The Quick Read: On a second lien, the most you can borrow is the smallest of three results: 70% CLTV (combined loan-to-value) minus the first mortgage, a $500,000 line cap, and what the rent supports. That 70% applies at a 720 credit score or better, on lines from $50,000, subject to underwriting. The rent must cover a stress payment on the whole line at 1.10x or better, and the home must be a non-owner-occupied rental. None of this opens until the heir holds recorded title.
- Title comes first. Letters from the probate court give authority, not ownership.
- Max line is roughly (value × 70% CLTV) minus the first mortgage balance, capped at $500,000.
- Rent covers a stress payment on the entire line, not just the drawn amount.
- A rental with no mortgage can take a first-lien line at up to 75% LTV with a 740 score.
- Seasoning applies as well, so the clock on title matters before any line can close.
An heir who inherits a rental often assumes the will settles everything. It does not. This article walks through when the line becomes available, how the amount is sized, and when a different product makes more sense. Lendmire’s complete DSCR loans guide covers the wider DSCR family if you want the broader picture.
Why “After Probate” Really Means “After Title”
A recorded deed in the heir’s name is the gate. Until then, no rent-based line is available to the heir, however strong the rent is.
Cornell’s Legal Information Institute explains that letters testamentary or letters of administration authorize an executor or administrator to act for the estate. Letters prove authority. They do not prove ownership. A lender needs a borrower who holds title and can sign the security instrument.
| Stage | Who can sign | Line for the heir? |
|---|---|---|
| Probate open, no deed yet | Executor for the estate | Generally no |
| Estate distributed, deed not recorded | Not yet the heir | Not yet |
| Deed recorded to heir | The heir | Possible, after seasoning |
| Funded trust or transfer-on-death | Trustee or new owner | Depends on title review |
Some homes skip probate. A funded living trust, survivorship ownership or a transfer-on-death deed can move title without a court. A trustee’s authority comes from the trust document, not from a probate court. A title review still decides the question.
How Is the Maximum Line Calculated?
The maximum is the smallest result of three checks: the leverage limit, the program’s line cap, and the rent test. Equity alone never sets the number.
Across the wholesale network Lendmire places files with, the sizing runs in this order:
1. Value. The lender’s own valuation sets it. 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. Date-of-death values and probate valuations are not the lender’s number.
2. Leverage cap. An heir who keeps a first mortgage can only take a second lien. On a second lien, CLTV (first mortgage balance plus the new line, divided by value) goes up to 70% at a 720 score or better. Below 720 there is no second-lien cell, and a first-lien line exists only on a rental with no mortgage.
3. Subtract existing liens. The first mortgage the heir keeps comes off the top.
4. Line cap. Second-lien lines run from $50,000 to $500,000.
5. Rent test. Gross monthly rent divided by the qualifying payment must reach 1.10x, subject to underwriting.
The qualifying payment is a fully amortizing principal-and-interest payment on the entire credit limit at the start rate plus 2 percentage points. It is not the interest-only payment on what you draw. Taxes and insurance are not part of the qualifying payment. A large line can therefore fail the rent test even when equity is plentiful. Confirm on the file how the lender treats the first-mortgage payment on a second lien, since the lender’s own coverage calculation governs.
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, and a two-to-four-unit property can have at most one vacant unit.
Three Worked Scenarios
These use percentages and ratios only. Your numbers will differ, and the lender’s calculation governs.
Paid-off inherited house, first lien. A single-family rental with no mortgage and a 740 score can reach 75% LTV on a first-lien line of up to $500,000. At 700 to 739, the cap drops to 70% LTV. A line above $500,000, up to $1,000,000, is capped at 65% LTV at 720 or better. The binding limit here is often the rent test, since the stress payment covers the full line.
Inherited house with a mortgage the heir keeps. Say the first mortgage uses about 40% of value. At a 70% CLTV cap, the second-lien line can use roughly the remaining 30% of value, subject to the $500,000 cap and the rent test. If rent only supports about 1.05x on that full line, the line must shrink until coverage reaches 1.10x.
Co-heirs. Three siblings hold title together and one wants cash. Every title holder signs. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. If one sibling will not sign, the line stops there. Buyouts are a separate step, and the borrowers on the line need not be the borrowers on the first mortgage.
What Happens to the Existing Mortgage?
It stays. Federal law generally prevents a lender from calling a loan due solely because a relative inherits the home on the borrower’s death. That is the Garn-St Germain Act. A confirmed heir can also be treated as a borrower for servicing purposes under the CFPB’s successor-in-interest rule.
Those rules keep the old loan alive. They do not create new credit. The payments must stay current, and a second-lien line will sit behind that loan. A decedent’s own home equity line is another lien to identify early, so pull a title report before planning any draw.
Seasoning: Two Six-Month 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). The title clock should not be assumed to start at the date of death. It generally runs from the recorded transfer, so a slow probate pushes the line back further. Confirm how the lender measures it on your file.
