The Quick Read: No ranked list of providers can tell you which one fits, because the right DSCR HELOC depends on the rental you already own, your credit, and the equity you hold. Lendmire is a mortgage broker, not a lender, and it matches each file to a wholesale lender that writes the product.
- The line sits on a rental you already own, never on the property you are buying.
- It is a standalone second lien behind your first mortgage, or a first lien on a paid-off rental.
- The rent qualifies the line at a minimum 1.10x coverage, with no traditional personal-income documentation, W-2s or personal income calculation, subject to lender guidelines.
- The purchase loan is a separate approval with its own rules.
Why “Top Providers” Is the Wrong Question
A ranked list implies one winner. In practice the lenders that write this product differ on property type, credit tiers, leverage and valuation, so the best program for your situation changes with the file. Lendmire works with a network of wholesale DSCR HELOC lenders and shops the scenario across them. Naming a company here would tell you nothing about whether it fits your rental.
What you can compare is the program itself. Across the network, this home equity line follows a consistent shape, and every figure below is a ceiling or floor, not an offer, and is subject to underwriting.
Key Terms Defined
- DSCR: gross monthly rent divided by the qualifying payment on the loan.
- HELOC: a revolving line of credit secured by property you own, drawn as needed.
- Second lien: a loan that sits behind the first mortgage you keep.
- CLTV: combined loan-to-value, meaning the first mortgage balance plus the new line, divided by the property’s value.
- Draw period: the stretch when you can borrow and pay interest only.
- Seasoning: how long you must have owned or refinanced the property before the line is available.
How the Two-Loan Sequence Works
A HELOC-funded down payment involves two approvals that never merge. The line is approved on the rental that secures it. The short-term rental purchase loan is approved on the new property. Because the line is a standalone loan, it is never closed together with a purchase.
The order matters:
1. Pick the rental that will secure the line. It must be a non-owner-occupied one-to-four-unit property you own, not your own home.
2. Ask the purchase lender first whether borrowed funds are acceptable as a down payment. Programs differ, and some want unborrowed cash.
3. Open the line, then draw the cash into your own account. At least 80% of the line is drawn at closing, so plan for a funded balance rather than a standby limit.
4. Keep the paper trail: the line agreement, the draw statement and the bank deposit.
5. Apply for the purchase loan, which is underwritten on the new property’s income.
One practical point follows from that third step. An approved but undrawn line is a weak proof of funds, and the CFPB notes that a lender may stop further credit if the home’s value falls significantly. Treat the line as cash only once it sits in your account.
How the Rent Qualifies the Line
The line is qualified on the securing rental’s income, not yours. The test is a minimum 1.10x coverage: gross monthly rent divided by a qualifying payment. That payment is a fully amortizing payment on the entire credit limit, calculated at a stress rate above the start rate, so it is deliberately tougher than what you will actually pay while interest-only.
Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A lease in place is required, and a two-to-four-unit property may have at most one vacant unit.
Two details trip people up. Taxes and insurance are not part of the qualifying payment. And on a second lien, confirm on the file how the lender treats the first-mortgage payment, because the lender’s own coverage calculation governs.
Leverage Tiers and Line Size
Lines start at $50,000, and the closing draw is never less than $50,000. On the smallest lines that means the whole line is drawn at closing.
| Lien position | Credit score | Maximum leverage | Line size |
|---|---|---|---|
| Second lien | 720 or better | 70% CLTV | Up to $500,000 |
| First lien (no mortgage) | 740 or better | 75% LTV | Up to $500,000 |
| First lien (no mortgage) | 700 to 739 | 70% LTV | Up to $500,000 |
| First lien (no mortgage) | 720 or better | 65% LTV | Above $500,000 to $1,000,000 |
There is no second-lien tier below 720. If you keep a first mortgage, a second lien is your only structure, so a 700-to-719 score is the obstacle there, not lien type. A declining-market flag can lower the ceiling by 5 points, and Philadelphia lines carry a ceiling 10 points lower.
Terms and Draw Rules
The draw period is 5 years interest-only on the drawn balance. A 25-year fully amortizing repayment period follows, for a 30-year maturity. The rate is variable. Later draws are at least $5,000 each.
