The Quick Read: You qualify when the rental’s rent covers a stress payment on the whole line at 1.10x or better, your credit meets the lien tier, and the equity fits the combined leverage cap, though the interest-only draw on this program runs 5 years, not 10, subject to lender guidelines.
- The rent qualifies the line, so the file needs no tax returns, W-2s, pay stubs or personal income calculation, subject to lender guidelines.
- The line is a standalone second lien behind the first mortgage you keep, or a standalone first lien on a rental with no mortgage.
- Second-lien leverage tops out at 70% CLTV with a 720 score. First-lien leverage reaches 75% LTV at 740 or better.
- The draw period is 5 years interest-only, then a 25-year repayment period. A 10-year draw is not on offer here.
- The LLC can stay on title, per lender program requirements.
Key Terms Defined
DSCR (debt service coverage ratio): gross monthly rent divided by the qualifying payment on the line.
Stress payment: a fully amortizing payment on the entire credit limit at the start rate plus 2 percentage points, used only to test coverage.
CLTV (combined loan-to-value): the first mortgage balance plus the new line, divided by the property’s value.
LTV (loan-to-value): the line divided by value, used when there is no first mortgage.
Draw period: the stretch when you can borrow against the line and pay interest on the drawn balance.
Repayment period: the stretch after the draw ends, when borrowing stops and the balance amortizes.
What Is a DSCR HELOC on a Rental?
A DSCR HELOC is a revolving line of credit secured by a non-owner-occupied one-to-four-unit rental. It is reviewed on the property’s rent instead of the owner’s personal income. Lendmire, a mortgage broker, arranges these lines through a wholesale lender in its network. The lender reviews and approves every file.
The structure matters more than the label. The line is written as a standalone second lien behind the first mortgage you keep. Or it is a standalone first lien on a rental that has no mortgage. It is never closed with a purchase. It is never a third lien. It is never a line on your own home or a second home.
That is the point of the product. You reach equity in a rental without refinancing a first mortgage you like 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 program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Borrowers must be US citizens, permanent residents or non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible.
Investors who want the broader picture can start with Lendmire’s complete DSCR loans guide.
Does a 10-Year Interest-Only Draw Exist on This Program?
No. The draw on this program is 5 years of interest-only payments on the drawn balance. Then comes a 25-year fully amortizing repayment period, for a 30-year maturity. The rate is variable.
The title phrase is a search habit. Plenty of investors expect a decade of interest-only borrowing. This program does not offer one. If your plan depends on ten years of interest-only carry, this line does not fit it.
The shorter draw changes how you plan, not how you qualify. Rent is tested against a fully amortizing stress payment, not against the interest-only payment you will actually make. So the length of the draw does not move the coverage number. It does decide how long the cheap payment lasts.
How Underwriting Treats the File, Step by Step
1. Confirm the lien position. If a first mortgage stays in place, the line is a second lien. If the rental has no mortgage, it is a first lien. These carry different credit floors and leverage caps.
2. Screen the collateral. The property must be a non-owner-occupied rental of one to four units. A lease must be in place. A two-to-four-unit building may have at most 1 vacant unit.
3. Check the borrower. The credit tier comes from the lender’s own report. There can be no 30-day mortgage late in the last 12 months. At least 48 months must have passed since a bankruptcy, foreclosure, short sale or deed-in-lieu.
4. Size the equity. Take the leverage cap times value, then subtract every existing lien. A heavily leveraged first mortgage can leave no room.
5. Run the coverage test. Rent goes over the stress payment on the entire limit. The result must clear 1.10x.
6. Order the valuation. The lender confirms value and market rent through an automated valuation or a full appraisal, depending on line size.
7. Clear title and insurance. Title work follows the lien position. Hazard insurance must cover both liens, with flood coverage where required.
8. Set the closing draw. At least 80% of the line is drawn at closing.
Underwriting is individual. The figures here are ceilings and floors, not offers.
