Can You Get an Investment Property HELOC With Interest-Only Payments?

The Quick Read: Yes, a HELOC on a rental can carry interest-only payments, but only a narrow pool of lenders offers one, and the interest-only stretch lasts for the draw phase alone before the line converts to principal-plus-interest payments on whatever balance remains, because the balance never shrinks while you pay interest only. The line is qualified on your personal credit and debt-to-income, not on the rent. Eligibility is subject to lender guidelines and a full file review.

• On the wholesale network Lendmire works with, an investment property line tops out at 70% CLTV and $500,000, with a 700 minimum credit score.
• The investment structure is a 5-year interest-only draw followed by a 25-year fully amortizing repayment, and it is the only structure offered on investment lines.
• At least 75% of the line is drawn at closing, so this is not a pay-only-for-what-you-use revolver.
• Title must sit with an individual or a revocable living trust. An LLC cannot hold it.
• The real risk arrives at the end of the draw, so plan the exit well before month 60.

Does an Interest-Only Draw Really Come Standard?

Interest-only is common on rental HELOCs, but it is a feature of the contract, not a law of nature. Some plans let you pay interest alone during the draw, and others fold principal into the minimum payment. Read the line agreement before assuming anything.

On the investment line described below, the interest-only draw is built into the structure. You pay interest on the drawn balance for five years. Then the line moves into a 25-year repayment period, which brings the total life to 30 years. The pricing floats across both periods and never converts to a fixed payment.

That structure suits an investor who wants low carrying costs while the borrowed money does its job. Typical uses include repairs, a down payment on the next purchase, or a renovation that may support a higher appraised value, depending on comps and underwriter review. The trade-off is simple. Nothing you pay during the draw reduces what you owe.

Who Actually Offers a HELOC on a Rental?

Very few lenders do, and that is the main obstacle for most investors. Large retail lenders generally decline non-owner-occupied collateral. BiggerPockets notes that most banks give HELOCs only on a primary residence, which is why some investors turn to investor-focused lenders. NerdWallet adds that not all lenders offer a line on an investment property, that requirements are strict, and that lenders see higher default risk than on a primary home.

Lendmire is a mortgage broker, not a lender. It places these lines with select wholesale partners, and those partners review and approve each file. The line is available only in Lendmire’s 16 full-service states, which is narrower than its 41-market DSCR footprint. Those states are AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA.

What the Network’s Investment Line Looks Like

On an investment property, the network line caps at 70% CLTV, and the maximum line is $500,000. The minimum credit score is 700. That is a hard floor, with no tier beneath it. A 720 score and a 700 score both reach the same 70% ceiling, so a higher score buys eligibility, not extra leverage.

Other parameters, all subject to lender guidelines:

• Position: a standalone line in first or second lien position. A second lien leaves your existing mortgage in place.
• Draw at closing: at least 75% of the line.
• Valuation: lines at or below $500,000 ordinarily use an automated valuation with no traditional appraisal. You can request a full appraisal in any case, and a higher CLTV may call for a secondary valuation.
• Eligible properties: single-family, 2-4 units, PUD, townhome, and condominium, including non-warrantable condos.
• Not offered: manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties.
• Exposure: a borrower may hold up to three lines. An owner with more than 15 financed properties is not eligible.

The line size comes from simple math. Take the property value, multiply by the 70% ceiling, subtract every lien already on the property, and cap the result at the program maximum.

How Do You Qualify When the Rent Isn’t the Test?

You qualify on your personal profile: credit, income, and total debts. The rental income does not carry the approval. The maximum DTI on the network is 50%. The qualifying payment is the interest-only payment on the full line, not on the amount you plan to use. A line sized at $500,000 is tested as if it were fully drawn.

That detail trips up investors who expect a small draw to mean a small qualifying payment. Because 75% of the line is drawn at closing anyway, the gap between the tested payment and the real payment is narrow.

Investors with many mortgages feel this most. Each financed property adds to the debt side of the ratio. NerdWallet notes that some lenders count only part of rental income toward a higher DTI. Market-wide, it reports investment-property HELOC DTI limits in the 40% to 50% range. The network’s own maximum is 50%.

“DSCR HELOC” is mostly a search phrase. A true DSCR second lien is typically a closed-end loan that amortizes from day one and is judged on rent against the full payment. The network’s investment equity line works differently. It is judged on DTI against the interest-only payment. If your debts are heavy but your rent is strong, the other product may fit better, as the comparison below shows.

What Happens When the Interest-Only Period Ends?

