Top HELOC Providers for a Down Payment on a Second Home

The Quick Read: The right HELOC provider for a second-home down payment is not a single company but a lender that writes lines on your collateral type, accepts the proceeds toward a purchase, and fits your credit and combined leverage, so a broker that shops several wholesale lenders can match the line to your file. The lender that fits depends on your equity, your credit profile, and whether the new property is a personal second home or a rental. Lendmire arranges these lines as a broker and is never the lender. Every figure below is subject to lender guidelines and full file review.

• On the wholesale HELOC programs Lendmire places files with, the program credit floor is 600. A line on a second home needs a 640 score, and a line on an investment property needs 700.
• Investment-property lines top out at 70% combined loan-to-value, while second-home lines reach 90% only at a 720-or-better credit profile.
• The purchase lender decides whether borrowed money counts, so the HELOC and the purchase loan are two separate approvals.
• If the new property is a rental, a DSCR loan is the usual alternative for the purchase, and the HELOC payment sits outside the coverage ratio but still comes out of your pocket.

Key Terms Defined

HELOC: A home equity line of credit, a revolving line secured by your home that you draw on as needed.

Equity: The home’s value minus what you still owe on it.

CLTV (combined loan-to-value): All loans secured by the property added together, divided by the property’s value.

Draw period: The stretch when you can borrow from the line, usually with interest-only payments.

Repayment period: The stretch after the draw period, when the balance is paid down on a fixed schedule.

DSCR (debt service coverage ratio): A rental loan test that divides the property’s monthly rent by its monthly payment.

PITIA: The full monthly housing payment: principal, interest, taxes, insurance, and any association dues.

Seasoning of funds: The time borrowed or deposited money sits on your statements before a lender treats it as yours.

Why “Top Provider” Is the Wrong Question

Nobody can name one lender that is right for every borrower. Lending on this product splits by collateral type, credit tier, and how the purchase lender treats borrowed money. A lender that is excellent for a primary-residence line may not write a line on a rental at all.

So the useful question is which provider type and which program fits your file. Banks, credit unions, online lenders, and wholesale lenders reached through a broker all write HELOCs. They differ on the points that matter for a down payment.

One investor thread on BiggerPockets describes a bank declining to let HELOC money go toward an investment purchase. That is one report, not a rule. It does show why you screen a provider’s policy before you pay for an appraisal or an application.

How Underwriting Treats a Borrowed Down Payment, Step by Step

The HELOC and the purchase loan are two files with two approvals. The line is secured by a property you already own. The purchase loan is secured by the property you are buying. Here is how the sequence runs.

1. Confirm the purchase lender’s borrowed-funds rule first. Some programs accept a fully borrowed down payment. Others cap the borrowed share or want part of the money unborrowed. The rule can also differ for the down payment, closing costs, and reserves.

2. Size the line. A lender takes a percentage of your home’s value, then subtracts what you owe. That remainder is the most you can borrow.

3. Qualify for the line. On the wholesale programs Lendmire places with, debt-to-income tops out at 50%. It is capped at 45% for credit profiles from 600 to 679, and a ratio above 45% needs a score of at least 680. The lender reviews your file on the interest-only payment calculated on the maximum draw, not on what you plan to draw.

4. Draw the money. These programs require at least 75% of the line to be drawn at closing, so size the line close to what you need.

5. Let the funds sit on a statement. The purchase underwriter wants to trace the deposit back to the HELOC account. Seasoning expectations differ by lender.

6. Apply for the purchase loan. A conventional second-home lender adds the new HELOC payment to your debt-to-income ratio. A DSCR lender looks mainly at the property’s rent against its payment.

For a rental, that last step is where the paths split. The complete DSCR loans guide explains how a rental loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.

What the HELOC Programs Look For

Lendmire works with select wholesale lenders, and the figures below come from those programs. Lenders will differ, and programs change.

Credit. The program floor is 600. A second-home line needs 640, and an investment line needs 700. Lenders pull a single-bureau score tied to the primary wage earner, and the report can be no more than 90 days old at closing.

Combined leverage. Ceilings depend on the occupancy of the property securing the line. On an investment property the ceiling is 70% CLTV, with no higher tier. On a second-home line of up to $500,000, the ceiling rises with credit, though two adjacent tiers share the same figure.

The 700+ and 680+ tiers both carry 85%, so the ceiling does not rise between them. Primary-residence lines also reach 90% CLTV only at a 720-or-better credit profile. Lower tiers apply below that.

Line size. Lines run from $25,000 to $750,000. A line above $500,000 is for a primary residence only. It needs a credit profile of 700 or better (720 on the longer-runway structure described below), caps at 75% CLTV, and requires a full appraisal. At or below $500,000, lenders ordinarily use an automated valuation instead of a traditional appraisal.

