The Quick Read: Yes, through select programs, a Dearborn landlord can open a home equity line on a rental that qualifies primarily on the property’s rent instead of personal income, subject to lender guidelines and underwriting. The line sits as a standalone second lien behind the first mortgage the owner keeps, or as a standalone first lien on a paid-off rental.
- Rent must cover a stress payment on the whole line at a minimum 1.10x coverage.
- A second lien runs to 70% combined loan-to-value at a 720 score or better.
- Lines start at $50,000, and most programs cap rental lines at $500,000 on a second lien.
- Each borrower is limited to 5 loans or $2,500,000 with the program, so this is not an unlimited-property scaling tool.
- Michigan is one of the 15 states where the program is offered, which are 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee.
Dearborn is a useful example here, not a special case. The same rules apply to a landlord in any eligible state. Many landlords hear “HELOC” and picture the bank product they already know. This one works differently, and the differences decide whether it fits.
What Is a DSCR HELOC, Exactly?
A DSCR HELOC is a revolving line of credit on a non-owner-occupied one-to-four-unit rental, qualified on the property’s rent. It is written as a standalone second lien or a standalone first lien. It is never closed with a purchase, never a third lien, and never placed on your own home.
The word “HELOC” matters. Per the CFPB, a home equity line is an open-end line of credit that lets you borrow repeatedly against equity during a draw period. A DSCR HELOC borrows that structure. What changes is the qualifying basis. Instead of tax returns, W-2s and a debt-to-income ratio, the file leans on rent, the lease, credit and the valuation.
Be clear about one thing: it is still underwritten. Credit, the property, title and insurance are all reviewed. The personal income file is simply not the qualifying basis.
A lot of marketing blurs this product with a DSCR cash-out refinance. They are different tools. Across Lendmire’s wholesale network, most DSCR lenders write closed-end loans, and fewer offer a revolving line on a rental. That is why the answer to the title question is “yes, but narrower.”
How Does the Coverage Test Work on a Line?
Coverage equals gross monthly rent divided by the qualifying payment. On this program, the minimum is 1.10x. The qualifying payment is a fully amortizing payment on the entire credit limit, not just the drawn amount, at a stressed start rate. You are tested on the whole line even if you plan to draw less.
Rent counts as the lesser of the appraiser’s Form 1007 market rent or the lease. A lease above market can count with three months of receipts. A lease in place is required, and a two-to-four-unit property may have at most one vacant unit.
Here is the catch for second liens. Whether the first-mortgage payment joins the qualifying payment is not something to assume. The lender’s coverage calculation governs, so ask before you size the line. Treat any worked math as illustrative.
Run the idea this way. Say a duplex’s combined rent clears the stressed payment on a $150,000 line at roughly 1.2x. That passes. Raise the line to $300,000 on the same rent and coverage drops toward 0.6x. Same property, same tenants, different answer. Line size drives the test more than most landlords expect.
Coverage also differs from cash flow. DSCR counts rent against the debt payment. It does not subtract repairs, vacancy or management. A file can clear 1.10x and still leave thin monthly cash flow.
What Leverage and Credit Do You Need?
On a second lien, combined loan-to-value tops out at 70%, at a 720 credit score or better, on lines up to $500,000. Below 720 there is no second-lien option. On a first lien, leverage reaches 75% LTV at 740 or higher. These are ceilings, subject to underwriting, not offers. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
| Factor | Second lien | First lien (separate terms) |
|---|---|---|
| Sits behind | Your existing first mortgage | Nothing (no mortgage) |
| Max leverage | 70% CLTV | Up to 75% LTV at 740+ (first lien only; does not apply to second liens) |
| Credit floor | 720 (no second-lien option below this) | 700 (first lien only) |
| Line size | $50,000 to $500,000 | To $500,000, then to $1,000,000 |
| Over $500,000 | Not available | 65% LTV at 720+ |
Second-lien terms and first-lien terms are listed separately in the table above.
On a first lien, 720 to 739 and 700 to 719 both carry 70% LTV on lines up to $500,000. Larger first-lien lines sit at the 65% ceiling. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Math example, using price and percentage only. A rental valued at $400,000 with a first mortgage already in place has a 70% combined ceiling. Everything you owe, plus the new line, must fit under that. A landlord who already owes 60% has only a thin slice left. Dearborn rents and values vary by source, so use your own appraisal and lease, not a portal figure.
Credit history counts too. Expect no 30-day mortgage late in the past 12 months, and 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu. No reserves are required.
Mind the portfolio cap. Per-borrower exposure is limited to 5 loans or $2,500,000 with the program, whichever is reached first. A landlord with a large portfolio can use the line on a handful of rentals, not on every property they own. Conventional financing has its own financed-property limits, but this program has a firm one of its own, so plan the order in which you tap equity.
The property rules are also firm. Single-family, PUDs, townhomes, two-to-four units and warrantable condos can work. Rural-designated property, row homes, condotels, leaseholds and mixed-use are outside this lane. A home listed for sale in the prior two months is out, and so is a property with a solar lien.
Can the LLC Stay on Title?
Yes. Vesting in your LLC is allowed on investment property, subject to program terms. Members sign as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument.
This is a real advantage over many bank products, which often want personal title. Credit to an entity that is not a natural person is generally treated as business-purpose, as Cornell’s copy of the regulation shows.
The borrowers on the line need not match the borrowers on the first mortgage. That helps owners who hold the first mortgage personally but run the portfolio through an entity.
