Can You Take A Home Equity Loan On A Rental Property?

Can You Take A Home Equity Loan On A Rental Property — The Quick Read: Yes, but the product looks different than the HELOC on your primary home. Investment-property equity lines run through a smaller pool of lenders, usually cap around 70% combined loan-to-value, and want a 700 credit profile minimum. Title has to sit in your own name or a revocable trust, not an LLC, which is the detail that trips up most landlords who ask this question.

Key Terms Defined

• Home equity loan: a lump-sum loan secured by the equity in a property, paid back in fixed monthly installments.
• HELOC (home equity line of credit): a revolving line secured by property equity, with an interest-only draw period followed by a full principal-and-interest repayment period.
• CLTV (combined loan-to-value): every lien on a property added together, divided by the property’s current value. It’s the number that caps how much equity you can pull.
• Lien position: the payoff order if a property is sold or foreclosed on. A first mortgage gets paid before a second-lien equity loan or HELOC.
• Draw period: the phase of a HELOC when a borrower can access funds, usually with interest-only payments, before the balance converts to full amortization.

How Equity Financing on a Rental Property Actually Works

Equity math on a rental works the same way it does on a primary home. Take the property’s current value, subtract what’s owed against it, and what’s left is equity. A lender then applies a maximum combined loan-to-value ratio to decide how much of that equity can actually be borrowed.

The difference on a rental is who’s willing to lend against it. Fewer institutions write home equity products on non-owner-occupied property at all. The ones that do tend to structure the product as a line rather than a traditional lump-sum loan. Across Lendmire’s wholesale network, the investment-property version of this product is built as a standalone equity line — draw period, then repayment period — not a closed-end second mortgage.

Tax treatment depends on how you use the loan proceeds and how the property is titled. The IRS applies different deduction rules depending on that use. So investors should keep clean records and talk to a tax professional before assuming any interest is deductible.

What Lenders Require on an Investment Property Line

The ceiling on a rental property equity line sits at 70% combined loan-to-value, and most programs in the network want a 700 credit profile at minimum. That’s a hard floor, not a soft guideline — credit above 700 doesn’t buy extra leverage on this product, it just widens which lenders will look at the file. Compare that to a primary residence, where the same product can stretch to 90% CLTV for borrowers with a 720-or-better score. That higher ceiling never extends to rental property.

Because the maximum investment-property line caps at $500,000, and a full appraisal is typically only required above that threshold, most investment lines close on an automated valuation rather than a traditional appraisal. That’s a real time-and-paperwork saver, though a lender can still order a full appraisal if the file needs one, and a borrower can always request one.

Debt-to-income runs up to 50% on most files. It tightens to 45% for credit profiles between 600 and 679. Since investment property already floors at 700, that tighter mid-tier DTI band mostly matters on primary and second-home files, not rentals. The DTI calculation qualifies off the interest-only payment at the line’s maximum draw amount, not a hypothetical minimum payment. Bank-statement income analysis on business accounts requires a 680 minimum score. But again, investment property already requires 700 — so bank-statement documentation is rarely the binding constraint on a rental file.

For derogatory credit, bankruptcy needs four years of seasoning from discharge or dismissal. Foreclosure-family history includes foreclosure, deed-in-lieu, pre-foreclosure, and short sale. These follow a seven-year and four-year seasoning path on investment files. Eligible property types include single-family homes, 2-4 unit buildings, PUDs, townhomes, and condos, including non-warrantable condos. This product doesn’t allow manufactured homes, co-ops, condotels, log homes, commercial property, mixed-use property, or agriculturally zoned parcels.

Investors compare notes on forums like BiggerPockets. They consistently report the same thing: most large retail banks simply don’t offer a HELOC on non-owner-occupied property. That’s why the search for this product usually ends at a credit union, a portfolio lender, or a broker working a wholesale network.

The Title Catch: Why LLCs Can’t Use This Product

Here’s the detail that catches most investors off guard. Title on this equity line has to sit with an individual borrower or an inter vivos revocable living trust — nothing else. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts can’t hold title on this product, period.

That’s the sharpest structural difference between a rental property equity line and a DSCR loan, where LLC ownership is common and often expected. If a rental is already deeded to an LLC, the fix is either a vesting change back to the individual owner or a personal trust — or moving to a DSCR cash-out refinance instead, which is built to work with entity-held title. Lendmire’s guide to home equity loans on rental property walks through this vesting issue in more detail for investors weighing the two paths.

