The Quick Read: A paid-off rental can supply cash through a home equity line of credit, or HELOC, and that cash can fund the down payment on several rentals, but two separate lenders must approve two separate loans, and the purchase lender decides whether borrowed money counts as your down payment before you ever draw a dollar. The line is underwritten to you. The purchase loan is underwritten to the property.
- Two approvals, not one. The line lender reviews your credit, equity and debt. A DSCR lender reviews each new rental. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
- Ask first, draw second. Whether a purchase lender accepts borrowed down-payment funds varies by program.
- The line has hard limits on an investment property. Across Lendmire’s wholesale network, the ceiling is 70% combined loan-to-value, with a $500,000 maximum line and a 700 minimum credit score.
- Passing coverage is not positive cash flow. The line payment sits outside the DSCR math, but you still pay it.
- Draw before you go under contract. An open line is permission to borrow, not money in the bank.
Key Terms Defined
Combined loan-to-value (CLTV): all loans secured by a property, added together, divided by its value.
PITIA: principal, interest, taxes, insurance and association dues, the full monthly housing payment on a property.
Coverage ratio (DSCR): monthly rent divided by PITIA. A ratio of 1.00 means rent equals the payment.
Source of funds: where your down payment came from, as shown by statements and documents.
Reserves: liquid cash a lender wants left over after closing, commonly measured in months of PITIA.
Blanket loan: one note secured by several rentals. A portfolio DSCR loan and a cross-collateralized loan name the same thing.
What Does “Package” Mean Here?
A package can mean three things, and each one changes the math. It can be several separate DSCR purchases closed around the same time, one blanket loan covering several rentals, or one oversized down payment funded in a single wire.
Most purchase programs in our network land at 75%-80% LTV (loan-to-value) on a purchase, so you are funding roughly 20%-25% down per property, plus closing costs and reserves. Select programs reach 85% LTV with roughly a 700+ score. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
A blanket loan works differently. The 30-year portfolio DSCR loan covers two to 20 properties under one note, with leverage up to 80% of value on a purchase or rate-and-term refinance. Coverage is measured on the pool. Pooled rent is tested against pooled debt service, so stronger properties can offset weaker ones. A rental that falls short on its own can sit in the pool only where underwriting tests the pooled coverage, the leverage and the terms. The rental portfolio term loan is built for five or more rentals or units, with leverage up to 75% and fixed terms that end in a balloon. Both are subject to lender guidelines.
Whichever structure you pick, one fact stays constant: the down payment comes from somewhere, and the line is a single pot of cash. Split it across properties and each one still needs its own proof.
How Do the Two Loans Fit Together?
The two loans are separate approvals, but they do connect in practice. The purchase lender still reviews the source of the line proceeds, so the draw must be traced and documented from the line to closing. Neither approval guarantees the other.
| Factor | Paid-off rental HELOC | DSCR purchase loan |
|---|---|---|
| Underwritten to | You: credit, equity, debt | The new property’s rent |
| Collateral | The paid-off rental | The rental you’re buying |
| Payment style | Interest-only draw, then repayment | Set by the loan structure |
| What can sink it | Title, credit, debt ratio | Coverage, leverage, reserves |
The line is a revolving credit product, which the federal consumer-finance regulator describes as an open-end line of credit you can borrow against repeatedly. The new purchase is a separate, business-purpose loan. DSCR loans are designed for non-owner-occupied investment properties, and they are reviewed differently from a standard owner-occupied mortgage.
How Much Line Does a Paid-Off Rental Support?
On an investment property, the network’s ceiling is 70% CLTV, capped at a $500,000 line. A paid-off rental has no first mortgage to subtract, so the whole allowance is available as line, up to that cap.
The sizing formula is simple: value times the lender’s percentage, minus any mortgage balance. The CFPB’s older HELOC booklet shows it with a $100,000 home, a 75% limit and a $40,000 mortgage, which produces a $35,000 line. That 75% is an illustration for owner-occupied homes. On an investment property in our network, the figure is 70%. Take away the mortgage and the full allowance is yours.
Here are the other parameters on a rental line, subject to lender guidelines:
- Credit: 700 minimum. A 720 score reaches the same 70% CLTV as a 700, so a higher score buys eligibility, not leverage.
