Key Takeaways
- An investment property HELOC lets you tap equity without touching your primary home.
- Rates are higher and requirements are stricter, so shopping around is key.
- Fewer lenders offer these HELOCs, making broad comparison even more important.
A HELOC on an investment property is a practical way to tap equity without touching your primary home. If your rental has appreciated or sits in a strong market, you may have meaningful equity available for renovations, debt consolidation, or even expanding your portfolio.
Just remember that investment property HELOCs come with stricter requirements, higher rates, and fewer lender options. Still, by comparing offers from both national and local lenders, you can often find a line of credit that aligns with your goals.
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What to know about investment property HELOCs
It’s possible to get a home equity line of credit (HELOC) on your investment property. But there are a few things you should know first.
Verify your HELOC eligibility. Start hereRequirements are stricter
Lenders may require higher credit scores (720-740), lower debt-to-income ratios, and bigger cash reserves to qualify for an investment property HELOC. In addition, you can likely only borrow up to 75% of your property value, compared to 85% or 90% when using a HELOC on a primary residence.
Interest rates are higher
Investment property mortgage rates are almost always higher than interest rates on a primary residence. You can usually expect to pay 0.5% to 0.75% above current market rates. The same principle is true for HELOCs, so be sure to shop with multiple lenders and find the lowest rate you can qualify for.
There are fewer options
While many mainstream lenders offer HELOCs, not all of them will do a HELOC on an investment property. As second mortgages, HELOCs are already considered higher risk. And taking the credit line on a rental property doubles down on that risk for lenders. So fewer are inclined to offer this option.
Look for major nationwide lenders offering investment property HELOCs (we list a few below), but also explore local options. You might find a credit union or small bank willing to help you out. Or, contact a broker that works with multiple mortgage lenders and can help you shop around for your HELOC.
How an Investment Property HELOC Works
A HELOC for an investment property functions much like one on a primary home: it’s a revolving credit line secured by your rental property’s equity. Your borrowing limit depends on the property value, your mortgage balance, credit score, and current rates.
Draw period: Typically the first 10 years. You can borrow as needed up to your limit and usually only owe interest on what you use.
Repayment period: Lasts 10–20 years. You can’t borrow more (unless renewed) and must repay the balance with interest. Payments may change because HELOC rates are variable.
Investment property HELOC requirements
Qualifying for a HELOC an investment property or a second home is a little tougher than getting one on your primary home. According to experts, you typically need:
- More than 25% equity accrued in the property
- A loan-to-value ratio that doesn’t exceed 75%
- A credit score of 720 or higher, in many cases
- A debt-to-income ratio of 43% or lower
- Cash reserves of at least six months
Cash reserves are savings you have banked in case of emergency. HELOC investment property lenders usually want to see substantial cash reserves when you get a loan on an investment property because you need to be able to cover your mortgage payments if the property stops generating income for a period of time.
“Lenders like to see that you have at least 2% of your unpaid principal balance or the remaining balance on your mortgage saved up and readily available in emergencies or in case of rental income shortfalls in order to qualify for a HELOC on an investment property,” says Levon Galstyan, a CPA associated with Oak View Law Group and a consumer finance expert.
In addition, HELOC investment property lenders may want to see proof of positive cash flow on the investment property.
“If it’s an existing rental property, you may need to furnish proof to the lender that the investment property is already generating income and will continue to do so for the foreseeable future,” says Dennis Shirshikov, a strategist at Awning.com and a professor of economics and finance at City University of New York.
What lenders offer HELOCs on investment property?
HELOCs on investment properties are still a niche product, and availability varies widely by lender. While many institutions offer HELOCs, only a smaller subset will extend them to rental or non-owner-occupied homes. Still, borrowers have several places to look.
Verify your HELOC eligibility. Start hereNational banks: Some large banks offer HELOCs on investment properties, though qualification standards tend to be tighter and maximum loan-to-value ratios more conservative.
Community banks: Local and regional banks may be more flexible, especially if you have an established banking relationship or a strong financial profile.
Credit unions: Membership-based credit unions often provide competitive pricing and may be more willing to consider investment-property HELOCs than big banks.
Online lenders: A growing number of online lenders offer HELOCs with fast, fully digital applications. Only a few will allow investment properties, but the ones that do can be worth exploring.
Mortgage brokers: Brokers have access to multiple lenders — including niche and portfolio lenders — and can help identify institutions currently offering HELOCs on investment properties.
Investment Property HELOC Fast Fact
Many major banks no longer offer investment-property HELOCs, making credit unions, regional banks, and portfolio lenders more common sources.
Lenders that may offer investment-property HELOCs:
Availability changes frequently, but some nationwide institutions known to offer this option from time to time include:
- U.S. Bank
- TD Bank
- Flagstar
- PenFed Credit Union
- Alliant Credit Union
- Fifth Third Bank
(These examples are not guaranteed or exhaustive, and availability can vary by location and borrower profile.)
Because offerings shift with market conditions, your best approach is to shop broadly — including national lenders, credit unions, and local banks — or work with a broker who can screen multiple HELOC providers on your behalf.
How to get HELOC on an investment property
To get a HELOC on your investment property, follow a few simple steps:
Check your HELOC options. Start here1. Determine how much equity you have
Remember that when you take a HELOC on an investment property, you’ll likely need to leave 25% of your equity untouched. So you need more than 25% accrued to qualify.
For example: Say your rental property is worth $500,000 and you own $300,000 on the original mortgage. You have $200,000 in home equity, or 40%. If your lender’s maximum loan-to-value for an investment property is 75%, the most you can borrow in total is $375,000. After subtracting the existing mortgage amount ($300K), you’re left with a maximum potential HELOC amount of $75,000.
