby money.
- The footprint: Texas is one of the states where this program is offered, through select programs and subject to lender guidelines.
What Is a DSCR HELOC, and Why Does Texas Not Block It?
A DSCR HELOC is a revolving line of credit on a rental you keep. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Texas homestead equity rules apply to your own home, not to rentals, so they do not set this line’s ceiling.
Most people hear “Texas HELOC” and think of the state’s tight rules for home equity. Those rules protect homesteads. The Texas A&M Real Estate Research Center explains that these constitutional home-equity loans cannot be taken out on a secondary residence or on a rental or investment property. A great deal of generic advice online skips that distinction, and it leaves Texas landlords believing they face the same limits as a homeowner. They don’t.
The line itself comes in two shapes:
- A standalone second lien sits behind the first mortgage you keep. This is the “without refinancing” version.
- A standalone first lien goes on a rental that has no mortgage at all.
Both qualify on the rental’s income: no traditional personal-income documentation, W-2s or personal income calculation, subject to lender guidelines. You can hold the property in an LLC, subject to program terms, with the members signing as guarantors. The line is never offered on your own home or a second home. It also never closes together with a purchase and never sits in third-lien position.
This is a business-purpose investor product. If you want the broader picture of how rent-qualified loans work, Lendmire’s complete DSCR loans guide covers the foundation.
How Is the Maximum Line Calculated?
The maximum is combined loan-to-value (CLTV) applied to the property’s value, minus what you still owe on the first mortgage, capped at the program’s line maximum. On a second lien, CLTV tops out at 70% at a 720 score or better. The line size runs from $50,000 to $500,000.
CLTV means the first-mortgage balance plus the new line, divided by the property’s value. The test is a ceiling on the total stack, not on the new line alone.
Run it as percentages of value. Say your first mortgage sits at 55% of the property’s value and your credit is 735. The combined ceiling is 70%, so the room for a new line is about 15% of value. If your first mortgage sits at 35% of value, the room is about 35% of value, before the other limits step in.
Three limits apply to a second-lien line, and the smallest one wins:
1. The equity limit. 70% CLTV minus the first mortgage, measured against the lender’s valuation.
2. The line cap. $500,000 on a second lien, no matter how much equity you hold.
3. The coverage limit. Rent must cover the stress payment on the entire line, covered below.
There is also a floor. Lines start at $50,000, so if the equity room leaves less than that, the product does not fit the property.
The first-lien version for a free-and-clear rental
If the rental has no mortgage, you can write a first-lien line instead. The leverage depends on credit:
- 740 or better: up to 75% loan-to-value on lines up to $500,000.
- 700 to 739: up to 70% loan-to-value on lines up to $500,000.
- Lines above $500,000, up to $1,000,000: 65% loan-to-value at 720 or better.
That 65% ceiling matters. A big line on a paid-off rental gets less leverage than a smaller one, so a $750,000 line does not get the 75% a smaller line might.
A declining-market flag on the property can lower the ceiling by 5 points, so the headline figures are ceilings, not offers.
Which Limit Hits First?
The binding constraint is whichever of equity, line cap or rent coverage produces the smallest number. Rentals with thin rent against the property’s value run into coverage.
Here are three illustrative profiles, built on percentages and ratios rather than dollars. The lender’s own calculation governs any real file.
| Profile | What binds | What it looks like |
|---|---|---|
| Heavy first mortgage | Equity | First mortgage near 60% of value leaves about 10% of value. The line may fall below the $50,000 minimum. |
| High value, low debt | Line cap | Large equity room, but the line stops at $500,000. |
| Soft rent for the value | Coverage | Equity is there, but rent cannot carry the stress payment on the full line at 1.10x. |
The first profile is the one people miss. A 70% ceiling sounds generous until a first mortgage already uses most of it. A rental bought with a high-leverage loan has little room, no matter how rent-rich it is.
The third profile is more subtle, because the test runs on the whole limit rather than the drawn amount. That is how the coverage test works here, and it matters when you size the line, as the next section explains.
How Does the Rent-Coverage Test Work?
Rent must be at least 1.10 times the qualifying payment. 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, meaning it is deliberately higher than what you would actually pay during the interest-only draw period.
Gross monthly rent divided by that stress payment must come out to 1.10x or better. 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 in place is required. On a two-to-four-unit property, at most one unit may be vacant.
Three details change how you size a line:
- The payment covers principal and interest on the full limit. Taxes and insurance are not part of the qualifying payment, though they still affect your real cash flow.
