The Quick Read: Usually up to 70% combined loan-to-value on an investment property’s current value, minus your existing mortgage balance, capped at $500,000 through select lenders in Lendmire’s wholesale network, and only with a credit score of 700 or better and title held in your own name or a revocable trust. The line is sized on what the property is worth today. The finished accessory dwelling unit (ADU) and its projected rent do not enlarge it.
- Scores above 700 add eligibility cushion but do not raise the investment ceiling.
- LLC-titled rentals are not eligible for the line. Those properties need a vesting change or a DSCR cash-out refinance instead.
- At least 75% of the line is drawn at closing, so it works poorly as a pay-as-you-build account.
- Availability is limited to a subset of 16 states, narrower than Lendmire’s DSCR footprint.
These figures are not a commitment to lend, and each file is subject to lender guidelines and a full review of property, leverage, and credit.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
How the Maximum Is Calculated
The borrowing ceiling is the lower of two numbers. The first is current value times 70%, minus every lien already on the property. The second is the $500,000 program cap. The line size also has a floor of $25,000 on this network, so a very small result may not produce a usable line.
Here is the sequence:
1. Start with the property’s current value, which for lines this size usually comes from an automated valuation. 2. Multiply it by 70%, the investment-property CLTV ceiling. 3. Subtract the first mortgage balance and any other liens. 4. Compare the result with the $500,000 cap. 5. The lower figure is the most the line can be.
Combined loan-to-value (CLTV) counts every loan against the property, not just the new one. That is why the existing mortgage balance matters more than the new unit’s cost. The line is built from equity you already hold.
Market-wide, NerdWallet reports that most equity loans and HELOCs limit combined debt to 80% of current value. That figure comes from owner-occupant lending. On Lendmire’s network, an investment property tops out at 70% CLTV.
Three Examples Using Percentages
Percentages show the pattern without pretending any one property is typical. Each row assumes a credit score of 700 or better and an eligible property. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
| First mortgage balance | Room under 70% CLTV | Result |
|---|---|---|
| 40% of value | 30% of value | Line sized to that room, up to the cap |
| 55% of value | 15% of value | Smaller line, may fall short of the build |
| 68% of value | 2% of value | Likely below the $25,000 minimum line |
A mortgage balance of 70% of value or more leaves no room at all. The $500,000 cap only binds on higher-value properties where the room under 70% exceeds that amount.
Run your own version before you price contractors. If the line is smaller than the build budget, the gap has to come from cash or another structure.
What Counts Toward the Limit (and What Doesn’t)
Current value counts. The unbuilt ADU does not. Equity loans and HELOCs base the amount on the home’s value before the work is done, while construction and renovation loans use the projected value after the work.
Three items regularly get miscounted:
- The finished unit’s value. An ADU may support a higher appraised value, depending on comps and underwriter review. That value arrives after the build, so it cannot fund the build.
- Projected ADU rent. The line is a personal-credit product, so the rent from an unbuilt unit does not raise the amount or help the borrower qualify.
- Title. An LLC, corporation, partnership, or land trust cannot hold title on this line. Only the individual borrower or a revocable living trust can. A property already deeded to an LLC needs a vesting change, or a different loan.
Valuation also deserves a note. Because an investment line caps at $500,000, it normally runs on an automated valuation with no traditional appraisal. A borrower can still request a full appraisal. A higher CLTV may also trigger a secondary valuation.
Appraisal risk shows up later. If you plan to refinance after the ADU is built, a thin set of ADU comparables can leave the appraised value below what the unit cost to build. Plan the exit with that possibility in mind.
Why Occupancy Changes Everything
The same house can carry very different limits depending on how it is used. Investment lines get the tightest terms on this network.
| Occupancy | Max CLTV | Line ceiling |
|---|---|---|
| Investment property | 70% | $500,000 |
| Second home | Up to 90% at 720+ credit only | Up to $500,000 |
| Primary residence | Up to 90% at 720+ credit only | Above $500,000 up to $750,000 at 75% CLTV, full appraisal |
On an investment line, a 720 score and a 700 score both reach 70%. A higher score therefore adds eligibility cushion rather than leverage.
