The Quick Read: Usually you can borrow the lesser of two limits: the equity left under the program’s combined loan-to-value ceiling, which is 70% on a second lien at a 720 credit score or better, and the $500,000 line cap on a second lien, subject to underwriting. Rent from the leased units qualifies the file. It does not make the line bigger.
- Equity sets the size. Property value times the ceiling, minus every lien already on the property.
- Rent sets eligibility. Rent used for lender review must cover a stress payment on the whole line at 1.10x or better.
- Leased units help. A 2-4 unit building may have at most one vacant unit, and a lease in place is required.
- Second lien or first lien. Keep your first mortgage and add a second lien, or open a first lien on a rental with no mortgage.
- Your own income stays out of it. No traditional personal-income documentation, W-2s or personal income calculation, subject to lender guidelines.
The Two Limits That Set Your Line
The line is the smaller of the equity left and the program cap. Whichever limit binds first controls. Most landlords assume rent sets the number. Rent opens the door, and equity decides how far you walk through it.
Here is the formula for a second lien. Multiply the property’s value by 70%. Subtract the first mortgage balance and any other recorded lien. What remains is the room for the line. Then compare it with the $500,000 maximum.
A first lien works differently. It exists only on a rental with no mortgage. Through select programs, the ceiling there is 75% loan-to-value at a 740 score or better, and 70% from 700 to 739, on lines up to $500,000. Lines above $500,000 and up to $1,000,000 run at 65%. Lines start at $50,000. Every figure is a ceiling, not an offer, and each file is underwritten individually.
Motley Fool notes that general home equity lenders usually cap combined leverage at 85% or less. A rental line sits lower. Lenders treat investment property as the riskier collateral, and the ceilings show it.
Key Terms Defined
DSCR is the debt service coverage ratio. It is gross monthly rent divided by the monthly payment the lender uses to qualify the line.
CLTV is combined loan-to-value. Freddie Mac’s glossary defines it as all loans secured by the property divided by its value. On a second lien, the first mortgage counts alongside the new line.
Stress payment is the payment used for qualifying, not the one you actually make. Here it is a fully amortizing payment on the entire credit limit at the starting rate plus 2 percentage points.
Rent roll is a list of each unit, its tenant, its rent and its lease end date.
Draw period is the window when you can pull money from the line. Here it lasts 5 years, interest-only on the drawn balance.
Standalone second lien is a line recorded behind your first mortgage and closed on its own, never together with a purchase.
A Worked Sizing Example
Say your fourplex has a first mortgage, and you want to know how much room the 70% ceiling leaves. Run it as a share of value. These are illustrative inputs, and the lender’s own calculation governs.
| First mortgage vs. value | Room left under 70% CLTV |
|---|---|
| 55% of value | 15% of value |
| 65% of value | 5% of value |
| 70% of value or more | Nothing |
Now apply the cap. On a high-value building, 15% of value could exceed $500,000, so the cap binds. On a modest building, equity binds long before the cap does. Either way, the smaller number wins.
A first lien on a paid-off fourplex follows the same logic. At a 740 score, the first-lien loan-to-value ceiling is 75% of value, but lines above $500,000 drop to 65% loan-to-value. A bigger line can mean less leverage, which is not what most people expect.
Also check the property flags. A property in a market flagged as declining carries a ceiling 5 points lower, so a second lien there tops out near 65% CLTV.
Does Rent Change How Much You Can Borrow?
Rent changes whether you qualify, and it can cap the line when coverage is thin. The test is gross monthly rent divided by the stress payment on the entire credit limit. The minimum is 1.10x. Taxes and insurance are not part of that qualifying payment.
Because the payment is figured on the full limit, a bigger requested line means a bigger qualifying payment. That is why coverage can cap the line even when equity is plentiful. If your coverage lands just under 1.10x, the line shrinks until it clears.
What counts as rent? Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. The appraisal rent comes from Form 1007. On a 2-4 unit building, the appraiser uses Form 1025, which Fannie Mae’s Selling Guide lists as the form for two- to four-unit properties. Those are agency forms that investor programs borrow. DSCR loans themselves are not agency products.
One open question on a second lien: whether the first-mortgage payment joins the qualifying payment. Confirm on the file how the lender treats it. That single detail can swing coverage more than a small rent bump.
For the wider picture of how these loans are built, see Lendmire’s complete DSCR loans guide.
What “All Other Units Leased” Does and Doesn’t Prove
It proves the building is working, and it is the cleanest file you can present. It does not prove the rent counts at face value. Lenders read the lease against the appraiser’s market rent. A lease in place is required, and a 2-4 unit property may have at most one vacant unit.
