The Quick Read: When your lease and the appraiser’s market rent differ, the lender counts the lesser of the two, unless three months of rent receipts support a lease above market. Which lenders fit depends on the file, but a lease must be in place, and the owner’s personal income is not part of the test.
- A DSCR HELOC is a revolving line on a rental you keep, written as a standalone second lien or a standalone first lien, and qualified on the rent.
- The coverage test runs on a stress payment over the entire credit limit, not just the drawn balance.
- A vacant rental is not eligible for the line, because a lease in place is required.
- The best program for your situation depends on your lease, your equity, your credit tier, and your property type.
What Is a DSCR HELOC, and Why Does the Rent Figure Matter So Much?
A DSCR HELOC is a revolving line of credit secured by a rental you already own. It is reviewed on the property’s rental income, not on your paycheck or tax returns. Because rent is the whole qualification story, the rent number the lender picks decides how big a line you can get.
Here is how the structure works across the programs Lendmire places files with. The line is either a standalone second lien behind the first mortgage you keep, or a standalone first lien on a rental with no mortgage. It is not written together with a purchase, it cannot sit behind two other liens, and it cannot be placed on your own home or a second home. You can hold title in your LLC, subject to lender program eligibility, and the LLC’s members sign as guarantors.
Qualification is simple to state. The line qualifies primarily on property-level rental income covering the qualifying payment, subject to lender guidelines. There is no traditional personal-income documentation: no W-2s, pay stubs, or debt-to-income ratio. The credit report, the lease, and the valuation are all documented. The program is for people who want to reach a rental’s equity without refinancing the first mortgage and without opening the personal income file.
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. The rent rule above is the one that governs the programs in Lendmire’s network, so confirm on the file how a given lender applies it, especially on the first-mortgage payment for a second lien.
For the broader picture, Lendmire’s complete DSCR loans guide covers how the ratio works on purchases and refinances.
Key Terms Defined
Lease rent: The monthly rent written in the signed lease between you and your tenant.
Market rent: The monthly rent an appraiser estimates the unit would command, based on comparable rentals nearby.
Rent schedule form: The appraisal form that records the market-rent opinion. Form 1007 covers one-unit properties, and Form 1025 covers two-to-four-unit properties.
Coverage ratio (DSCR): Gross monthly rent divided by the qualifying payment. This program’s minimum is 1.10x, subject to underwriting.
Stress payment: A fully amortizing payment on the entire credit limit at a higher test rate than the start rate. It is used only for qualifying, never as your actual payment.
Combined loan-to-value (CLTV): The first mortgage balance plus the new line, divided by the property’s value. First-lien figures are plain LTV, since there is no other loan.
Which Rent Counts: The Lease or the Market Rent?
The rule in one sentence: rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. That sentence is the whole rule on programs in Lendmire’s network.
Walk through the steps the way a file actually moves:
1. Valuation. The property is valued for loan-to-value purposes. The appraiser also gives a market-rent opinion on the rent schedule form.
2. Lease collected. The executed lease goes in the file. A lease in place is required.
3. Comparison. The lender sets the lease against market rent.
4. Counted rent. A lease below market stays at the lease figure. A lease at market counts at that figure. A lease above market counts at market, unless three months of receipts support it.
5. Ratio. Counted rent is divided by the qualifying payment, which is principal and interest on the full line at the stress rate. Taxes and insurance are not part of it.
6. Other gates. Credit, equity, property type, and title are reviewed alongside the ratio.
One caution on the first-lien versus second-lien math. Whether a first-mortgage payment joins the qualifying payment on a second lien is a detail to confirm on the file. The lender’s own coverage calculation governs, so ask how the first-mortgage payment is treated before you assume a number.
What Does the Appraiser Decide, and What Doesn’t the Appraiser Decide?
The appraiser documents market rent. The lender decides what income counts. McKissock, an appraiser-education provider, explains that Form 1007 estimates monthly market rent for one-unit properties by comparing three similar rentals. It also notes that the lender makes the final income determination and weighs the 1007 against leases and other documents.
That split matters for two reasons. First, a low market-rent opinion is not a verdict on your income. It is one input the lender weighs. Second, a disputed rent opinion is a file issue you can raise with the lender, not something the appraiser settles alone.