How Much Can You Borrow, and How Many Lines Can You Hold?

Line sizes on this product run from $25,000 up to $750,000 as a general range, but investment property is capped lower — at $500,000 — because anything larger is reserved for primary-residence borrowers only. At least 75% of the approved line has to be drawn at closing on both draw structures in the network, so this isn’t a product where you open a large line and touch it sparingly.

Portfolio exposure is capped too. A borrower can hold at most three of these lines at once. On the longer-runway structure that investment property uses exclusively, combined exposure across all three tops out at $750,000. Investors who already own more than fifteen financed properties aren’t eligible for this product at all, regardless of equity position or credit profile.

Where This Product Is Available, and the State Quirks

You can get this equity-line product in 16 full-service states through Lendmire: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, and Washington. This footprint is narrower than the 40-market DSCR platform.

A few states carry their own overlays. Texas applies a 12-day waiting period, a one-lien-at-a-time rule, and 12-month seasoning — but only on primary residences. Texas rental properties and second homes are treated as non-homestead transactions and skip those restrictions. Still, Texas properties are capped at 10 acres either way. New Mexico and Ohio apply a CLTV cap that shifts with the borrower’s credit profile rather than a flat number. And in Indiana, North Carolina, Pennsylvania, Tennessee, Texas, and Washington, a property listed for sale — or one that was listed within the past 60 days — isn’t eligible.

Both products are non-owner-occupied loans. This puts them outside typical consumer-mortgage territory. A rental property equity line is written as business-purpose credit under the Consumer Financial Protection Bureau’s exempt-transactions rule. This means the three-day cancellation right that applies to a primary-residence home equity loan doesn’t apply here. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, lenders review them differently from a standard owner-occupied mortgage.

Home Equity Loan vs. HELOC vs. DSCR Cash-Out Refinance

When a DSCR Loan Makes More Sense Than a Rental Property Equity Line

If the rental sits in an LLC, or the equity need is larger than $500,000, an equity line stops being an option. A DSCR cash-out refinance becomes the practical path instead. DSCR loans qualify primarily on the property’s rental income covering the payment, subject to lender guidelines, rather than on personal income documentation. This is a real advantage for investors holding several properties whose personal debt-to-income ratio wouldn’t otherwise support more financing.

Across the DSCR side of Lendmire’s wholesale network, purchase leverage typically runs 75-80% LTV, with select high-leverage programs reaching 85% for borrowers around a 700 credit profile. Cash-out refinancing on standard rental property tops out around 75% LTV on most programs, generally after about six months of seasoning. Coverage ratio requirements vary by lender: a 1.00 debt-service coverage ratio is a floor on select programs, not a universal standard, and stronger coverage typically opens better leverage and pricing. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted accordingly, and no-ratio qualification is available only through select lenders, generally for borrowers who already own a primary residence. Credit floors run as low as 620 in parts of the network, though most programs prefer around 660, and a 700-plus profile unlocks the strongest leverage tiers. Loan sizes generally run up to $3,000,000 on standard programs, with smaller balances available through select lenders, and files above $2,500,000 typically structured as 30-year fixed loans. Reserve requirements vary by lender, leverage, and loan size — commonly landing around six months of PITIA, sometimes waived on conservative rate-and-term files at modest leverage under $1,500,000, and stepping up toward nine months on larger loans.

For a fuller breakdown of how coverage ratios, leverage tiers, and reserves interact across DSCR programs, Lendmire’s complete DSCR loans guide is worth a read before comparing the two products side by side. Investors weighing both paths on the same property can also review Lendmire’s breakdown of qualifying scenarios for a home equity loan on a rental property for a closer look at where each product fits.

If you’re buying or refinancing a rental property and want to see how the numbers actually work, Lendmire can help compare DSCR loan options based on the property’s income, your credit profile, leverage, and your goals as an investor.

About Lendmire

Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 40 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Internal Revenue Service — Publication 936, Home Mortgage Interest Deduction

2. BiggerPockets Forums — HELOCs for Investment Property

3. Consumer Financial Protection Bureau — Regulation Z, Exempt Transactions