The Quick Read: Interest-only payments during the draw period are the feature this article is about, and the provider that fits you depends on your occupancy type, credit profile, and how much combined leverage you need. The real question is not who offers interest-only, but who will write a line on your property at all.
- Interest-only covers only the draw phase. After it ends, the balance amortizes and the payment steps up.
- On Lendmire’s wholesale network, an investment-property line tops out at 70% CLTV, with a 700 minimum credit score and a $500,000 maximum line.
- Primary-residence and second-home lines can reach 90% CLTV, but only at a 720-or-better credit profile.
- Pricing floats on every line in the network. The interest-only payment can move before repayment even begins.
- A broker that shops several wholesale lenders can match your scenario to the right program. No single provider is the best fit for everyone.
What Does Interest-Only During the Draw Period Mean?
An interest-only draw means your required payment covers the interest on what you have borrowed and nothing more. The balance stays flat unless you pay extra principal on purpose. That keeps the carrying cost low while you buy, rehab, or hold a rental.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
A home equity line of credit (HELOC) works in two phases. The draw period comes first. You borrow, repay, and borrow again up to a limit, and interest accrues only on the amount you have actually drawn. The repayment period follows. Borrowing stops, and the balance amortizes over a fixed term.
Lendmire is a mortgage broker, not a lender. It places files with a wholesale network of HELOC lenders, so these mechanics come from how the programs on that network work. Interest-only is a lender feature written into the line’s contract. It is not guaranteed on every plan in the market, so read the contract rather than the marketing label.
Key Terms Defined
Draw period: the window when you can borrow against the line and pay interest only.
Repayment period: the later phase when you can no longer borrow and the balance amortizes over a set term.
CLTV (combined loan-to-value): all loans secured by the property, added together, compared to its value.
Minimum payment: the smallest amount the contract requires each month. During the draw it is interest only.
Balloon: a lump sum due at the end of a loan that never amortized. This is a different structure from a draw-then-repay line.
DTI (debt-to-income): your monthly debts compared to your monthly income. A HELOC is underwritten on this, not on rent.
DSCR (debt service coverage ratio): monthly rent divided by the full monthly property payment. It measures what the property earns, not what you earn.
Who Actually Offers These Lines? (Providers by Category)
The providers fall into four groups: banks, credit unions, online home equity lenders, and wholesale networks reached through a broker. Interest-only draws show up across all four. The sharper dividing line is whether a provider writes a line on non-owner-occupied property at all.
NerdWallet notes that not every lender offers a HELOC on an investment property. It also says the pool of lenders is smaller and the borrowing limits are lower than on a primary home. That matches what a broker sees when shopping a rental file.
Lendmire does not rank or name individual lenders, and no honest list can do that for you. The best provider for your situation depends on property type, credit profile, leverage need, and how the title is held. A broker that shops several wholesale lenders can compare those programs side by side against your file.
What Do These Programs Look Like on Lendmire’s Network?
The network’s lines are standalone, in first or second lien position. Limits depend on occupancy. Every figure below is a typical guideline, subject to lender guidelines and full file review, and none of it is a commitment to lend.
| Occupancy | Minimum credit | Max CLTV | Max line |
|---|---|---|---|
| Investment property | 700 | 70% | $500,000 |
| Second home | 640 | 90% (720+ only) | $500,000 |
| Primary residence | 600 | 90% (720+ only) | $500,000 at 90% CLTV; $750,000 at 75% CLTV, 700+ (720 on the longer-runway program) |
Look at the investment row first, because that is where rental investors land. The ceiling is 70% CLTV at a 700 minimum credit score, and nothing sits above it. A higher score on an investment line buys eligibility, not a higher ceiling.
On primary residences and second homes, higher tiers exist. A 720-or-better profile reaches 90% CLTV, but only up to a $500,000 line. A primary residence at 700 or better can reach 75% CLTV up to $750,000. Lower scores step the ceiling down.
Market surveys report that many lenders cap investment-property lines near 75% to 80% LTV, per NerdWallet. That describes the broader market. On this network, the investment-property ceiling is 70% CLTV.
Draw Structures: 3/17 Versus 5/25
Two draw structures exist on primary residences and second homes. The first is a 3-year interest-only draw with a 17-year fully amortizing repayment, called the 3/17 structure here. The second is a 5-year interest-only draw with a 25-year fully amortizing repayment, called the 5/25 structure. Investment lines run the 5/25 structure only.
Longer draws keep the payment low for more years. They also push the step-up further out, and the longer repayment spreads the balance over more time. A shorter draw brings amortization sooner. That suits a borrower who plans to pay down principal anyway.