Your home equity level “can be calculated by subtracting any outstanding mortgage balance from the current market value of your property,” says Boyd Rudy, associate broker with Dwellings Michigan. The lender will likely require an appraisal to determine your property’s current value, but you can use the purchase price or an online estimator like Zillow to get a ballpark number.
2. Gather financial documentation
Applying for a HELOC requires the same slate of financial documentation as any other mortgage loan. Ensure you have all the paperwork a lender may request, including:
- Proof of employment and income
- Bank statements
- Other financial account statements
- Proof of rental income on the investment property
- Recent tax returns
Having all your paperwork together before you apply will help the process go a lot more smoothly.
3. Shop around for lenders and rates
You can look for HELOC investment property lenders online and/or at brick-and-mortar financial institutions and get preapproved. Experts recommend getting preapproved with at least three different HELOC lenders so you can find the best deal on your loan. Compare loan offers and terms carefully, including the initial interest rate, draw period, repayment period, costs, fees, penalties, and restrictions (if any) about how the money can be used.
Investment Property HELOC Fast Fact
Expect to pay higher interest rates than you would on a primary-home HELOC because lenders view rental properties as higher-risk.
4 Formally apply for HELOC
Once you choose a lender for your HELOC investment property lender, you’ll complete a full application. You’ll provide financial documents and personal information, and the lender will order an appraisal (either a digital or in-person one) to determine the property value. Then your lender’s underwriting team will evaluate the application to ensure you and your investment property qualify for the requested loan amount.
5. Get final approval and close
It may take between two and six weeks to get approved for a HELOC — possibly longer if the loan is for an investment property. Be sure to stay in touch with your lender and respond to any requests for additional information as quickly as possible. This will help you avoid unnecessary delays in the processing time and help you get your cash faster.
Pros and cons of a HELOC on an investment property
A HELOC can be a cheap way to get access to cash. And it may be tempting to borrow from an investment property so you’re not reducing the equity in your primary home. But there are both pros and cons to consider before going this route.
Check your HELOC options. Start here| Pro of HELOC on investment property | Cons of HELOC on investment property |
|---|---|
| Doesn’t touch your primary home. Your residence isn’t used as collateral, so your everyday housing stability isn’t at risk. | Higher rates than primary-home HELOCs. Lenders charge more for investment properties because they carry greater risk. |
| Flexible use of funds. Money can be used for renovations, debt consolidation, emergency reserves, or acquiring additional properties. | Stricter qualification standards. Expect higher credit score requirements, stronger income verification, and lower allowable LTV ratios. |
| Borrow only if and when you need to. You’re approved for a credit line but only accrue interest on amounts you actually draw. | Fewer lender options. Not all banks offer investment-property HELOCs, making it harder to shop and compare rates. |
| Potential tax benefits. Interest may be deductible if the funds improve or purchase a property (consult a tax professional). | Variable interest rates. Payments can rise if market rates increase, making budgeting less predictable. |
| Avoids large lump-sum borrowing. Unlike cash-out refis or home equity loans, you’re not required to take out a full amount upfront. | Possible balloon payment. Some HELOCs require a lump-sum payoff when the draw period ends. |
| Can support long-term investment strategy. Access to revolving capital can help scale or update your portfolio. | Rental income risk. A vacancy or dip in rental cash flow could make repayment harder, especially if rates climb. |
Investment property HELOC FAQ
If you already own a rental property and have built a sufficient amount of equity (usually more than 25%), you can pull equity out of it using a HELOC, home equity loan, or cash-out refinance. Keep in mind that lenders require better credit scores and higher equity levels to cash out an investment property than they do for a primary residence.
Yes. If you qualify, you can obtain a HELOC on a rental property. This assumes you already own the rental property, have sufficient equity in it, and can use it as collateral. If not, you can get a HELOC on your primary residence and use the funds to help purchase and/or improve a desired rental property.
It’s possible to get a home equity loan on your investment property. Similar to an investment property HELOC, these will have higher rates and stricter requirements than a loan on your primary residence. In addition, it’s harder to find lenders that offer second mortgages on rental homes.
Yes, you can use the funds from a HELOC to buy an investment property. The money you borrow can, for example, be used for the down payment on an investment property purchase; for repairs, upgrades, and improvements on your investment property; or for virtually any other purpose you choose. In general, once you’re approved for a HELOC, there aren’t restrictions on how you can use the funds.
If you’re borrowing against an investment property, lenders usually require you to leave 25% of your equity untouched. That means you’ll need significantly more than 25% to make a HELOC worthwhile. The rules are more lenient for a primary residence; you may be able to borrow up to 85% or even 90% of the home’s value in that case.
Lenders who offer HELOCs on investment properties include national banks, community banks, credit unions, online lenders, and mortgage brokers, though options may be more limited and come with stricter requirements.
Yes, investment property HELOC rates are typically higher than rates for a primary residence. Lenders view rental properties as riskier, so you can usually expect to pay about 0.5% to 0.75% above standard HELOC rates. Your credit score, equity level, and overall financial profile will also influence the final rate you receive.
Compare your options and take the next step
It pays to shop around with several different HELOC lenders and consider alternatives, too.
If you don’t qualify for a HELOC on an investment property or the costs are too high, think about applying for a second mortgage on your primary residence instead. You might also get the cash you need using a personal loan or credit cards, though interest rates on these unsecured borrowing options are far higher than mortgage rates.
Still, “Investors [may] prefer to get a HELOC because the cash isn’t sitting idly by if there are no investment opportunities, and the payments to service the debt are much lower early on with a HELOC,” notes Shirshikov.
Get in touch with an investment property HELOC lender to learn what you qualify for an explore all your options.
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