How the 1.10x Coverage Test Works
Coverage is gross monthly rent divided by the qualifying payment. The qualifying payment is principal and interest on the full credit limit, fully amortized, at the start rate plus 2 percentage points. Taxes and insurance are not part of it.
Two details trip files.
First, the test runs on the whole limit. It does not matter how much you plan to draw. A $300,000 line is tested as if all $300,000 is borrowed.
Second, rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. Landlords who raised rents recently and have no receipt history feel this one.
On a second lien, confirm on the file how the lender treats the first-mortgage payment in its coverage calculation. Do not assume it is in or out. The lender’s own calculation governs, and the arithmetic in any example is illustrative.
Picture a rental with strong lease rent and a modest first mortgage. The stress payment on the full line is what the rent has to beat. Bigger line, bigger stress payment, thinner coverage. Some owners find that a smaller line clears 1.10x where the maximum does not. Sizing down is a valid fix.
What Leverage Can You Expect?
Leverage depends on lien position and credit score. These are ceilings through select programs, subject to underwriting.
| Lien | Credit score | Ceiling | Line size |
|---|---|---|---|
| Second lien | 720 or better | 70% CLTV | $50,000 to $500,000 |
| First lien | 740 or better | 75% LTV | Up to $500,000 |
| First lien | 700 to 739 | 70% LTV | Up to $500,000 |
| First lien | 720 or better | 65% LTV | Above $500,000 to $1,000,000 |
Below 720 there is no second-lien tier. A borrower who keeps a first mortgage can only take a second lien, so a 700-719 score with a first mortgage does not fit this line. A first lien exists only on a rental with no mortgage. The first-lien floor is 700.
A declining-market flag lowers the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower.
Market surveys report that investment-property lines are harder to get than primary-home lines, with a smaller lender pool and stricter requirements, per NerdWallet. The network figures above are narrower and rent-based, so read them as their own program.
What the File Needs: Valuation, Seasoning and Property
Valuation depends on line size. Lines up to $400,000 take an automated valuation with a confidence score of 85 or better, paired with a property inspection report, or a full interior appraisal. Lines above $400,000 take a full interior appraisal on Form 1004, 1073 or 1025. Appraisal waivers are not accepted.
The appraisal also carries the Form 1007 market rent that feeds the coverage test. A weak rent schedule hurts the coverage number. If the lease sits above the appraised rent, the three months of receipts become the fix.
Seasoning is two clocks in one rule. A rental bought or refinanced inside the last 6 months is not eligible (that clock runs from the last note date to the new note date), and the owner must have held title for 6 months (settlement date to note date).
Property eligibility is where files die quietly. Eligible types include single-family, PUD, townhome, two-to-four units, warrantable and non-warrantable condominiums, and lots up to 10 acres. Outside this program:
- rural-designated property
- row homes
- condotels
- commercial, agricultural or mixed-use property
- leaseholds and land trusts
- age-restricted communities
- hobby farms, modular and log homes
- land contracts
- a property listed for sale in the prior 2 months
- a property with a solar lien
Title work follows the lien. A first lien and any second lien above $400,000 get a full title policy. Smaller second liens get an owner-and-encumbrance report.
No reserves and no cash to close are required. Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
Draw Rules and Line Sizing
Lines start at $50,000. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000. On the smallest lines, that means the whole line is drawn at closing. Later draws are at least $5,000 each.
This shapes the decision. You are not opening a large line and leaving it idle. Most of the line carries a balance from day one. Size the line to what you will use.
The CFPB notes that some plans require an initial draw at setup and a minimum amount per draw. That is how this one works. Plan for that jump.
Where the General Rule Breaks
The LLC is on title. This is allowed. Vesting in the owner’s LLC works on investment property, subject to program terms. The members sign as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. The borrowers on the line need not be the borrowers on the first mortgage.
The first mortgage eats the cap. A property can be worth far more than you paid and still have no room. The 70% CLTV ceiling counts the first mortgage balance. A recent cash-out on the first lien can leave nothing for a second.
A purchase just closed. The line is never closed with a purchase, and the seasoning clocks apply. A rental bought or refinanced recently has to wait.
