Can You Get a HELOC on a Rental Property?

What a HELOC Is

A home equity line of credit, or HELOC, lets you borrow against the equity in a property. Equity is the difference between what the property is worth and what you still owe on it. You are approved for a credit limit and can draw from it as you need it, instead of taking one lump sum.

Why a Rental Is Different From Your Home

Many banks limit HELOCs to the home you live in. A rental or other investment property can be treated as higher risk, so fewer lenders offer a HELOC on one. When they do, they often have stricter rules, such as wanting more equity to remain in the property after the loan.

That is where a mortgage broker can help. Because we work with more than one lending partner, we can look for programs that fit an investment property instead of you checking lender by lender.

What Lenders Usually Look At

• Your credit history
• How much equity the property has, and how much would remain after the loan
• The property’s value, which may require an appraisal
• Rental income or a current lease
• Your cash reserves
• Entity documents, if the property is held in an LLC

Every lender sets its own rules, so these items and their limits vary.

HELOC, Home Equity Loan, or Cash-Out Refinance?

There are three common ways to use equity in a rental property. Which one fits depends on your current loan and what you want to do.

• HELOC: a line of credit you draw from as needed. Good for costs that come in stages, such as repairs.
• Home equity loan: one lump sum repaid on a set schedule. It is often a second loan, so your current mortgage stays in place.
• Cash-out refinance: replaces your current mortgage with a new, larger one and pays you the difference.

Things to Keep in Mind

• The property is the collateral. Missing payments could put it at risk.
• Many HELOCs have payments that can change over time.
• Rents can fall and repairs can cost more than planned. Think about what happens if your income drops.
• Costs, limits, and terms differ by lender. We do not quote rates on this site.

Common Questions

Can I get a HELOC on a rental property?

Some lending partners offer them. Availability depends on the lender, the property, your qualifications, and the state.

Do I have to live in the property?

Many HELOCs are limited to a primary home. Some programs allow rental or investment property. We can tell you what may be available.

Which lenders offer a HELOC on an investment property?

It varies, and not every bank offers one. A mortgage broker can compare lending partners for you.

Is a home equity loan on a rental property different?

Yes. A home equity loan is a lump sum with a set repayment schedule. A HELOC is a line of credit you draw from as needed.

This article is general information. It is not financial advice or a loan offer. The Funding Clinic is a mortgage broker and arranges loans funded by third-party lenders. Availability, eligibility, and terms vary by lender, property, and state.