When the Rent Test Caps the Line
Rent can cap the line well below what equity would allow. Because coverage is measured on the whole credit limit, a bigger line means a bigger stress payment and a thinner ratio. A rental with strong equity but modest rent can end up with a smaller line than its equity suggests.
If the number falls short, there are honest options: a smaller line, a unit-mix check on a two-to-four-unit property, or a different product. The coverage failure is information about the property, not a puzzle to engineer around.
HELOC, Cash-Out Refinance, Estate Loan or Sale?
| Option | Best fit | Tradeoff |
|---|---|---|
| DSCR HELOC (second lien) | Heir keeps a low first mortgage | Second-lien cap of 70% CLTV; variable rate |
| DSCR HELOC (first lien) | Rental with no mortgage | Stress payment on the entire line |
| DSCR cash-out refinance | Wants one lump sum | Replaces the old first mortgage |
| Estate-level loan | Needs cash during probate | Different product; court approval may apply |
| Sale | No plan to hold | Ends the rental income |
Programs qualify primarily on property-level rental income covering the payment, subject to lender guidelines, so the choice usually comes down to the first mortgage. If the inherited loan carries terms worth keeping, a second-lien line preserves it. If it does not, a cash-out refinance may be cleaner.
Stacking liens has a cost. A second lien shrinks remaining equity and must be cleared or subordinated before a later cash-out refinance on the same property. For an investor who plans to refinance within a few years, that matters.
What Shrinks the Amount
- A first mortgage or other liens with large balances.
- A declining-market flag, which lowers the ceiling by 5 points.
- A credit score below 720 on a second lien.
- A property that is not eligible: rural-designated, row home, condotel, leasehold, listed for sale in the prior 2 months or carrying a solar lien.
- An LLC-titled or trust-titled house that does not meet vesting requirements. LLC vesting is allowed on this program for investment property, subject to program terms.
An heir who lives in the home cannot use this product. It is for non-owner-occupied one-to-four-unit rentals only, never a primary residence or second home.
Terms Once the Line Opens
The draw period is 5 years, interest-only on the drawn balance. Then a 25-year fully amortizing repayment period follows, for a 30-year maturity. The rate is variable. At least 80% of the line is drawn at closing, and later draws are at least $5,000 each. No reserves are required. Mortgage history needs no 30-day late in the last 12 months, and 48 months must pass since a bankruptcy, foreclosure, short sale or deed-in-lieu. Exposure is limited to 5 loans or $2,500,000 per borrower with the program.
Because most of the line is drawn up front, this is not a standby reserve. Size it for what you will actually spend.
Where the Program Is Offered
The DSCR HELOC is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee, through select programs. Foreign nationals and ITIN borrowers are not eligible. Lendmire is a broker that arranges the line through a wholesale lender, and approval depends on lender guidelines, credit and property review.
Key Terms Defined
Letters testamentary: Court documents that authorize an executor to act for the estate. They are not proof of ownership.
CLTV: Combined loan-to-value. The first mortgage balance plus the new line, divided by the property’s value.
Seasoning: The required time since a purchase, refinance or transfer before a loan is available.
Vesting: How title is held, such as individual, trust or LLC.
DSCR: Debt service coverage ratio. Gross monthly rent divided by the qualifying payment.
Pre-Application Checklist
- Death certificate and letters, or trust and transfer documents.
- Recorded deed in the heir’s name.
- Payoff or balance statements for every lien.
- A current lease and rent receipts.
- Hazard insurance, with flood coverage where required.
- A written plan for co-heirs.
Frequently Asked Questions
Can an executor borrow against the house for me?
Not on the heir’s behalf. Letters give the executor authority over estate assets, not new credit for the heir. Estate-level borrowing is a different product, and some states require court approval for it.
Does the will make me the owner?
No. A will says who should receive the property. The recorded deed gives title, and title comes before any rent-based line.
Does the step-up in basis raise my borrowing amount?
No. Basis is a tax concept, while the lender’s valuation sets collateral value. Fidelity’s overview of step-up in basis explains the tax side. Tax treatment varies; consult a qualified professional.
Can the LLC stay on title?
On an investment property, vesting in the owner’s LLC is allowed, with members signing as guarantors, subject to program terms. If the house is deeded to an entity that the program does not accept, a cash-out refinance is the usual alternative. Lendmire’s piece How Much Can You Borrow on a Bank Statement HELOC on an Inherited Home After Probate? covers another route.
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.
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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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. Cornell LII Wex – “letters”
2. 12 U.S.C. § 1701j-3 (Garn-St Germain), Cornell LII
4. Fidelity – What Is Step-Up in Basis
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? · How to Get a DSCR HELOC on an Inherited Duplex With Tenants Still in Place · How to Qualify for a DSCR HELOC for a Home With a Solar Lien or HOA Suit
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
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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.