The Quick Read: The line is sized by the lower of two limits: a combined loan-to-value ceiling and a rent-coverage test run on the full credit limit, and interest-only payments do not raise either one. Through select programs, subject to underwriting, the ceilings are:
- A second lien behind a first mortgage reaches 70% CLTV at a 720 score or better, on lines from $50,000 to $500,000.
- A first lien on a rental with no mortgage reaches 75% LTV at 740 or better, and 70% LTV from 700 to 739, on lines to $500,000.
- First-lien lines above $500,000, up to $1,000,000, drop to 65% LTV at 720 or better.
- Rent must cover a stress payment on the entire line at a coverage of at least 1.10x.
- Interest-only applies for 5 years on the drawn balance, then a 25-year repayment period follows. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The interest-only feature changes the cash you pay each month during the draw period. It does not change the line you qualify for.
How Is the Maximum Line Calculated?
The maximum line is the CLTV or LTV ceiling times the property value, minus the balance of any first mortgage, capped by the program’s line limit. Then the rent test is applied to that number. Whichever limit is lower sets the line.
Take the equity limit first. On a second lien, combined loan-to-value means the first mortgage balance plus the new line, divided by value.
On a first lien, the line is the LTV ceiling times value. That only applies to a rental with no mortgage. A borrower who keeps a first mortgage can only take a second lien, and the second-lien floor is a 720 score.
Two adjustments can trim the number. A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower. Both apply on top of the tiers.
What Does the Coverage Test Do to the Line?
The coverage test can cap the line below what equity allows. Gross monthly rent is divided by a qualifying payment, and the result must reach 1.10x. That payment is a fully amortizing principal-and-interest payment on the entire credit limit at the start rate plus 2 percentage points.
The test runs on the whole limit, not on what you plan to draw. A bigger line raises the stress payment even if you intend to borrow little.
Taxes and insurance are not part of that qualifying payment. Whether the first-mortgage payment joins the calculation on a second lien is something to confirm on the file, 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. A two-to-four-unit property can have at most 1 vacant unit.
Here is an illustrative case, with modeled inputs. Picture a rental with strong equity but average rent. Equity would support a $500,000 line, but the stress payment on that full amount pushes coverage under 1.10x. The line shrinks until the ratio clears. The same property with a smaller line passes.
For the broader mechanics of coverage ratios, the complete DSCR loans guide walks through how the ratio is built.
What Do the Leverage Tiers Look Like Side by Side?
| Lien position | Score | Ceiling | Line range |
|---|---|---|---|
| Second lien | 720+ | 70% CLTV | $50,000–$500,000 |
| First lien (no mortgage) | 740+ | 75% LTV | to $500,000 |
| First lien (no mortgage) | 700–739 | 70% LTV | to $500,000 |
| First lien, larger line | 720+ | 65% LTV | above $500,000 to $1,000,000 |
Below 720 there is no second-lien option. A 700 to 719 borrower who keeps a first mortgage is therefore blocked, because the second-lien floor is 720. The first-lien floor is 700, and that route exists only when the rental carries no mortgage.
The lines are ceilings and floors, never offers. Each file is underwritten individually.
What Does Interest-Only Actually Do?
During the 5-year draw period, you pay interest on the drawn balance only. The balance does not shrink. The rate is variable, so the minimum payment can move even when you draw nothing new. The CFPB’s HELOC brochure notes that some plans allow interest-only payments while others build in principal, and that payments on variable-rate plans can change without new draws. This program’s draw period is interest-only.
Then repayment starts. The line converts to a 25-year fully amortizing schedule inside a 30-year maturity. Payments include principal and interest and step up. Experian’s draw-period explainer describes this payment shock when repayment begins, and many borrowers find the payment much higher.
That step-up is the reason the stress test exists. It tests the rent against a fully amortizing payment now, so the line is not approved on the cheap interest-only phase alone.
How Much Gets Drawn at Closing?
A large share 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 is drawn at closing. Later draws are at least $5,000 each.
This shapes the interest you carry from day one. A line is not a standby reserve you leave untouched. If you want a smaller balance, ask for a smaller line.