- A bigger line means a bigger test payment. Asking for the maximum on a rental with modest rent can fail on coverage even when equity is plentiful. Asking for a smaller line can clear the test.
- The first mortgage is a separate question on a second lien. Whether the first-mortgage payment joins the qualifying payment is not published, so confirm on the file how the lender treats it. The lender’s coverage calculation governs.
Run the rent against a full-limit stress payment before you pick a number.
Does Borrowing This Way Really Avoid Refinancing?
Yes. A standalone second lien leaves your first mortgage untouched, so its balance, term and payment stay as they are. You add a new lien rather than replacing the old one. The cost is stacked leverage, which reduces your remaining equity at the next refinance.
That is the real tradeoff. Keeping a low-payment first mortgage can be worth a lot, and the second lien lets you reach equity without disturbing it. But second-lien pricing runs above first-lien pricing, and the rate is variable, so the rate and the pricing terms come with the lender’s disclosures.
The loan’s structure is simple:
- Draw period: 5 years, interest-only on the drawn balance.
- Repayment period: 25 years, fully amortizing.
- Maturity: 30 years.
- Draws: at least 80% of the line is drawn at closing, with a closing draw of at least $50,000, and later draws of at least $5,000 each.
That draw rule is why it is not a standby reserve. On the smallest lines, the closing draw is the whole line. Plan on carrying interest on most of what you open.
What Does Texas Law Actually Control?
Texas law controls homestead lines, meaning loans on your own residence. Its rules include an 80% combined-debt cap, a waiting period before closing and a one-equity-loan-at-a-time limit. None of that sets the ceiling on a rental line. On a rental, the program’s own tiers do.
The two sets of rules look different side by side:
| Item | Texas homestead rules | DSCR HELOC on a rental |
|---|---|---|
| Applies to | Your own home | Non-owner-occupied rentals |
| Combined-debt ceiling | 80% on a homestead | 70% CLTV on a second lien |
| Who sets it | State constitution | The program |
| Income test | Personal | Rent coverage at 1.10x |
| Minimum draw | $4,000 on homestead lines | At least 80% drawn at closing |
The 80% cap belongs to the homestead extension-of-credit provisions of the Texas Constitution. The Texas Office of Consumer Credit Commissioner is part of the group of agencies that administer them, as the Texas Register notes. Regulator guidance from the Texas OCCC sets a $4,000 minimum advance on a homestead line. That figure belongs to homestead lines, not rentals.
You may also see articles that claim a Texas line can draw only 50% of value. That rule is outdated, and it never applied to rental lines anyway.
The rule runs both ways. A rental escapes the 80% homestead cap, but the program’s 70% CLTV ceiling can be tighter than what a Texas homestead line permits on paper. The ceiling is a program choice, so it can be lower.
A DSCR HELOC is never offered on an owner-occupied home.
What Does the File Need?
Beyond coverage and leverage, the file needs a credit tier, a valuation, and a clean property type. Credit minimums are 720 on a second lien and 700 on a first lien.
Credit and history. There can be no 30-day mortgage late in the last 12 months. The waiting period is 48 months after a bankruptcy, foreclosure, short sale or deed-in-lieu. No reserves and no cash to close are required.
Valuation. Lines to $400,000 use an automated valuation (confidence score of 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.
Title. A full title policy applies on a first lien and on second liens above $400,000. Smaller second liens use an owner-and-encumbrance report.
Seasoning. 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).
Property type. Single-family homes, PUDs, townhomes, two-to-four-unit properties and condominiums are eligible, along with lots up to 10 acres. Rural-designated property, row homes, condotels, leaseholds, land trusts and mixed-use are outside the program. So is a property listed for sale in the prior 2 months.
Borrowers. US citizens, permanent residents and non-permanent residents with a Social Security number can apply. Foreign nationals and ITIN borrowers are not eligible.
Exposure. The program allows at most 5 loans or $2,500,000 per borrower.
All of this is subject to underwriting and select program terms. Offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee, the program runs with the same figures in Texas as anywhere else it is offered.
Edge Cases Texas Landlords Run Into
Two situations deserve a closer look: a rental that used to be your homestead, and a first mortgage that is itself a Texas home equity loan. In both, the title history decides what is possible, and it should be reviewed before you plan around any number.
A former homestead. If the rental was once your own home, the lien history matters. Lenders review the title commitment to see whether the existing first lien is itself a homestead equity loan. Anything firmer than that needs an attorney’s input, so do not assume the answer.