Short-term rentals are a separate case. The same McKissock piece makes the point that the 1007 documents monthly rent, not nightly rent, so an appraiser cannot multiply a nightly rate by 30. A short-term rental follows a different program path. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
How the Counted Rent Plays Out: A Scenario Table
This table shows how counted rent typically works through select programs in Lendmire’s network, subject to underwriting. It is a general map. The lender’s own calculation governs.
| Situation | Counted rent | What the file needs |
|---|---|---|
| Lease below market | The lease figure | Signed lease |
| Lease at market | The lease figure | Signed lease |
| Lease above market | Market rent, or the lease with 3 months of receipts | Receipts if you want the lease counted |
| Month-to-month or expired lease | Varies by lender | Ask how the lender treats it |
| Vacant unit | Not eligible | Lease must be in place |
| Short-term rental | Separate program path | Different documentation |
Two Worked Examples
The coverage figures below are modeled assumptions, not market data and not an offer.
Below-market lease. Picture a landlord whose long-tenured tenant pays well under what the appraiser’s comps suggest. The appraisal says market rent would clear 1.20x on the stress payment. The lease only clears about 1.05x. On a program with a 1.10x minimum, the lease rent counts, so the file falls short. The fixes are covered below.
Because the qualifying payment is principal and interest on the full line, the rent is the only side of the ratio that moves here. Counted rent falls to the lease figure, and the largest line that still clears 1.10x shrinks in proportion to that rent. Cutting the requested line is what restores coverage.
Above-market lease. Say you signed a tenant at a premium, and the lease would clear roughly 1.30x while market rent supports about 1.15x. Without receipts, the program counts market rent, and you clear 1.10x with a little room. With three months of receipts showing the tenant has actually paid the higher rent, the lease may count, subject to underwriting. That could support a larger line, depending on the equity and leverage limits.
The lesson: a strong tenant premium earns nothing extra unless it is documented. Size the line around market rent first. Treat any lease premium as upside you have to prove.
What About Multi-Unit Properties?
Each unit gets its own test, and rents are summed. An above-market unit does not offset a below-market one. On a duplex with one unit leased well above market and one leased below, the lender looks at each unit’s counted rent separately, then adds them.
A two-to-four-unit property may have at most one vacant unit. A vacant unit counts for nothing on the lease side, so plan for the coverage ratio on the occupied units.
Where the General Rule Breaks
Month-to-month or expired leases. Lenders handle these differently. Some substitute market rent. Some treat the file as weaker. Ask how the lender treats a lease with little time left before you apply.
Vacant rentals. On this program, a lease in place is required, so a vacant rental is not eligible for the line. Some other loan types lean on market rent alone for vacant units. That is a different product, not this one.
Recently signed leases. A lease you signed to boost the file draws scrutiny. Underwriters look at whether the rent matches the market and whether payments actually arrived. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
Subsidized or voucher units. Rents can run below market. How a lender treats the contract rent depends on the program, so confirm before you apply.
Business-purpose status. Credit extended primarily for a business purpose is exempt from Regulation Z, and credit to acquire or improve non-owner-occupied rental property counts as business-purpose credit. Purpose is judged by the facts of each loan. The OCC’s Bulletin 2015-27 repeats the same exempt-transaction language. Confirm the rent rule in the program’s own guidelines rather than assuming a general standard.
How the Whole-Limit Stress Test Interacts With Rent
The program tests the payment on the entire credit limit, not on the drawn balance. A bigger requested line means a bigger stress payment, which means more counted rent is needed to hold 1.10x. That makes counted rent a limit on line size, not just a pass-fail gate.
Other program ceilings still apply. On a second lien, combined loan-to-value goes up to 70% at a 720 credit score or better, on lines up to $500,000, subject to underwriting. On a first lien with no mortgage on the rental, loan-to-value goes up to 75% at 740 or better and 70% from 700 to 739, on lines up to $500,000. Lines above $500,000 run to $1,000,000 at 65% loan-to-value at 720 or better. Lines start at $50,000. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Draw rules affect your planning. At least 80% of the line is drawn at closing, and later draws are at least $5,000 each. The draw period is five years interest-only on the drawn balance, then a 25-year fully amortizing repayment period, with a 30-year maturity. The rate is variable.