Three structural features apply on both:
- Opening draw: at least 75% of the line is drawn at closing. Interest starts on that amount on day one, so you do not get a line that sits untouched and costs nothing.
- Floating pricing: pricing floats across both the draw and the repayment period. It never converts to fixed.
- Later draws: after closing, the minimum subsequent draw is $1,000 on the 5/25 structure. The 3/17 structure does not state a subsequent-draw minimum.
If you wanted a standby line you would rarely touch, this structure is not it. These lines suit someone with a defined use for most of the money.
Is the Interest-Only Payment Fixed?
No. Pricing on every line in the network floats, so the interest-only payment can change during the draw. The CFPB’s HELOC booklet says the same about HELOCs generally. They typically carry variable rather than fixed pricing. Your payment tracks the balance and the index, and the balance does not shrink on its own.
The booklet also shows the basic sizing method. A lender takes a percentage of the appraised value and subtracts the balance on your existing mortgage. What is left is the room for the line. Rental coverage does not enter that math.
You can usually pay principal voluntarily during the draw. Doing so lowers the interest you owe and typically restores borrowing room. Treat it as a tool for managing the step-up, not as a requirement.
What Happens When the Draw Ends?
The payment steps up, because principal joins the interest. Opendoor, a real-estate marketplace and not a lender, illustrates the jump at roughly 20% to 25% when pricing stays flat. It says the jump can reach 35% or more if the index has risen. That is an illustrative estimate, not a guarantee, but the direction is reliable. On a line that floats, the draw ending and a higher index can land at the same time.
Picture a borrower who drew most of a line to fund a rehab and a down payment. Rents cover the interest-only carry with room to spare. The same rents may cover the amortizing payment only barely, or not at all. Stress-test the repayment payment against rent before you draw, not after.
How Underwriting Treats the Line, Step by Step
The line is underwritten on you, not on the property. Here is the sequence:
1. Credit and eligibility. The lender pulls a credit report, with a 600 program floor overall. Second homes floor at 640, and investment lines floor at 700. The score model keys to the primary wage earner. The report can be no more than 90 days old at closing, and there are no rescores.
2. Equity and valuation. The lender sizes the line from CLTV. Lines at or below $500,000 ordinarily run an automated valuation instead of a traditional appraisal. A higher CLTV may require a second valuation. You can request a full appraisal in any case. Every line above $500,000 requires one.
3. DTI. The ceiling is 50%. It drops to 45% for credit profiles from 600 to 679, and anything above 45% requires a 680 minimum. The lender reviews your file on the interest-only payment calculated on the maximum draw, not on what you have drawn. A $300,000 line is tested as if it were fully borrowed.
4. Title. The property must be held by you as an individual or in an inter vivos revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A property already deeded to an LLC needs a vesting change first, or a DSCR cash-out refinance instead.
5. Exposure. A borrower is limited to three lines. Combined exposure is capped by program, at $2,000,000 on the 3/17 structure and $750,000 on the 5/25 structure. A borrower with more than 15 financed properties is not eligible.
Size changes the file as well. Lines above $500,000 are primary-residence only, so they do not apply to a rental. They need a credit profile of 700 or better (720 on the 5/25 structure), cap at 75% CLTV, and require a full appraisal.
Property types matter too. Single-family homes, 2-4 units (640 minimum on the 5/25 structure), PUDs, townhomes, and condos, including non-warrantable ones, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not offered. The lines are also available only in Lendmire’s 16 full-service states, which is narrower than its DSCR footprint.
Where the General Rule Breaks
The line cannot buy the property. A HELOC draws on equity you already hold. Investors who want a rental purchase typically pair the line, which funds the down payment or the rehab, with a separate purchase loan. For a rental, that second loan is often a DSCR loan.
An LLC cannot hold the line. This is the sharpest structural difference from a DSCR loan. A DSCR loan can often close in an LLC, subject to lender program eligibility. A rental HELOC cannot.
A prior HELOC payment is still a debt. A DSCR lender may count it, depending on program rules. A DSCR file compares rent to the property’s own payment, and the personal-income DTI test does not drive it.
Interest-only and full-term interest-only are not the same. A balloon structure keeps you at interest only for the whole term and demands a lump sum at the end. A draw-then-repay line, like the programs here, amortizes later. Confirm which structure the contract describes.
Listing status can disqualify a property. In some states, a property listed for sale, or listed within the past 60 days, is ineligible. New Mexico and Ohio apply a CLTV cap that depends on the credit profile.
Other state shortenings exist. Tennessee, for instance, shortens both structures to 3/12 and 5/10. Michigan lowers the minimum line to $10,000. Your actual terms depend on the state and the lender.