An investor who owns a primary residence with substantial equity may find a better line there than on a rental. That is a separate decision with a separate lien on a different property. Compare it with the rental line before committing.
Who Qualifies and What Lenders Review
An investment line is underwritten mainly on the borrower’s personal profile. The key items on this network:
- Credit: a 700 minimum, a single-bureau score model, and a report no more than 90 days old at closing.
- Debt-to-income: a 50% maximum, calculated on the interest-only payment at the full line amount.
- Property type: single-family, 2-4 units, PUD, townhome, and condominium, including non-warrantable condos.
- Not offered: manufactured homes, co-ops, condotels, log homes, commercial or mixed-use property, and agricultural zoning.
- Credit events: a bankruptcy needs 4 years of seasoning. A foreclosure follows a 7-year path, and a short sale or deed-in-lieu follows a 4-year path.
- Exposure: a borrower is limited to three lines, and owning more than 15 financed properties makes a borrower ineligible.
Self-employed borrowers can document income through business bank statements under the applicable program, subject to lender guidelines. On an investment line, the 700 credit floor is the tighter constraint.
Typical documents include the credit report, the current mortgage statement, an insurance declaration, vesting documents, and the valuation. The ADU plans and budget help the lender understand the purpose. They do not raise the limit.
Home equity lines on rentals are a narrower product than those on owner-occupied homes, so borrowers who have only used owner-occupied lines should expect tighter terms. Details on the investment version are on the HELOC program page.
Draw Structure and the Build Schedule
The investment line runs a 5-year draw period followed by a 25-year fully amortizing repayment period. At least 75% of the line is drawn at closing. Pricing floats through both periods and never converts to fixed.
That structure matters for an ADU. A build is paid in stages, but most of this line is funded up front. You carry interest on the drawn balance before the first wall goes up. Subsequent draws after closing carry a $1,000 minimum on one of the network’s two wholesale programs.
The CFPB explains that a HELOC lets you borrow repeatedly against equity during a draw period. It also notes that some plans require an initial draw at setup. Across the market, draw periods commonly run 5 to 10 years, with a repayment period of around 20 years, according to Experian. The 5-year draw and 25-year repayment above are the network figures for investment lines.
Experian also warns that some lines end with a balloon payment. On this network the repayment period is fully amortizing. Even so, stress-test the repayment phase, because floating pricing can change the payment after the draw ends.
HELOC, Cash-Out Refinance, or Construction Loan?
The right product depends on equity, title, and how large the build is. These routes size the loan differently.
| Option | Sized on | Fits best when |
|---|---|---|
| Investment HELOC | Current value, 70% CLTV | You have ample equity and a personal-credit file |
| DSCR cash-out refinance | Current value and rental coverage | Property is LLC-titled or income is hard to document |
| Construction or renovation loan | Projected post-build value | Equity is thin or the build is large |
A DSCR cash-out refinance tops out around 75% LTV on most standard rentals across the network, with about 6 months of seasoning as the common expectation. It replaces the first mortgage rather than sitting beside it. That matters if the existing mortgage carries terms you want to keep. It matters less if you were already planning to refinance.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. Coverage of 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. A stronger ratio opens better leverage and pricing. LLC-titled borrowers can use these loans, subject to lender program eligibility. The complete DSCR loans guide covers how coverage is calculated.
Clearing 1.00 does not mean the property produces positive cash flow. The ratio compares rent to the full monthly housing obligation only. Repairs, vacancy, management, utilities, and capital costs sit outside it.
Construction and renovation loans are the usual answer when equity is thin or the build is large. They underwrite to the after-completed value and release funds in stages. The Terner Center discusses renovation loans backed by agency programs as an after-value route for low-equity owners. Those programs are built mainly for owner-occupants, so investors should treat them as a contrast rather than a plan.