- Line size: $25,000 to $500,000.
- Debt-to-income: up to 50%, tested on the interest-only payment calculated on the maximum draw.
- Structure: a 5-year interest-only draw, then a 25-year repayment period. Pricing floats and never converts to fixed.
- Draw at closing: at least 75% of the line is drawn when the line closes. Size the line to your actual need, because you will carry most of it from day one.
- Valuation: a line at or below $500,000 usually runs on an automated valuation, so a traditional appraisal is commonly not required.
- Property types: single-family, 2-4 units, townhomes, PUDs and condos, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial and mixed-use properties are not eligible.
The line also has to be reachable in your state. HELOC availability is narrower than the DSCR footprint, so confirm that early.
Will the Purchase Lender Accept Borrowed Down Payment Funds?
It depends on the program. Across our wholesale network, the picture is mixed. Some lenders accept documented HELOC proceeds as a down payment. Others want a slice of your own seasoned cash, and the strictest want that slice unborrowed.
Investors report both outcomes. One lender on a BiggerPockets thread says some lenders allow a HELOC down payment on a DSCR purchase, and he closed a three-family that way. That is an anecdote, not a guideline. It also comes with a warning: a fully borrowed down payment means you’re financing close to the whole purchase.
Ask the purchase lender these questions before drawing:
1. Do you accept line proceeds as the down payment, in whole or in part?
2. Do you require a portion of the down payment from your own unborrowed funds?
3. Do line proceeds count toward reserves, or only toward the down payment?
4. What documents trace the cash from the line to the closing table?
5. Does the new line show up as a liability on my credit report, and does it change my eligibility?
Down payment and reserves are separate tests. Borrowed money may satisfy one and not the other. Reserves vary by lender, leverage, loan size and transaction type, commonly around 6 months of PITIA, so never assume line proceeds double as reserves. On a package, those reserves multiply with every property.
Step by Step: From Line to Closing
Order matters more than speed here. A line that opens after you sign a purchase contract is a problem.
1. Get the line first. The HELOC must be open and funded before you go under contract. Getting a line on a rental is usually the hard part, not the down-payment use.
2. Ask the DSCR lender before drawing. Use the questions above. Get the answer on borrowed funds in writing if you can.
3. Draw into a dedicated account. The lender can then trace the deposit to the line instead of treating it as an unexplained cash infusion.
4. Assemble the paper trail. Collect the line’s closing documents, the draw confirmation, and statements showing the cash landing in your account. Add proof the money covers the down payment, closing costs and reserves.
5. Let the property carry the loan. Each purchase supplies a lease or rent schedule, an appraisal and insurance. The DSCR underwriter divides rent by PITIA, and the line payment generally sits outside that ratio.
6. Plan the exit. Decide how the balance gets repaid before you draw. A future cash-out refinance on the stabilized properties is the common route. Our network generally tops out around 70% LTV on a standard rental cash-out, with about 6 months of seasoning as the usual expectation. Short-term-rental collateral tops out at 70% on a cash-out.
If title to the new rental will sit in an LLC, the cash can move in by documented member contribution or loan, with a personal guaranty typical, subject to lender program eligibility.
Does Passing Coverage Mean the Deal Cash Flows?
No. The coverage ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, capital expenses and the line payment all sit outside it.
Run a stress test on a package. Picture three rentals that each clear roughly 1.20x on their own. The lender is satisfied. But you also carry a floating-pricing line on at least 75% of the borrowed amount. Add one vacancy, a roof repair and a line payment that moved upward, and you can lose money every month while every file still looks clean on paper.
The honest test is whether the properties can cover both loans together, plus expenses, in a bad month. Many investors want the portfolio near the stronger end of the coverage range before layering a line on top. A ratio just over 1.00 leaves almost no room.
A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. If a package has one property under 1.00, the pool structure may carry it, but borrowing against a line to bridge it adds exposure.
In files across our network, the pattern that causes trouble is not the DSCR ratio. It is the cash cushion. Investors draw the full line for the down payments, then reach the reserve test with nothing left over. Hold the reserve money out of the draw plan from the start.
Where the Rule Breaks
The standard mechanics above hold for most files. These cases bend them.
