HELOC on investment property: smart guide for real estate investors 

Getting a home equity line of credit (HELOC) on an investment property stands out as one of the most powerful financing tools for real estate investors. It can be a great tool for investors to borrow against their earned equity to grow their portfolios without eating into their cash reserves or dealing with high-interest debt.

A home equity line of credit for an investment property works just like a traditional HELOC, where you borrow against the equity of a property, but particularly non-owner-occupied properties.

People often ask "Can you get a HELOC on an investment property?" The answer is definitely yes, but it comes with tighter requirements than owner-occupied options. This piece will help you discover when you should use a HELOC on an investment property, the best HELOC lenders for investment property HELOCs, the qualification requirements of an investment or rental property HELOC, and ways to determine if an rental property HELOC lines up with your financial goals.

Let's get into how to use an equity line of credit for investment property effectively. You'll learn what lenders want to see before approving a HELOC loan on investment property. The pros and cons will help you figure out if this financing method fits your investment strategy.

....in as little as 3 minutes – no credit impact

 When should you use a HELOC for an investment property?

An equity line of credit for investment property offers more flexibility than traditional loans and lines up well with specific investment scenarios.

Property renovations and improvements are the most common way to use a HELOC. Your property's equity can allow you to borrow funds that add valuable renovations that bring returns much higher than the HELOC's interest costs. These improvements can increase rental income and property value at the same time.

Expanding your real estate portfolio makes another smart choice. You can use existing equity to buy additional properties instead of liquidating investments or waiting years to save for down payments. This strategy helps grow your portfolio while your original properties gain value. This is a great strategy for investors interested in long or short-term rentals, like Airbnbs. 

Bridge financing needs that pop up in real estate investing. You might find an undervalued property that needs quick action, or face a temporary cash gap between property sales. An investment property HELOC gives you quick cash without the long approval process of conventional loans.

Debt consolidation becomes a good option when you have multiple high-interest debts from your investment activities. A lower-interest HELOC loan on rental property can reduce your monthly payments and save you thousands in interest. It typically offers more competitive rates than personal loans, and certainly high-interest credit cards.

....in as little as 3 minutes – no credit impact

The best HELOC lenders suggest using these funds to generate income or build wealth, not for personal expenses or purchases that don't grow in value.  

The right time to get a home equity line of credit comes when property values stay stable or rise. Your investment property should have good equity (usually 30-40%), and you should use the funds to spot specific investment opportunities that can return more than the HELOC costs.

Market timing plays a key role—getting your HELOC when interest rates are lower can affect your investment returns greatly.

Requirements for a HELOC on an investment property

Getting a HELOC on investment or rental property requires much stricter criteria than primary residences. Lenders see rental properties as higher risk and demand tougher qualifications.

Typically, investment property HELOCs need a credit score of 700-720 at minimum, while primary homes only need 650-680. Lenders set this higher bar because they worry about investor dedication to properties they don't live in.

Most lenders want you to have at least 20% equity in your investment property. Primary residences typically only need 15%. The maximum loan-to-value (LTV) ratio stops at 75-80% for investment properties, but primary homes can go up to 85-90%.

Debt-to-income rules are different too. Investment properties might allow a maximum DTI ratio of 50% based on predicted rental income. Primary residences usually cap at 43%.

Property appraisals are more thorough with investment properties. You'll need in-person appraisals, sometimes multiple ones to verify the property's value. Primary residences might qualify with just desktop or virtual appraisals. 

Cash reserves create another challenge. Lenders want reserves for at least six months of payments on rental property HELOCs. Primary residences often skip this requirement completely.

Interest rates and fees run higher for investment property equity lines naturally. Lenders charge this extra amount because non-owner-occupied properties carry more risk.

Finding the right lender can be tricky. Many financial institutions don't offer HELOCs on investment properties, which makes it harder to shop around for good rates. Better Mortgage is one of the few lenders that offers HELOC on primary, secondary, and investment properties (learn the difference between secondary and investment properties here). 

While many HELOCs are only available on primary residences, Better's digital HELOC lets you tap into the equity of second homes, as well as investment properties—allowing you to borrow $50,000 to $500,000 for your next investment. 

With Better, you can get your custom cash estimate and pre-approval in as little as 3 minutes, without having to upload documents or take a hit to your credit score. 

....in as little as 3 minutes – no credit impact

Most other lenders' application process works like standard mortgages where you'll need to show complete documentation of your income, assets, property details, and current debts to get a sense of what you're approved for.

The search to find the best HELOC lenders for investment property takes thorough research and comparison. Traditional banks don't offer many options for investment properties, which makes this search tougher than finding one for your primary home.

Here are the key factors you need to analyze when looking at lenders:

Interest rate structure – The introductory rate isn't everything. You need to understand how the variable rate works once this period ends. Some lenders let you lock in fixed rates for parts of your HELOC, which helps when rates keep changing.

Fee schedules can look very different between lenders. Ask for a full list of application fees, yearly maintenance charges, early exit penalties, and any other costs you might face.

Better Mortgage does not charge any hidden fees, and does not require early payment penalties. 