An existing Texas equity loan. A property can carry only one homestead-type equity lien at a time. If your first mortgage is one of those, confirm how the title treats it before you count on a second lien.
An LLC on title. Vesting in your LLC is allowed on investment property, subject to program terms. The members sign as guarantors, and a title holder who is not a borrower signs a non-borrowing owner acknowledgment. The borrowers on the line do not have to match the borrowers on the first mortgage.
A closed-end second sold as a HELOC. Some products marketed as DSCR HELOCs are really closed-end seconds that pay out one fixed amount. This program is a revolving line with draws, so read the product description rather than the label.
One line per property. Each line attaches to a single rental. Rental number two needs its own equity and its own coverage.
Can the Line Buy My Next Rental?
Not directly. The line must exist on a seasoned rental before you go under contract on the next property, and the purchase lender has to accept borrowed funds for the down payment. The line cannot close together with a purchase.
The next property’s coverage ratio is a separate question. The line’s payment belongs to the first property, a separate debt on a separate property, so it does not enter the new property’s coverage ratio.
That sequence is the practical use: open the line on a seasoned rental, hold the funds, then use them toward the next deal. Remember that 80% of the line is drawn at closing, so you are paying interest while the money waits for a property. Factor that carry into the plan.
For a different use of the same line, Lendmire’s article How Much Remodel a Rental HELOC Covers Without Refinancing covers renovation spending.
HELOC or Cash-Out Refinance: How to Choose
A DSCR HELOC fits when you want to keep your first mortgage and can carry the interest on a drawn balance. A cash-out refinance fits when you want to replace the first mortgage entirely. Each trades something away, and neither is the clear winner for every rental.
| Factor | DSCR HELOC (second lien) | Cash-out refinance |
|---|---|---|
| First mortgage | Stays in place | Replaced |
| Structure | Revolving line, draws | One lump sum |
| Reviewed on | Rental income | Depends on the program |
| Best when | First mortgage is worth keeping | A new first lien makes sense |
This one is a judgment call. The stronger move depends on whether your existing first mortgage is worth protecting, or whether a single new loan simplifies the stack. The question for Texas investors is how much first-mortgage debt you carry, since that leaves less equity room.
Key Terms Defined
DSCR (debt service coverage ratio): gross monthly rent divided by the qualifying payment. Here, 1.10x is the minimum.
CLTV (combined loan-to-value): your first-mortgage balance plus the new line, divided by the property’s value.
Second lien: a loan that sits behind your first mortgage in repayment priority.
Stress payment: a fully amortizing payment on the entire credit limit at the start rate plus 2 percentage points, used only to test coverage.
Draw period: the 5 years in which you pay interest only on the drawn balance, before the 25-year repayment period begins.
Seasoning: the waiting period the program requires after a purchase or refinance before a line is available.
Frequently Asked Questions
Does Texas’ 80% home-equity limit cap a rental line?
No. That limit belongs to homestead extensions of credit, meaning your own home. The cap on a rental line is the program’s own: 70% CLTV on a second lien at a 720 score or better, subject to underwriting.
What is the maximum line on a Texas rental?
On a second lien, lines run from $50,000 to $500,000, and the amount also has to fit under 70% CLTV and the rent-coverage test. On a free-and-clear rental, a first-lien line can reach $1,000,000, but lines above $500,000 carry a 65% loan-to-value ceiling at 720 or better.
How long must I own the rental 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).
Can my LLC hold the line?
Yes, subject to program terms, and only on investment property. The LLC’s members sign as guarantors. If a title holder is not a borrower, that person signs a non-borrowing owner acknowledgment and the security instrument.
Do I need to show tax returns or pay stubs?
No. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The lease, rent figures, credit report and valuation are all documented, but no personal income calculation is made.
If You Want to Run the Numbers
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. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
For a Texas landlord, the practical question is rarely the state’s homestead rules. It is how much of a rental’s equity sits behind the first mortgage you want to keep.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) arranging DSCR home equity lines of credit — standalone first or second liens on non-owner-occupied one-to-four-unit rentals, qualified on rent — through a wholesale lending network in 15 of its 16 licensed states (every licensed state except Tennessee). Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Texas A&M Real Estate Research Center: What to Know About Home Equity Loans in Texas
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 for Landlords Choosing a Lender? · How Much Can You Borrow on a DSCR HELOC Past Conventional Loan Limits? · How Much Can You Borrow on a DSCR HELOC as a Co-Owner Who Is on the Deed?
Guides: DSCR HELOC in Texas
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.