The Bridge-Then-Refinance Sequence
Some investors use the line as a bridge. The steps run in order:
1. Draw the line and build the ADU.
2. Lease the new unit and let the rent seasoning build.
3. Refinance into a longer-term loan, often a cash-out refinance that pays off the line.
This works best when the refinance is already sized on paper before the line closes. If the appraisal comes in below build cost, the refinance may not retire the line in full, and the gap is yours to cover. A line that is paid in full and closed also frees up one of your three line slots.
Risks Worth Sizing
Floating pricing is the first risk. The payment can move during both the draw and repayment periods, and the line never converts to a fixed structure.
The second is the lien. The line is secured by the property itself. The CFPB’s HELOC booklet notes that a HELOC generally must be paid in full if you sell the home. That affects exit planning on a rental you might sell before the ADU pays back.
The third is timing. The ADU earns nothing until it is built and rented. Keep cash reserves for the period between the first draw and the first lease, because interest on the drawn balance starts on day one.
Research from the Terner Center found that ADU funding often combined several sources, with few borrowers financing against the unbuilt unit’s future value. The practical lesson is to size the build against equity you already hold.
Key Terms Defined
HELOC: A revolving credit line secured by property, drawn during a set period and repaid afterward.
ADU (accessory dwelling unit): A secondary living unit on the same lot as a main home, such as a backyard cottage or garage conversion.
CLTV (combined loan-to-value): The total of all loans on a property divided by its current value.
Draw period: The stretch of time when you can borrow from the line, usually with interest-only payments.
Automated valuation: A data-driven estimate of value used in place of a full appraisal on smaller lines.
Frequently Asked Questions
Does the finished ADU raise how much I can borrow?
No. The line is sized on the property’s value before construction, so the unit’s completed value cannot fund its own construction. After the build, the unit may support a higher appraised value, depending on comps and underwriter review. That higher value helps a later refinance, not the original line.
Can I use projected ADU rent to qualify?
No. A HELOC on this network is reviewed on personal credit and debt-to-income, with the payment calculated on the maximum draw. Rent from an unbuilt unit plays no part. A DSCR loan works the other way, with property rent compared against the full monthly housing obligation, and it is reviewed under a separate set of program rules.
Can my LLC-owned rental get this line?
Not as titled. Only an individual borrower or a revocable living trust can hold title on this line. If the property sits in an LLC, the options are a vesting change or a DSCR cash-out refinance, subject to lender program eligibility.
What if the line is smaller than the build cost?
The gap needs another source. Options include cash, a cash-out refinance that sizes a larger loan, or a construction loan that underwrites to the after-completed value. The percentage table above shows how quickly equity runs out when the first mortgage balance is high.
Is a HELOC or a cash-out refinance better for the ADU?
It depends on what you want to keep. A HELOC leaves the first mortgage untouched and adds a second lien. A cash-out refinance replaces the first mortgage and, on a standard rental, can reach about 75% LTV. Choose the HELOC if you want to preserve the existing mortgage, and the refinance if you need more room. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Next Steps
Before talking to anyone, gather the current mortgage statement, the title or vesting document, insurance details, and your ADU budget. Compute your room under 70% CLTV from the table above.
If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Investors can reach the team at 828-256-2183 or request a quote. The editable calculator on the site gives an illustrative estimate only.
An ADU build is a slow bet on a smaller, rentable footprint, and the equity that pays for it has to exist before the first board is cut.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage that arranges home equity lines of credit through wholesale lending partners in its 16 full-service states. Lines on primary residences, second homes and investment properties are each reviewed individually by the lender under the program’s occupancy, credit and combined-loan-to-value 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. NerdWallet – Property Line Loans for ADUs
3. Experian – HELOC Draw Period
4. Terner Center – Reaching California’s ADU Potential
6. Terner Center – Jumpstarting the Market for ADUs
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Eligibility Differs for a HELOC vs. a Cash-Out Refinance · DSCR HELOC Requirements for Investment Property Repairs Drawn as Needed · DSCR HELOC Requirements for Approval Before an Appraisal
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.