Entity title. An LLC cannot hold title on the rental line. Title must be in your name or an inter vivos revocable living trust. A paid-off rental already deeded to an LLC needs a vesting change before the line is possible, or a DSCR cash-out refinance instead. Check that a line is still obtainable before you retitle anything.
Frozen or reduced lines. An undrawn line is permission, not committed money. A lender can freeze or cut one. That is why you draw before contract, not after.
Limited exposure. A borrower is limited to three lines, and a borrower owning more than 15 financed properties is not eligible for the rental line.
Credit history. A bankruptcy needs 4 years of seasoning from discharge or dismissal. Investment files follow a 7-year path for foreclosure and 4 years for a deed-in-lieu, pre-foreclosure or short sale.
Listed properties. A property listed for sale, or listed within the past 60 days, is ineligible in several states.
The new property type. Manufactured homes, log homes and barndominiums are not reviewable under these DSCR programs. If your package includes one, it falls outside.
Which property backs the line. A line on a rental keeps your home out of it. A line on your primary residence puts the home at risk, though on our network a primary-residence line can reach up to 90% CLTV, and only at a 720 score or better. That higher leverage comes with the roof over your head as collateral.
Rental Line, Home Line or DSCR Cash-Out?
Which tool fits depends on what you can hold as collateral and what you want to carry.
| Factor | Rental HELOC | Primary-home HELOC | DSCR cash-out |
|---|---|---|---|
| Collateral | Paid-off rental | Your home | The rental |
| Max leverage | 70% CLTV (investment) | Up to 90% at 720+ | Up to 70% LTV, standard rental |
| Payment style | Floating, interest-only draw | Floating, interest-only draw | Fixed 30-year spine |
| Home at risk | No | Yes | No |
A cash-out refinance on a seasoned rental gives you a fixed structure and one payment. The tradeoff is that you pay for a new loan on the property. The line gives flexibility and a floating payment. For a one-time package down payment, many investors prefer the fixed structure. For repeated deals, the line’s revolving access can matter more.
Who Should Do This, and Who Should Wait?
| Move forward | Wait |
|---|---|
| Purchase lender accepts line proceeds in writing | Lender wants unborrowed cash and you have none |
| Properties cover both loans with room to spare | Coverage barely clears the floor |
| Reserves sit outside the draw | The draw would empty your cash |
| Title is in your name or a living trust | The rental sits in an LLC |
| Exit plan exists for the balance | The plan is hoping rents rise |
If you land mostly on the right side, a smaller package or a seasoning period may serve you better. The complete DSCR loans guide covers purchase leverage, coverage and reserves in more depth.
Frequently Asked Questions
Does the HELOC payment count against my DSCR?
Generally no. The ratio is the new property’s rent against its own PITIA. The line payment still has to come out of real cash, so it matters for cash flow even though it doesn’t enter the ratio.
Can one line fund the down payments on several properties?
Yes, if the line is big enough. On an investment property, the line caps at $500,000 and 70% CLTV. Each purchase still needs its own documentation, and the purchase lender decides whether the borrowed cash counts.
Do I need a traditional appraisal for the line?
Usually not. Investment lines cap at $500,000, so they commonly run on an automated valuation. A higher CLTV may require a secondary valuation, and you can request a full appraisal in any case.
What credit score do I need?
The rental line has a 700 minimum, with no tier below it. A 720 score gets the same 70% CLTV. The DSCR purchase loan has its own floors, around 660 on most programs and 620 in parts of the network, with 700+ unlocking the strongest leverage.
Should I draw before or after I go under contract?
Before. An undrawn line can be frozen or reduced. Drawing first lets you trace the funds and avoids a surprise during the purchase.
Next Steps
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.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB: What Is a Home Equity Line of Credit (HELOC)?
2. CFPB: What You Should Know About Home Equity Lines of Credit (booklet)
3. BiggerPockets: Using a HELOC for Down Payment or Full Purchase
This article is part of Lendmire’s investment property HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a DSCR Loan Close in Time for a Rental Package Under Contract? · Super Jumbo DSCR vs Private Bank for a Family LLC With a Trustee · How Reserves and Sourcing Work on a Rental HELOC for BRRRR
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.