That structure creates the main cash-flow risk. The qualifying test ignores your actual line payment, so a rental can clear coverage and still strain your monthly budget once you carry both the new purchase loan and the line’s interest-only payment. The CFPB’s HELOC booklet also warns that monthly payments can change even when you draw nothing more. Model your cash flow with the line’s payment included, then stress it for a vacant stretch and for the day the interest-only period ends.
The File: Valuation, Seasoning and Eligibility
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. No reserves and no cash to close are required.
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).
Credit history matters too: no 30-day late on the mortgage in the last 12 months, and 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu. Exposure is capped at 5 loans or $2,500,000 per borrower with the program.
Where the Rule Breaks
Several edge cases catch investors who assume the product works like a bank HELOC:
- Your own home. This line is never offered on an owner-occupied home or second home. A primary-residence HELOC is a different product.
- The property you are buying. The line cannot fund its own down payment. It must sit on a rental you already hold.
- Excluded property. Rural-designated property, condotels, row homes, leaseholds, land trusts, age-restricted communities, mixed-use, a property listed for sale in the prior 2 months, and a property with a solar lien are all outside the program.
- Borrowers. U.S. citizens, permanent residents and non-permanent residents with a Social Security number are eligible. Foreign nationals and ITIN borrowers are not.
- LLC title. An LLC can hold title on investment property, subject to program terms, with members signing as guarantors.
- Location. The program is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee.
Which Funding Path Fits Which Investor
| Situation | Often fits | Watch for |
|---|---|---|
| Rental with equity, first mortgage you want to keep | DSCR HELOC (second lien) | Needs 720 and CLTV room |
| Paid-off rental, strong credit | DSCR HELOC (first lien) | Leverage tied to score tier |
| Want to replace the first mortgage and pull more equity | DSCR cash-out refinance | Resets the first loan |
| Ample liquid cash | Cash down | Ties up savings |
Lendmire’s broader pages on the cash-out refinance route cover the refinance side. For this article, the practical point is that a HELOC leaves your existing first mortgage untouched, while a cash-out refinance replaces it.
Short-Term Rental Income and the Purchase Loan
The purchase loan, not the line, is where short-term rental income gets tested. Treatment varies by program. Some lean on an appraiser’s market-rent schedule and others on documented income, and short-term income is more volatile than a long-term lease. That makes cushion and cash on hand more valuable. A nightly rate multiplied by 30 is not a sound way to measure income.
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. The complete DSCR loans guide covers how the purchase loan itself works.
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.
Common Mistakes
- Drawing the line before confirming the purchase lender accepts borrowed funds.
- Counting an undrawn line as available cash.
- Reading the coverage ratio as proof the deal cash-flows once the line’s payment is added.
- Pointing the line at a property type the program excludes.
- Assuming a ranked provider list reflects your leverage tier.
Frequently Asked Questions
Will a short-term rental purchase lender accept HELOC money as the down payment?
It depends on the purchase program. Some accept documented borrowed funds and some want unborrowed cash, so ask before you draw. Keep the line agreement, draw statement and bank deposit to show the source.
Does the HELOC payment count against the DSCR on the new rental?
Generally no. The purchase loan’s coverage is the new property’s rent against its own payment. The line’s payment still hits your personal cash flow, so stress-test the combined monthly obligation.
How soon after buying a rental can I open the line?
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).
Can my LLC own the rental that secures the line?
Yes, on investment property, subject to program terms. The members sign as guarantors, and a title holder who is not a borrower signs an acknowledgment and the security instrument.
Is a larger down payment better for the purchase loan?
It can be. Weigh that against the extra line balance you carry and the variable rate on it.
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.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) arranging DSCR home equity lines of credit — standalone first or second liens on non-owner-occupied one-to-four-unit rentals, qualified on rent — through a wholesale lending network in 15 of its 16 licensed states (every licensed state except Tennessee). Eligibility is determined by the lender on each file. 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: What Is a Home Equity Line of Credit HELOC
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Top DSCR HELOC Providers for a First-Time Landlord · Top DSCR HELOC Providers When Rental Income Counts Toward Qualifying
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
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.