a large national bank Loans Home Equity Loan on Investment Property

The Quick Read: A large national bank Loans is the former name of a large retail lender, and a home equity loan on a rental means a closed-end second mortgage secured by an investment property, which few lenders write and which carries tighter leverage, credit, and title rules than a loan on your own home. Check whether your lender writes rental-secured equity products at all before you plan around one.

• A home equity loan pays out as a lump sum. A home equity line of credit (HELOC) is a revolving line you draw on as needed.
• Across Lendmire’s wholesale network, the equity product on a rental is a standalone line, capped at 70% CLTV on an investment property and $500,000 total, with a 700 minimum credit score. All figures are subject to lender guidelines.
• The property must be titled to you personally or to a revocable living trust. An LLC cannot hold title on these lines.
• Equity products test you: your credit, income, and debts. A DSCR loan tests the property: rent against the full monthly payment.
• Equity lines through this network are available in 16 states, narrower than the 41-market DSCR footprint.

What Does the Old Lender Name Mean Today?

The name belongs to a lender that has since rebranded. Search results for the old name mix reviews, lender pages, and generic explainers, and they disagree about whether that lender currently offers a home equity loan at all. Several of those pages are old.

This article does not tell you what any single retail lender offers this month. Product menus change, and large retail lenders often skip non-owner-occupied collateral entirely. The practical move is to ask one direct question: do you write a home equity loan or line secured by a rental, and in my state?

What this article does explain is the product category. You will see how a second lien on a rental works, how underwriting treats it, where it breaks, and when a DSCR loan is the better tool. Lendmire is a broker. It arranges these loans through select wholesale lenders and is not the lender.

How a Home Equity Loan Works on a Rental

A home equity loan on a rental is a second-lien loan that pays you a lump sum, secured by the rental itself. You keep your existing first mortgage and add a second payment on top of it. The lender sizes the loan from the property’s value and the liens already on it.

NerdWallet says borrowing against an investment property is possible. It also says the lender pool is smaller, the borrowing limits are lower than on a primary home, and cost may run higher. Lenders attribute this to default risk: borrowers tend to protect the home they live in before the home they rent out.

Lenders also see a rental as weaker collateral because the second lien sits behind the first. If the property is sold to pay debts, the first mortgage gets repaid first. That ranking is the root of the extra caution.

Three Different Deals Hiding Under One Search

Most people searching this phrase mean one of three transactions. Pages on the topic often blur them together.

The first is the most common route. It is a primary-residence product, so the investment-property rules below do not apply to it. The second is the niche product this article focuses on. The third is often the cleaner answer when no lender will write a second lien on your rental.

How Underwriting Treats a Rental Equity Loan, Step by Step

Underwriting a rental equity line starts with equity and ends with your personal ratios. Here is the sequence on most files across the network.

1. Equity. Equity is the property’s value minus every lien on it. The lender adds the existing first mortgage and the new line together, then divides by value. That total is the combined loan-to-value, or CLTV.

2. The cap. On an investment property, the network ceiling is 70% CLTV, for both 720+ and 700+ credit profiles. Credit above 700 buys eligibility, not extra leverage. On a primary residence the ceiling can reach 90% CLTV, but only at a 720-or-better credit profile. That higher number never applies to a rental.

3. Valuation. Investment lines are capped at $500,000, so they commonly run on an automated valuation with no traditional appraisal. A borrower may still ask for a full appraisal.

4. Your credit. The network floor on an investment line is 700, with no tier beneath it. The lender pulls one credit report and uses the score of the primary wage earner. The report can be no more than 90 days old at closing.

5. Your debts. Debt-to-income (DTI) tops out at 50%, and the lender reviews your file on the interest-only payment calculated on the maximum draw. Lenders often credit only part of a rental’s income against your debts, so rent helps less than you might expect.

6. Funding. At least 75% of the line is drawn at closing. After that you can draw more in amounts of $1,000 or more, depending on the program.

Who gets turned down at this stage? Often it is the investor with many mortgages or traditional personal-income documentation that show low net income after write-offs. The property cash flows, but the personal ratios do not pass.

Structures and Variations

The network’s rental equity product is a standalone line. It can sit in first-lien or second-lien position, so it works whether or not you have a mortgage on the property.

Investment lines run one structure only: a 5-year interest-only draw followed by a 25-year repayment period. The line stays variable and does not convert to a fixed payment. Primary residences and second homes have a second, shorter structure, which does not apply to a rental.