That also answers the sizing question for many investors. Take only the line the project and the exit plan need, because most of it is drawn at once and the stress test runs on all of it.
What Valuation and File Items Cap the Number?
Valuation sets the value in the formula. Lines to $400,000 use an automated valuation with a property inspection report, or a full interior appraisal. Lines above $400,000 take a full interior appraisal. Appraisal waivers are not accepted.
Other file limits apply:
- 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).
- No reserves and no cash to close are required.
- At most 5 loans or $2,500,000 per borrower can sit with the program.
- 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.
- Foreign nationals and ITIN borrowers are not eligible.
The rental can sit in an LLC, subject to program terms. Members sign as guarantors.
Property type matters too. Single-family, PUD, townhome, two-to-four units and condominiums, warrantable or not, are eligible, along with lots up to 10 acres. Rural-designated property, row homes, condotels, leaseholds, commercial or agricultural property and a property listed for sale in the prior 2 months are outside this lane.
Skip the Maximum Line
Borrowing the full ceiling is the wrong default. Three things argue for a smaller line.
First, the stress test. A smaller line raises coverage, which leaves headroom if rent softens or the appraisal’s market rent lands under the lease.
Second, the step-up. The balance is the same on the first day of repayment as on the last day of the draw period. Interest-only gave you five years of lower carry and zero principal paid.
Third, the exit. Before repayment starts, an investor needs a path: sell, pay down, or refinance. A line sized to a project with a clear return has an exit. A line sized to the maximum equity has a deadline.
This is a genuine trade-off. A larger line gives more capital for the next purchase, though it adds more balance carried into a higher repayment payment. Running both sizes against the rent before choosing is the sound move.
Second Lien or Cash-Out Refinance?
A second lien leaves the existing first mortgage in place, which matters when that mortgage carries terms worth keeping. The trade-off is a lower ceiling. A DSCR cash-out refinance on a standard rental typically reaches up to about 75% LTV, while the second-lien line tops out at 70% CLTV. The refinance replaces the first mortgage; the line sits behind it.
Lendmire’s piece DSCR HELOC vs DSCR Cash-Out Refinance With Interest-Only Payments During the Draw Period goes through that choice in more depth. NerdWallet’s investment-property HELOC page says you can get one but should expect strict requirements and limited availability.
A primary-residence HELOC is a different, owner-occupied product. This line is never offered on an owner-occupied home.
Key Terms Defined
Combined loan-to-value (CLTV): the first mortgage balance plus the new line, divided by the property’s value.
Draw period: the 5-year stretch when you can draw on the line and pay interest only on the balance drawn.
Repayment period: the 25-year stretch after the draw period when principal and interest are both due.
Stress payment: a fully amortizing payment on the whole credit limit at the start rate plus 2 percentage points, used only for the coverage test.
DSCR: gross monthly rent divided by the qualifying payment; this program requires at least 1.10x.
Frequently Asked Questions
Does interest-only let me borrow more?
No. The line is capped by CLTV or LTV and by the rent test on the full limit. Interest-only lowers the actual payment during the draw period, but the stress test assumes a fully amortizing payment, so it adds no borrowing room.
Can I borrow on a rental I just bought?
Not right away. A purchase at high leverage may also leave no combined room until value rises or the balance falls.
Do I have to draw the whole line at closing?
Usually not the whole line, but most of it, and on the smallest lines the required closing draw is the whole line. Plan the line size around that, because the interest-only payment is on the drawn balance from the start.
Is the rent the only thing that qualifies me?
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 are used. Credit, mortgage history, the valuation and the lease are still reviewed.
Where is this offered?
The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee, through select programs. Programs change, and every file is underwritten individually.
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. Lendmire is a broker and arranges financing through select lenders in its wholesale network; this is not a commitment to lend.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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
2. Experian: what is a draw period on a HELOC
3. NerdWallet: can you get a HELOC on an investment property
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 Without Changing the Deed? · How Much Can You Borrow on a DSCR HELOC as a Trucker With Equipment Costs? · DSCR HELOC Requirements for Sizing How Much Equity to Borrow
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
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.