Structure. Two draw structures exist on primary and second-home lines. One is a 3-year interest-only draw followed by a 17-year repayment. The other is a 5-year draw followed by a 25-year repayment. Investment lines use the 5-year structure only. The pricing floats through both periods and never converts to fixed.

Subsequent draws. After closing, the minimum additional draw is $1,000 on the structure that states one.

Borrower limits. A borrower is limited to three lines. A borrower with more than 15 financed properties is not eligible.

Property types. Single-family homes, 2-4 units, PUDs, townhomes, and condos, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, and commercial, mixed-use, or agricultural properties are not offered.

States. Lendmire’s HELOC placements cover 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. That is narrower than the 41-market DSCR footprint, which covers 40 states plus Washington, D.C.

A Worked Example in Percentages

Say your primary home carries a first mortgage equal to 50% of its value. Suppose your credit tier allows a combined ceiling of 75% (the federal CFPB HELOC booklet uses the same 75% purely as an illustration of how the sizing works). Your line can then reach 25% of the home’s value.

Now picture a second home priced near your primary home’s value. Putting 20% down and covering closing costs from the same draw would use most of that 25%. The line works, but with little room left over. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.

Three points follow from this.

• Cushion: Subtracting the 50% first mortgage from the 75% ceiling leaves 25% of the home’s value as the most the line can hold. Because at least 75% of the line is drawn at closing, you cannot leave much of it untouched as a reserve.
• Reserves: Many purchase programs want reserves in unborrowed funds, so a line that covers only the down payment may still leave a gap.
• Debt count: You carry the first mortgage, the HELOC, and the purchase loan at once, and the interest-only draw period ends in a payment that amortizes the balance.

Run a stress test before you commit. Ask whether your finances survive a higher payment on the line and the step-up when repayment begins. If the answer depends on the new property’s income, the plan is thin.

Where the General Rule Breaks

A fully borrowed down payment. Programs differ. Some accept it with documentation. Others want part of the money to be yours.

Reserves. Being accepted for the down payment does not mean the same dollars count as reserves. Reserve tests are separate, commonly around 6 months of PITIA. They vary by lender, leverage, loan size, and transaction type, and they are often met only with unborrowed funds.

LLC-owned property. On these HELOC programs, title must sit with you personally or in a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A rental already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance, which may accept an LLC borrower subject to lender program eligibility.

Collateral that is a rental. Some banks and credit unions write lines on rentals, and others have withdrawn them. Some lines restrict renting the property that secures them, so read the agreement. Lines on these wholesale programs allow investment collateral at 70% CLTV and 700 credit.

Second home versus investment property. Lenders treat them differently. Market surveys, such as one from SmartAsset, report about 10% down on a second home and 15% or more on an investment property. For a DSCR purchase of an investment property in Lendmire’s network, the typical range is 75%-80% LTV, which means 20%-25% down. Select programs reach 85% LTV on a purchase, with roughly a 700 or better score. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

A property for sale. In several of the 16 states, a property that is listed or was listed within the past 60 days is ineligible as collateral.

How the HELOC Fits a DSCR Purchase

If the new property is a rental, a DSCR loan is usually the purchase tool. On most files, coverage of 1.00 is where select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path accepts coverage below 1.00, with leverage and terms adjusted.

The HELOC payment generally sits outside the DSCR ratio, because the ratio compares rent to PITIA only. It still comes out of your pocket every month. Clearing 1.00 is also not the same as positive cash flow, since repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.

A larger down payment, even a borrowed one, shrinks the purchase loan and can lift coverage. It never erases credit floors, leverage caps, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. Borrowers who document income with bank statements can also read Lendmire’s piece Top Bank Statement HELOC Providers to Cover the Down Payment on Your Next Home.

HELOC or Something Else?

A HELOC is not always the right tool. Compare it against the alternatives.

The Consumer Financial Protection Bureau describes a HELOC as an open-end line you can borrow against repeatedly. It also warns that falling behind could cost you your home. That risk is the main reason to size the line conservatively.

Questions to Ask Before You Apply

Take these to any loan officer, whether at a bank, a credit union, or a broker.

• Do you write lines on my collateral type: primary, second home, or rental?
• What is the maximum CLTV at my credit score?
• Are there minimum draw or initial-draw rules, and what happens if I draw less than the full line?
• Does the line restrict renting the collateral?
• What are the draw and repayment terms, and do they convert to fixed?
• Does my purchase lender accept HELOC proceeds for the down payment, closing costs, and reserves?
• How long must funds sit on my statements before they count?

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.

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. BiggerPockets – Bank stated HELOC cannot be used as down payment

2. CFPB – HELOC booklet

3. SmartAsset – HELOC for a down payment

4. Consumer Financial Protection Bureau