A few more limits shape the file:

• Line size. The line runs from $25,000 up to $500,000 on an investment property. Lines above $500,000 exist only on primary residences, need a full appraisal, and cap at 75% CLTV.
• Exposure. A borrower is limited to three lines in total. A borrower with more than 15 financed properties is not eligible.
• Property types. Single-family, 2-4 units, PUDs, townhomes, and condos, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not.
• Past credit events. A bankruptcy needs 4 years of seasoning from discharge or dismissal. On investment files, a foreclosure needs 7 years. A deed-in-lieu, pre-foreclosure, or short sale needs 4.

If a line sounds like a closed-end loan to you, the difference matters. The CFPB explains that a home equity loan is one lump sum, while a HELOC revolves. If a first mortgage exists, either one is a second mortgage paid alongside it.

Where the General Rule Breaks

The general rule is that a rental equity product is a personal-credit loan on personal-name collateral. These cases bend or break it.

Property held in an LLC. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on these lines. Title must sit with you personally or in a revocable living trust. This is the sharpest structural difference from a DSCR loan. A property already deeded to an LLC needs a vesting change first, or a DSCR cash-out refinance instead, subject to program terms.

Rental restrictions in the documents. The CFPB’s HELOC booklet warns that a line’s terms may prohibit renting the home to others. Read the occupancy language before you use a homeowner-style line on a property that later becomes a rental.

Using your own home instead. Many investors tap their primary residence to fund the next purchase. That works mechanically, but it puts the home you live in behind the new rental. Adding debt makes a hard stretch harder, and the home itself is the collateral.

Short-term rentals. Traditional lenders often hesitate on short-term-rental collateral because the income is seasonal and harder to document. 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.

Recently listed properties. A property listed for sale, or listed within the past 60 days, is ineligible in several states. Take it off the market before you apply.

Where you live. Lendmire’s equity lines are limited to 16 full-service states. Investors outside them need a different structure.

Equity Loan or DSCR Loan: What the Decision Looks Like

Pick the product that tests the thing you are strongest on. An equity line leans on your credit and personal ratios. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.

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 complete DSCR loans guide covers the full mechanics.

Here is how a typical DSCR file looks across the network:

• Purchase. Most files land at 75%-80% LTV, which means 20%-25% down. Select programs reach 85% LTV with roughly a 700+ score.
• Cash-out refinance. Standard rentals top out around 75% LTV, with about 6 months of seasoning as the common expectation. On short-term-rental collateral the cash-out ceiling is 70%.
• Coverage. 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
• Credit. A 620 floor exists in parts of the network. Most programs want around 660, and 700+ unlocks the strongest tiers.
• Loan size. Standard loans run up to $3,000,000 on standard programs (smaller balances available through select lenders).
• Reserves. They vary by lender, leverage, loan size, and transaction type. Around 6 months of PITIA is common. PITIA is principal, interest, taxes, insurance, and association dues.

Picture an investor with six mortgages and a tax return full of depreciation. A rental equity line may stall on DTI even though the duplex’s rent comfortably covers its payment. A DSCR cash-out on that duplex could instead clear at around 1.2x coverage. NerdWallet points investors in that spot toward a DSCR second mortgage for the same reason.

The reverse also happens. If you hold one rental, own it personally, and have strong credit, a line of up to $500,000 on a first or second lien may be the lighter, cheaper-to-arrange tool. This is a genuine toss-up, and it depends on your title, your ratios, and your state.

Two cautions apply to either path. First, a second lien adds a payment and can complicate a later refinance of your first mortgage. Second, DSCR compares rent to PITIA only. Clearing 1.00 is not the same as positive cash flow, because repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. Stress-test the stacked payments against a vacant month before you borrow.

Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

If you want more detail on equity options, Lendmire’s piece on investment property home equity loans goes deeper.

Key Terms Defined

CLTV (combined loan-to-value): Every loan on the property added together, divided by its value.

Closed-end loan: A loan that pays the full amount upfront, with no redraw.

HELOC: A revolving line of credit secured by property, which you can draw on repeatedly up to a limit.

Second lien: A loan repaid after the first mortgage if the property is sold to cover debts.

DTI (debt-to-income ratio): Your monthly debt payments divided by your monthly income.

Draw period: The stretch of a line when you can borrow and pay interest only.

DSCR (debt service coverage ratio): A property’s monthly rent divided by its monthly payment, including taxes, insurance, and association dues.

Your Next Step

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. An illustrative calculator on the site can give you a rough estimate before you start. Lendmire arranges DSCR investor loans.

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. 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.

References

1. NerdWallet – HELOC on investment property

2. CFPB – Home equity loan vs HELOC

3. CFPB – HELOC booklet

4. NerdWallet – HELOC on investment property, DSCR second mortgage