What If the Lower Rent Leaves Coverage Short?
You have several options before giving up on the line:
- Request a smaller line. The stress payment shrinks with the limit, so a smaller line needs less counted rent.
- Strengthen the evidence. If your lease sits above market, assemble three months of rent receipts so the lease can count.
- Renew at a documented market rent. Renewing a stale below-market lease at a market-supported figure before you apply can raise counted rent. That is a general approach, not a rule, and it works only if the new rent is realistic.
- Review the first-mortgage side. On a second lien, ask how the lender treats the first-mortgage payment.
- Consider a different product. If the line cannot work on the counted rent, a different loan type may fit better, and a broker can walk you through the alternatives.
Which Lender Fits? Questions to Ask Through a Broker
Lendmire is a mortgage broker, not a lender. It works with a network of wholesale DSCR HELOC lenders and matches the scenario to the program. The right fit depends on your property type, credit tier, leverage need, lease, and documentation.
A big bank’s home equity line works differently. Banks review the file on your personal income, not on the rent. If your tax returns or debt-to-income ratio are the obstacle, a rent-qualified line addresses a different problem.
When you compare programs, ask these questions:
- Which rent counts when the lease is above market, and how many months of receipts are needed?
- How is a month-to-month or expired lease treated?
- Is the coverage test run on the full credit limit or the drawn balance?
- On a second lien, how does the lender treat the first-mortgage payment?
- Is my property type eligible?
- What valuation is required at my line size?
Eligibility Edges to Check First
On the program Lendmire places through its network, 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. Appraisal waivers are not accepted.
A rental bought or refinanced inside the last 6 months is not eligible, since that clock runs from the last note date to the new note date, and you must have held title for 6 months, counted from settlement date to note date. There are no reserves and no cash to close required, subject to underwriting. Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
Eligible property includes single-family, PUD, townhome, two-to-four units, and condominiums. Rural property, row homes, condotels, leaseholds, and land trusts are outside the lane. A property listed for sale in the prior 2 months and a property with a solar lien are also out. Borrowers must be US citizens, permanent residents, or non-permanent residents with a Social Security number.
The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. It is a consumer-licensed program, so it follows that footprint.
Document Checklist
Assemble these before you apply:
- The executed lease and any renewal.
- Three months of rent receipts, if your lease is above market.
- Your first-mortgage statement, if you have one.
- Entity documents, if the LLC holds title.
- Proof of title and the date you acquired or last refinanced.
- Property details: unit count, type, and condition.
Frequently Asked Questions
Does the lease or the appraiser’s market rent count on a DSCR HELOC?
A lease below market counts at the lease figure. The lender’s own calculation governs, subject to underwriting.
Can I get a DSCR HELOC on a vacant rental?
No. A lease in place is required on this program. A vacant unit is not eligible for the line. On a two-to-four-unit property, at most one unit may be vacant.
How long do I need to own the rental before applying?
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).
Does a short-term rental count at its nightly rate?
Not through the appraisal. The rent schedule form documents monthly rent, and an appraiser cannot multiply a nightly rate by 30. Short-term rental income follows a separate program path, and local rules vary by city, county, HOA, and property type.
Does the appraiser decide what income counts?
No. The appraiser gives a market-rent opinion, and the lender makes the final income determination. A disputed rent opinion is something to raise with the lender.
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. Reach the team at 828-256-2183 or request a quote. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. DSCR home equity lines of credit — revolving lines on non-owner-occupied one-to-four-unit rentals, qualified on the property’s rent instead of the owner’s personal income — are arranged through wholesale lenders in 15 of those 16 states (every licensed state except Tennessee), and every line is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. McKissock
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 Using the Lease or the Form 1007 Market Rent? · How to Qualify for a DSCR HELOC Using the Lease or the Form 1007 Market Rent · DSCR HELOC Requirements With a Below-Market Lease in Place · Best DSCR HELOC Program When Lease Rent and Market Rent Differ · Best DSCR HELOC Program Using the Lease or the Form 1007 Market Rent
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.