Draw period length sets how long you can tap into your funds. Investment property HELOCs usually come with 5-10 year draw periods. After that, you get 10-20 years to repay, but you can't take out new money.

Maximum loan amounts are a big deal as they mean different things to different lenders. Some won't go above $250,000, while others, like Better, offer up to $500,000 if you qualify.

More online lenders now offer optimized application processes and competitive rates. All the same, many still avoid investment property lending.

Note that investment property HELOCs take 30-45 days to approve – much longer than primary residence HELOCs. Better's HELOC allows you to get your cash in as little as 7 days.

....in as little as 3 minutes – no credit impact

Pros and cons of using a HELOC on an investment property

You need to understand both the benefits and drawbacks before getting a home equity line of credit for investment property. Let me break down these factors to help you decide if this financing option matches your investment goals.

Pros

Protection for your primary residence is a major benefit. Your primary home stays protected if you default on the HELOC because only your investment property faces foreclosure risk. This gives investors valuable peace of mind and financial security.

Flexible funding access makes investment property HELOCs really useful. You can draw funds whenever needed during the draw period instead of getting everything upfront. This works great for ongoing renovations or unexpected costs.

Interest-only payments during the draw period help your short-term cash flow. You can keep payments low at first and maximize rental income while improving the property or between tenants.

No effect on your primary mortgage rate sets HELOCs apart from refinancing. Your original mortgage's terms stay the same, which helps you keep any good interest rates on your primary loan.

Cons

Limited availability is the first challenge. Finding lenders who offer HELOCs for investment properties isn't easy since there aren't many options. This makes it harder to shop around for the best deal.

Higher interest rates and fees come with the territory. The rates are usually 2 percentage points above primary home rates. You might also need to pay yearly fees and early termination penalties.

Stricter qualification requirements mean you need a higher credit score (usually 700-720), lower maximum LTV ratios (75-80%), and good cash reserves (at least six months of payments).

Underwater risk could be a problem if property values drop. You might end up owing more than the property's worth, which makes it tough to refinance or sell later.

So take time to weigh these factors against your investment goals, financial situation, and risk tolerance before you apply for an investment property HELOC.

....in as little as 3 minutes – no credit impact

Alternatives to HELOCs for investment properties

Getting a HELOC for your investment property can be tough, but you have several other ways to secure funding. Let's look at some options that might work better and save you both time and money.

Home equity loans work a lot like HELOCs but give you all the money upfront instead of a credit line you can draw from. These loans come with fixed interest rates and you can take up to 30 years to pay them back, which makes your payments more predictable than variable-rate HELOCs. The catch is that these loans are still hard to find for investment properties and usually cost more than loans for your primary home.

Cash-out refinancing lets you replace your current mortgage with a bigger one and pocket the difference. You'll usually get better interest rates than investment property HELOCs, and you can typically cash out 70-75% of your property's equity. The downside hits when you reset your entire mortgage term and might lose the good rates from your original loan.

Home equity investments (HEIs) are becoming more popular because they don't require monthly payments. You get cash now and share your property's future value with the investor - it's that simple. Most HEI providers work with investment properties and don't care much about your income or debt-to-income ratio, which makes them available even if your credit isn't perfect.

Unsecured personal loans take your property out of the equation since you don't need collateral. These loans work great for emergency expenses like fixing burst pipes or replacing furnaces because banks approve them faster than secured loans. You'll pay more in interest and need to start repaying right away.

Small business loans might make sense if you run your investment properties through a company. Interest rates run higher than HELOCs, but a solid business plan showing how you'll grow your real estate portfolio could help you get approved.

Each option fits different needs - whether you want to protect your primary residence or need funding despite credit challenges.

....in as little as 3 minutes – no credit impact

Conclusion

HELOCs on investment properties offer major benefits for strategic real estate investors in 2025. This piece shows how these powerful financing tools can propel portfolio development and preserve cash reserves. These tools give investors the flexibility they need to improve properties, expand portfolios, and act quickly when unexpected opportunities arise.

All the same, getting this type of financing isn't easy. Lenders demand higher credit scores, stricter equity requirements, and tougher approval processes than owner-occupied HELOCs. The options are limited since fewer lenders offer these products, and they often charge premium interest rates.

You should weigh both benefits and drawbacks against your specific investment goals before choosing this financing option. Your investment timeline, risk tolerance, and current portfolio's makeup will determine if an investment property HELOC makes financial sense. Home equity loans, cash-out refinancing, or small business loans might better line up with your needs.

Smart investors know that HELOCs are just one tool in a complete funding strategy. The best approach combines multiple financing methods for specific investment scenarios. Market timing plays a crucial role - getting your HELOC when interest rates are favorable can substantially boost your overall returns.

Whatever financing path you choose, solid research and careful planning are the foundations of successful real estate investing. The knowledge from this piece gives you what you need to make smart decisions about using HELOCs to tap into your investment property's potential.

With Better, you can see what you're approved for in as little as 3 minutes with no credit impact.

....in as little as 3 minutes – no credit impact