Business-purpose investor loans are reviewed differently from a standard owner-occupied mortgage, and you should expect to document that the funds serve the rental business. The eCFR text describes the exemption in general terms. It carries no precise test for primary purpose, so do not treat it as a certainty for any one file.
How Do the Draw Rules and Valuation Work?
The line has a 5-year interest-only draw period on the drawn balance, then a 25-year fully amortizing repayment period, for a 30-year maturity. The rate is variable. At least 80% of the line, and never less than $50,000, is drawn at closing. Later draws are at least $5,000 each.
That first rule surprises people. This is not a pure “draw only what you need” account. Most of the line is funded at the start, so size it to the capital you will actually use.
Because the rate is variable, today’s coverage may not hold later. The CFPB also notes that lenders may reduce or freeze a line if the property’s value drops significantly. Plan for that.
Valuation depends on line size:
- Lines up to $400,000: an automated valuation (confidence score of 85 or better) with a property inspection report, or a full interior appraisal.
- Lines above $400,000: a full interior appraisal on Form 1004, 1073 or 1025.
- Appraisal waivers are not accepted.
Seasoning matters as well. A rental bought or refinanced in the last 6 months is not eligible, and you need 6 months of ownership. A landlord who just closed on a Dearborn two-family must wait.
DSCR HELOC or Cash-Out Refinance?
It depends on what you do with the money and what your first mortgage looks like. A line fits a landlord who wants to keep a low existing first mortgage and draw capital in stages. A cash-out refinance fits better when you need a large lump sum, want a single fixed schedule, or your current first mortgage is no longer attractive.
| Situation | Better fit |
|---|---|
| Keep a favorable first mortgage | DSCR HELOC (second lien) |
| Paid-off rental, want revolving access | DSCR HELOC (first lien) |
| Large lump sum for a purchase deposit | Cash-out refinance |
| Credit below 700 | Neither line tier; consider other programs |
| Needs reserves-free structure | DSCR HELOC |
| Rural or row-home property | Outside this lane |
Practitioner view from placing these files: the strongest candidates have a seasoned rental, a lease in place, a first mortgage worth keeping, and a clear use of funds. The weakest are borrowers who treat the line as a substitute for coverage the property doesn’t have. If rent barely clears 1.10x on the whole line, the structure is fragile once the variable rate moves.
Some select lenders also offer DSCR products with coverage below 1.00, but leverage and terms adjust. That is a different program and not this one. If a deal needs that path, the submarket and the numbers deserve a second look first.
For a deeper walkthrough of how coverage works across products, see Lendmire’s complete DSCR loans guide.
Who Is Not Eligible?
Foreign nationals and ITIN borrowers are not eligible on this program. Borrowers must be U.S. citizens, permanent residents, or non-permanent residents with a Social Security number. Also, the line is never offered on an owner-occupied home or second home.
Michigan is one of the states where Lendmire offers it. The program is not offered in Tennessee.
Short-term rentals add friction. A thin comp set makes rent evidence harder. Rabbu shows about 29 active Airbnb listings in Dearborn, so appraiser market-rent support may be limited.
Key Terms Defined
Combined loan-to-value (CLTV): All liens on the property, including the new line, divided by its value.
Draw period: The stretch when you can borrow against the line, here 5 years interest-only on the drawn balance.
Stress payment: The qualifying payment used to test coverage, calculated on the full limit at a higher test rate.
Second lien: A loan that sits behind your existing first mortgage.
Seasoning: How long you must have owned or refinanced the property before the line is eligible.
Frequently Asked Questions
Do I need tax returns or W-2s?
No. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The file is still documented, with a lease, a rent schedule or valuation, a credit report, title and insurance.
Can I keep my current first mortgage?
Yes, on a second lien. The line sits behind it, and the first mortgage balance counts in combined loan-to-value, up to 70% at a 720 score or better, through select programs. A first-lien line applies only to a rental with no mortgage.
Is there a limit on how many rentals I can use this on?
Yes. Per-borrower exposure is capped at 5 loans or $2,500,000 with the program. Investors with larger portfolios should decide which rentals to tap first, subject to underwriting.
What if my rental is vacant?
A lease in place is required, so a fully vacant property does not fit. A two-to-four-unit property can have at most one vacant unit. Landlords between tenants usually wait until a lease is signed.
Can I use it for a short-term rental?
Rent is the lesser of the appraiser’s market rent or the lease, so a long-term lease is the cleaner path. STR income needs different documentation and thin comps can limit what counts. Ask the lender how it treats the specific property before you build a plan on it.
Is my money available forever once drawn down?
Not guaranteed. Lenders can reduce or freeze a line if the property’s value falls significantly, per the CFPB. Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
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 through Lendmire’s quote page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and real estate investors in its 16 full-service states. Home equity lines of credit are arranged through wholesale lending channels; Lendmire brokers the line and the lender underwrites each application under its occupancy-based 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. CFPB
2. Cornell LII – 12 CFR 1026.3
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: DSCR HELOC vs DSCR Cash-Out Refinance for First-Time Investors and Equity Needed · DSCR HELOC vs DSCR Cash-Out Refinance for Richmond Hill Landlords Tapping Equity · DSCR HELOC vs DSCR Cash-Out Refinance for Using Home Equity on an Investment Property
Guides: DSCR HELOC in Dearborn, MI · DSCR HELOC in Michigan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.