Who Fits an Interest-Only Draw, and Who Should Skip It
| Fits | Skip |
|---|---|
| Clear project with a defined use for most of the line | Wants a standby line to leave untouched |
| Plans to repay or refinance before the draw ends | Rents barely cover even the interest-only carry |
| Owns the property individually or in a revocable trust | Holds the property in an LLC |
| Under three lines and 15 financed properties | Near the exposure caps |
| Credit profile of 700+ on an investment property | Below the 700 minimum on a rental |
The last row of the table deserves a closer look. On an investment line, a score above the 700 minimum does not buy extra leverage, because the ceiling stays at 70% CLTV at 700 and at 720 alike. It buys eligibility.
HELOC or DSCR?
These products answer different questions. A HELOC asks whether you, personally, can carry the payment. A DSCR loan asks whether the rent covers the property’s full payment: principal, interest, taxes, insurance, and any HOA dues. Many investors use both, at different stages.
DSCR financing qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire arranges DSCR investor loans in 41 markets, including Washington, D.C. Select lenders in the network offer extended terms such as 40-year and interest-only periods. Coverage below 1.00 is available through select lenders, with leverage and terms adjusted. Many select programs start at 1.00.
Clearing 1.00 does not mean positive cash flow. DSCR counts rent against the monthly property payment only. Repairs, vacancy, management, utilities, and capital expenses sit outside it. The full picture is in Lendmire’s complete DSCR loans guide.
A DSCR cash-out refinance replaces your first mortgage, while a HELOC sits behind it. If your existing first mortgage is worth keeping, the HELOC is the cleaner path. If your property is in an LLC, or you are near the HELOC exposure caps, the DSCR route often fits better.
For a related look at how these lines are structured, Lendmire covers top bank statement HELOC providers with a 10-Year interest-only draw period. It also has a piece on minimal payments during the draw.
What to Ask Before You Apply
Whoever the provider is, run these questions past them. They separate a contract term from a marketing label.
- Is the draw interest-only by contract, or only by default?
- How long is the draw, and how long is the repayment?
- Does pricing float, and does it ever convert to fixed?
- How much of the line must be drawn at closing, and what is the minimum draw afterward?
- Is the payment qualified on the full line or the drawn balance?
- Does the lender write the line on a non-owner-occupied property, and in which states?
- Can the property sit in a trust, and can it sit in an LLC?
- Is a full appraisal required at my line size?
Frequently Asked Questions
Can I pay principal during an interest-only draw?
Usually yes. Extra principal lowers the interest you owe and typically restores borrowing room. It also shrinks the balance that amortizes later, which softens the step-up when the draw ends. Check the contract for any limits on how and when you can pay.
Is the interest-only payment fixed?
No. Pricing floats across both the draw and repayment periods on the network’s lines, and it never converts to fixed. The payment can move with the index even while you are still in the draw.
Can I get a HELOC on a rental property?
Yes, through select lenders, but the pool is smaller. On Lendmire’s network, an investment-property line requires a 700 minimum credit score, caps at 70% CLTV, and tops out at a $500,000 line. The property must be held individually or in a revocable trust. Availability is limited to 16 states, and every file is subject to lender guidelines.
What happens if I own more than 15 financed properties?
You are not eligible for the HELOC programs on this network. A borrower is also limited to three lines. DSCR underwriting runs property by property instead, so investors with larger portfolios usually look there.
Is a HELOC or a DSCR cash-out refinance better for pulling equity from a rental?
It depends on the title, the first mortgage, and the coverage the rent produces. A HELOC keeps your existing first mortgage and runs on your personal DTI. A DSCR cash-out replaces the first mortgage and runs on rental coverage, usually at a lower leverage ceiling than a purchase. A broker can compare both against your file.
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. Reach the team at 828-256-2183 or request a quote through the site. The site’s illustrative calculator can give a rough sense of the structure, though it is only an estimate. The right provider is the one that writes your property, your title, and your leverage, and a draw that looks cheap today still has to survive the step-up.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and real estate investors in its 16 full-service states. Home equity lines of credit are arranged through wholesale lending channels; Lendmire brokers the line and the lender underwrites each application under its occupancy-based 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
2. CFPB – What You Should Know About Home Equity Lines of Credit
This article is part of Lendmire’s HELOC & home equity loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Top Investment Property HELOC Providers to Buy a Rental Property · Top DSCR HELOC Providers for Using Rental Equity to Buy Another Rental · Top Investment Property HELOC Providers With the Longest Possible Draw Period
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.