The payment steps up, and the step can be large. During the draw you pay interest only. At the start of repayment you pay interest plus principal on the full balance over the remaining years.

The Federal Reserve staff research on HELOCs found that reaching the end of the draw raises the likelihood of default, and that lines with balloon payments were hit hardest. The CFPB’s HELOC booklet adds that payments on a variable-rate plan can change even if you draw no more. Experian says repayment-period payments often more than double the interest-only payment, and that some HELOCs carry a balloon payment.

On the network’s investment line, the repayment period is a full 25-year amortization, not a balloon. The step-up is still real, and a floating price means the new payment is not locked in advance.

Run a Stress Test Before You Open the Line

Test the rental at the repayment-phase payment, not the draw payment. Here is a simple order of operations:

1. List what the property already carries: first mortgage, taxes, insurance, and any HOA dues.

2. Add the line’s payment as it would look once principal begins.

3. Compare that total to realistic rent after vacancy and repairs.

4. Repeat the comparison with the floating price higher than today.

A line that only works at the interest-only payment is a bridge, not a plan. If the numbers fail at step 4, either borrow less or line up the exit now.

When Interest-Only Is the Wrong Call

Interest-only fits an investor with a defined use for the money and a defined way out. It fits poorly when the borrowed funds produce no income and no exit exists.

Run-of-the-mill risks matter here too. The line adds a second payment to a property that already has one. A floating price can lift that payment. A drop in value can leave less equity just when you need to refinance. None of that makes the product bad. It makes the exit plan the most important part of the file.

Edge Cases That Change the Answer

Title. An LLC cannot hold title on this line. Only an individual or a revocable living trust qualifies. If your rental sits in an LLC, you would need a vesting change or a different product. Lendmire’s piece Interest-Only DSCR Loan vs Investment Property HELOC in an LLC covers that choice in detail.

Lien position. The line can sit in first or second position. Behind an existing first mortgage, the combined balance has to fit under the 70% CLTV ceiling.

Portfolio size. Three lines per borrower is the cap, and more than 15 financed properties disqualifies the borrower. An investor at that scale usually needs a property-qualified loan instead.

Credit. Anything below 700 is outside this program. Select programs in the wider market may differ, but those are different products with different terms.

Funds from your home. Some investors borrow against their primary residence instead, since primary-residence lines carry a different occupancy tier. That route puts your own home behind the loan, which raises the stakes if a rental underperforms.

HELOC or DSCR Cash-Out Refinance?

A HELOC keeps your existing mortgage and adds a line behind or beside it. A cash-out refinance replaces the first mortgage with a larger one. Which fits depends on what you qualify on and how you hold title.

A DSCR loan compares rent to the full monthly obligation: principal, interest, taxes, insurance, and any HOA dues. Many select programs start at a 1.00 coverage floor, and stronger ratios open better terms. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Credit expectations on most programs sit around 660, with a 620 floor in parts of the network. Reserves vary by lender, leverage, and loan size, and they commonly run around six months. Clearing 1.00 is not the same as positive cash flow, because repairs, vacancy, and management sit outside the calculation.

LLC-titled borrowers can pursue a DSCR cash-out refinance subject to lender program eligibility. The complete DSCR loans guide covers the full set of loan structures.

If your debts are light and you hold title personally, the HELOC can be a lower-friction way to draw equity while keeping your first mortgage. If you hold several properties, use LLCs, or carry high DTI from existing mortgages, the property-qualified route usually works better.

Key Terms Defined

Draw period: the window when you can borrow from the line and pay interest only. On the network’s investment line it lasts five years.

Repayment period: the stretch after the draw when borrowing stops and payments include principal. On the investment line it lasts 25 years.

CLTV: combined loan-to-value, the total of all liens divided by the property’s value.

Payment shock: the jump in the monthly payment when principal repayment begins.

Interest-only payment: a payment that covers interest on the drawn balance and none of the principal.

DTI: debt-to-income, your total monthly debts divided by your gross monthly income.

Next Steps

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. Reach the team at 828-256-2183 or request a quote. Any calculator on the site gives an illustrative estimate only, and every file is subject to lender guidelines and credit approval.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) arranging home equity lines of credit — primary-residence, second-home and investment-property lines — through a wholesale lending network in its 16 full-service states. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. BiggerPockets, ways to use home equity

2. NerdWallet, HELOC on an investment property

3. Federal Reserve FEDS paper 2015-073

4. CFPB HELOC booklet

5. Experian, what is a draw period on a HELOC