So if one unit is empty, you can still apply. But the empty unit adds no rent to the coverage test. Leasing it first can raise coverage, though a lease only helps when it is in place and supported.
| Situation | How it reads |
|---|---|
| One vacant unit | Allowed on 2-4 units; no rent counted |
| Two or more vacant | Outside the program |
| Lease below market | Lower lease amount counts |
| Lease above market | Counts with three months of receipts |
| Unit leased to a relative | Expect closer review |
| Ground-floor commercial space | Mixed-use is not eligible |
A below-market unit hurts more than people expect. Three units at market and one at a deep discount do not average out to a comfortable number. Check each lease against the appraisal’s rent schedule before you apply.
What Shrinks the Number
Eligibility cuts the line before math does. Here is what to check.
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).
Credit history. No 30-day mortgage late in the last 12 months. A bankruptcy, foreclosure, short sale or deed-in-lieu needs 48 months behind it.
Exposure. The program allows at most 5 loans or $2,500,000 per borrower. A big portfolio can run into that ceiling.
Property type. Rural-designated property, row homes, condotels, leaseholds, land trusts, mixed-use and age-restricted communities are outside this lane. So is a property listed for sale in the prior 2 months, or one with a solar lien.
Valuation. Lines up to $400,000 use an automated valuation with a property inspection report, or a full interior appraisal. Larger lines take the full appraisal. Appraisal waivers are not accepted.
Borrower status. U.S. citizens, permanent residents and non-permanent residents with a Social Security number are eligible. Foreign nationals and ITIN borrowers are not.
Credit tiers matter, though a higher score is not a bigger line on the second lien. A 720 score reaches 70% CLTV, and below 720 there is no second-lien tier at all. Reserves are not required.
Can the LLC Stay on Title?
Yes. Vesting in your LLC is allowed on investment property, subject to program terms. The 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 the Draw Works
You do not borrow a little and park the rest. At least 80% of the line is drawn at closing, and the closing draw is never under $50,000. On the smallest lines, that means the whole line is drawn at closing. Later draws are at least $5,000 each.
The draw period is 5 years, interest-only on the drawn balance. Then a 25-year repayment period begins, for a 30-year maturity. The rate is variable. The rate and the pricing terms come with the lender’s disclosures.
Think of it as a term loan with a small refill option. If you need a staged pull for renovations over time, that structure matters.
HELOC or Cash-Out Refinance?
Choose the line when your first mortgage is worth keeping. Choose a cash-out when you want one lump sum and a clean slate.
| Factor | DSCR HELOC | DSCR cash-out refinance |
|---|---|---|
| First mortgage | Kept in place | Replaced |
| Leverage | 70% CLTV, second lien | About 75% LTV, standard rental |
| Funds | Draw rules apply | Lump sum |
| Title | LLC allowed | LLC can stay |
A cash-out can reach higher leverage, but the rent has to cover the larger payment on the whole new balance. A line stacks a second payment onto the property, which tightens coverage. Neither wins everywhere. If your first mortgage is cheap and you have thin equity, the line is often the cleaner tool. If equity is deep and you want a big chunk, cash-out may fit better.
Across the lenders in Lendmire’s wholesale network, home equity lines on rentals are a narrow product, so expect to compare programs. If you qualify on your personal income instead, Lendmire’s piece How to Qualify for an Investment Property HELOC With All Other Units Leased covers that path.
This program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Lendmire is a mortgage broker. It arranges the line through a wholesale lender, and the lender decides approval.
Frequently Asked Questions
Does a higher credit score raise my line?
On a second lien, no. A 720 score or better reaches 70% CLTV, and a higher score adds nothing at that tier. On a first lien, score does move leverage: 740 or better reaches 75% LTV, and 700 to 739 reaches 70%. All of it is subject to underwriting. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Can I borrow if one unit is vacant?
Possibly. A 2-4 unit property may have at most one vacant unit. The empty unit adds no rent to the coverage test, so the line may come out smaller. A lease in place is still required on the rest.
Does the rent on my leases set the loan amount?
No. Rent decides whether coverage clears 1.10x. Equity and the line cap set the size. Thin coverage can shrink the line, though, because the stress payment runs on the full limit.
Is there a waiting period after I buy or refinance?
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 I use this line on my own home?
No. It is written only on non-owner-occupied rentals of one to four units. It is never offered on an owner-occupied home or a second home.
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 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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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. Motley Fool, Loan-to-Value Definition
2. Freddie Mac Capital Markets Glossary
3. Fannie Mae Selling Guide B4-1.2-01
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 With an Appraisal Below the Purchase Price? · How Much Can You Borrow on a DSCR HELOC as a Co-Owner Who Is on the Deed?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.