HELOC on an investment property
Fewer lenders offer them, and those that do ask for more equity and charge more.
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Can you get a HELOC on an investment property?
Yes, you can get a HELOC on an investment property, though fewer lenders offer one. Expect a combined loan-to-value cap around 70%–75%, a higher credit score, cash reserves and a margin 1–2 points above a primary-home line. On a $500,000 rental with a $300,000 mortgage, 75% leaves about $75,000. Of the 9,601 HELOCs Shawn Way's team funded from January 2023 to October 2026, 90% were on primary homes, 3% on investment properties and 1% on second homes.
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Often a better route
- HELOC on your primary home to fund rental purchases. Primary-home lines price better.
- DSCR cash-out refinance on the rental, qualified on its rent.
See using a HELOC to buy a rental.
Use a free calculator, or get your HELOC rate from Shawn.
What lenders usually require
| Factor | Rental HELOC | Primary-home HELOC |
|---|---|---|
| Max combined loan-to-value | About 70%–75% | About 80%–85% |
| Credit score | Often 700+ | Often 620+ |
| Reserves | Often 6+ months | Sometimes none |
| Rate | Margin 1–2 points higher | Lowest margins |
Example: a $500,000 rental
- Mortgage balance: $300,000. At a 75% cap, total debt can reach $375,000, so the line could be up to $75,000.
- At a margin 1–2 points above a primary-home line, the rate might be prime plus 2–3 points. Interest-only on $75,000 at about 9.5% is roughly $594 a month.
- If rent is $3,000 and the mortgage, taxes and insurance run $2,400, the HELOC payment would push the property's monthly cash flow negative. Lenders and you should both run that math.
Using your primary home instead
A HELOC on your own home usually has a lower rate, a higher cap and more lenders. Many investors draw from their primary-home line for a down payment or repairs on a rental, then refinance the rental with a DSCR loan to pay the line back. The risk: if the rental struggles, your own home secures the debt. Buying a rental with a HELOC.
How a DSCR cash-out works instead
A DSCR loan qualifies the property on its rent rather than your personal income. If rent divided by the property's monthly payment is 1.0 or higher, many lenders will do a cash-out refinance at 70%–75% loan-to-value. It replaces the existing mortgage, so it fits best when that mortgage's rate isn't much lower than today's. DSCR loans · DSCR calculator.
What to have ready
- Leases for every unit and recent rent deposits
- Schedule E from your last two tax returns
- Insurance with landlord (dwelling fire) coverage
- Mortgage, tax and HOA statements for the property
Related question: HELOC on LLC-owned property
Questions people ask
Can rental income help me qualify for a HELOC?
Usually, yes. HELOC lenders count rental income documented with leases and your tax return's Schedule E, typically about 75% of gross rent to allow for vacancy and expenses.
Can I get a HELOC on a property owned by an LLC?
Rarely through standard HELOC lenders, since most consumer HELOC programs won't lend to an LLC. A DSCR loan is designed for LLC ownership and qualifies on the property's rent instead.
Test a rental in the DSCR calculator.
Mistakes to avoid
- Counting on rent covering the HELOC payment without a vacancy reserve.
- Using a primary-home HELOC for a rental without a payoff plan.
- Forgetting to track draws for rental-related interest deductions.
Why banks say no, and who says yes
| Most retail banks | Programs built for rentals | |
|---|---|---|
| HELOC on a rental | Primary homes only | Investment properties allowed |
| Income | Tax returns, where rental write-offs hurt | Tax returns, or 12 months of bank statements on some programs |
| Lien position | Second lien only | First, second, or third lien on some programs |
| Behind a DSCR first mortgage | Rarely | Possible with some programs |
| Short-term rentals | Usually declined | Allowed on some programs |
Expect a lower combined loan-to-value limit than on your own home, often 70% to 75%, a higher rate, and reserves. A bank's no on a rental is usually a policy, not a verdict on you or the property.
How the property is titled matters
- In your own name: the standard case.
- In a revocable living trust: accepted by many programs. See HELOCs on homes in a trust.
- In an LLC: most HELOC programs won't lend to an LLC. The usual choices are deeding the property to yourself before closing (check your lawyer and insurer first) or using a DSCR loan, which can lend to the entity.
Common investor situations
- Low-rate first mortgage: a line keeps the rate in place; a cash-out refinance gives it up.
- Paid-off rental: the HELOC sits in first position, usually with better pricing.
- BRRRR between rehab and refinance: a line on another property can fund the rehab.
- Buying the next rental: draw for the down payment. See using a HELOC to buy a rental.
- Short-term rentals: some programs accept them; insurance and HOA rules matter.
Also asked
Is HELOC interest on a rental deductible?
Generally, yes. HELOC interest on money used for the rental is usually deductible as a rental expense on Schedule E, so track each draw tied to the property.
Can I get a HELOC on a rental held in an LLC?
Not usually through a standard HELOC. The usual routes for an LLC-owned rental are business-purpose loans or a DSCR loan, or deeding the property to yourself first after checking with your lawyer and insurer.
How much equity do I need for a HELOC on a rental?
Often at least 25% to 30% after the line. Rental HELOCs usually cap combined loan-to-value around 70%–75%, compared with about 80%–85% on a primary home.
Can I get a HELOC on a duplex I live in?
Yes. A two-to-four-unit home you live in is a primary residence, and many lenders offer HELOCs on it, sometimes with slightly lower caps than a single-family home. Rent from the other units may count as income.
Do HELOC lenders require landlord insurance?
Yes, for a rental they'll want a landlord or dwelling fire policy rather than a standard homeowners policy.
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Sources
Official sources behind this guide.
- What is the difference between a home equity loan and a HELOC? · Consumer Financial Protection Bureau
- What you should know about home equity lines of credit (booklet, PDF) · Consumer Financial Protection Bureau
- Publication 936, Home Mortgage Interest Deduction · Internal Revenue Service
- Regulation Z §1026.40: Requirements for home equity plans · Consumer Financial Protection Bureau