A large line. First-lien lines above $500,000 drop to a 65% LTV ceiling. Bigger is not better here. The bigger limit also raises the stress payment and weakens coverage. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
A lease above market. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
A property that was recently listed. A rental listed for sale in the prior 2 months is out. Owners who tested the market and pulled the listing run into this.
A different income-qualified line. An investment-property HELOC qualified on personal income follows that program’s own rules. It tests the owner’s debt-to-income ratio. This program does not.
Planning for the Draw-to-Repayment Step-Up
The payment changes when the draw ends. Interest-only on the drawn balance gives way to a 25-year fully amortizing payment. The CFPB HELOC brochure explains that an interest-only plan pays nothing toward principal, and that payments can change even if you draw no more money. Variable pricing causes the second effect.
Four inputs set the size of the step-up: the balance when the draw ends, the variable rate then, the length of the repayment term, and any principal you paid during the draw.
Run the test before you draw, not when the draw ends. Ask whether the rent still covers the fully amortizing payment on the balance you plan to carry. If the answer is thin, you have three options:
- pay principal during the draw
- draw less than the limit later
- plan a refinance or payoff before repayment begins
Use the plain term variable rate when you model it, and let the lender’s HELOC disclosures set the pricing terms.
The Investor Decision in Practice
Choose this line when the first mortgage is worth keeping, the rent clears 1.10x on the whole limit, and equity remains under the CLTV cap. Choose something else when the pieces do not fit.
| Situation | Better fit |
|---|---|
| Keep a low first mortgage, rent covers the full line | DSCR HELOC |
| Want one lump sum and a new first lien | DSCR cash-out refinance |
| Need a ten-year interest-only draw | Not this program |
| Rental has no mortgage and score is 700 to 739 | DSCR HELOC, first lien, 70% LTV |
Each new line adds to your exposure. The program caps you at 5 loans or $2,500,000 per borrower. Count the loans you already hold with it before you stack another.
If you would rather be reviewed on bank statement deposits, see how Lendmire frames the alternative in its piece Top Bank Statement HELOC Providers With a 10-Year Interest-Only Draw Period. That product is reviewed on documented deposits under its own program, subject to lender guidelines. It is a different structure from this line.
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.
Documents to Gather Before Applying
- Government ID and credit authorization for each borrower
- The current lease, plus three months of rent receipts if the lease is above market
- A mortgage statement for the first lien, if one stays in place
- Entity documents and guarantor details if an LLC holds title
- Hazard insurance covering both liens, and flood coverage where required
None of this is a personal income file. Lenders still document the rent, the lease, the credit report and the valuation. Every file is underwritten individually.
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.
Frequently Asked Questions
Can I get a 10-year interest-only draw on a DSCR HELOC?
Not on this program. The draw period is 5 years of interest-only payments on the drawn balance, followed by a 25-year repayment period and a 30-year maturity. The rate is variable. Model your carry for five years, not ten.
How long do I have to own the rental first?
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). A recent purchase has to season before it qualifies.
Can my LLC hold title?
Yes, on investment property, per lender program requirements. The members sign as guarantors. The line cannot go on your own home or a second home.
Do I need to show personal income?
No. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. There is no traditional personal-income documentation: no W-2s or pay stubs, and no personal income calculation. The lender still documents the rent, the lease, your credit and the valuation.
What if my coverage falls below 1.10x?
Size the line down or wait. The stress payment is tested on the whole limit, so a smaller limit lowers it. A lease above market rent can also count if three months of receipts support it.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps landlords and real estate investors open DSCR home equity lines of credit on their rentals — lines qualified on the property’s rent, never on the owner’s own home — through wholesale lenders in 15 of Lendmire’s 16 licensed states (every licensed state except Tennessee). Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its 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 – HELOC on an investment property
2. CFPB
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: When a DSCR HELOC Makes Sense Without a Cosigner · Where to Get a DSCR HELOC When the Rental Property Value Is Small · When a DSCR HELOC Makes Sense to Qualify on a Single Rental Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.