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You can get a HELOC on an financial commitment home — a home that you never reside in at all — but it might be more difficult to find, additional pricey, and scaled-down than a HELOC on your principal residence.

In spite of these drawbacks, you could possibly want to just take out a HELOC towards your expense property rather of placing your individual home up as collateral. This will decrease your chance of dropping your home if you have financial trouble.

Furthermore, owning an investment decision home is equivalent to working a organization. From a tax and accounting standpoint, it’s generally a excellent idea to continue to keep your particular cash flow and expenditures fully separate from your financial commitment home money and charges.

Here’s what you have to have to know about working with a HELOC on an financial commitment home:

What is a HELOC?

A residence fairness line of credit (HELOC) lets you borrow versus your home’s marketplace worth, up to a limit. You can borrow as a great deal or as very little of that limit as you require and fork out curiosity only on what you borrow.

The fascination rate is variable and centered on an index, such as the Wall Street Journal primary fee, in addition a margin decided by the loan company. Some HELOCs have a fastened-price alternative that is related to a property fairness personal loan.

As you repay what you borrow, you replenish your credit history line, equivalent to a credit card. You can use the revenue for any purpose.

Discover More: Using a Dwelling Fairness Loan or HELOC to Fork out Off Your Home finance loan

Can I use a HELOC on an financial commitment residence?

Certainly, you can choose out a HELOC on an financial commitment home. If you use the money correctly, it can help you construct your prosperity.

Proudly owning an investment property is like proudly owning a company. You owe taxes on the rental revenue your home generates, and you deduct the expenses (like depreciation, interest, and repairs) related with earning that revenue. You also capitalize expenditures to increase your assets, which signifies you include them to your property’s price tag foundation (or authentic benefit).

If you get out a HELOC on your investment assets, you can deduct the interest you fork out on your HELOC from the profits you gain on your financial investment home — as very long as you are making use of the HELOC for expenses linked to your investment home.

As opposed to other sorts of borrowing, a HELOC can be a minimal-value way to boost your return on your financial commitment — to build leverage, in other words and phrases.

Credible does not give HELOCs, but we can support you obtain a fantastic price on a money-out refinance.

Linked: House Equity Financial loan or HELOC vs. Reverse Home loan: How to Decide on

Where to get a HELOC on an investment decision house

You may possibly have to seem harder to uncover a lender that features HELOCs on expense houses than if you were seeking for a HELOC on your primary home. Here’s in which to seem:

• Standard financial institutions: These are the major-identify banks that present household loans in several states or nationwide, like Financial institution of The united states and U.S. Financial institution. Some conventional banks (which include Chase and Citibank) really don’t offer you HELOCs as of October 2022.
• Local banking companies and credit unions: Nearby banks or community banking companies provide people in a particular geographic spot. Credit score unions are open up to any individual who meets the membership specifications. Some (like Pentagon Federal Credit score Union) are open up to practically anyone, while other people have tighter limitations.
• Financial loan brokers: These are people today or organizations that can hook up borrowers with financial loans from a selection of lenders, totally free of charge.
• On line lenders: These are loan companies that really do not have brick-and-mortar locations and strictly function on line.

Get a Home Financial loan: Compare Today’s Very best Lenders

Prerequisites to get a HELOC

These are the variables creditors will glimpse at when analyzing your HELOC software. The factors are the exact whether or not you are having a HELOC on a main home or an investment decision residence, but the specifications will be stricter on an expense house.

Combined loan-to-benefit ratio

Mixed financial loan-to-price (CLTV) ratio is a way to evaluate your fairness in your investment assets. You are more probable to qualify for a HELOC with a reduce CLTV.

You can compute your CLTV by introducing the credit score restrict you are implementing for to your present home loan balance and dividing that sum by your home’s appraised value.

Financial debt-to-cash flow ratio

Calculate your personal debt-to-money (DTI) ratio by dividing your overall month to month personal debt obligations by your regular monthly gross cash flow. The reduced your DTI, the superior.

If you have too significantly financial debt relative to your income, loan providers might not be eager to offer you you a HELOC.

Credit score rating

Your credit rating rating is dependent on the info in your credit score report, these kinds of as how many financial loans and credit history cards you have and how normally you make your regular monthly credit card debt payments on time. This score assists a lender assess how probably you are to repay your money owed. The greater your credit rating rating, the superior.

Hard cash reserves

Some loan companies might demand you to have a particular sum of funds in your personal savings or examining account prior to they’ll grant you a HELOC. These reserves act as a security net that could support you remain current on HELOC payments if your income decreases or your fees go up.

See: Have Bad Credit and Want a House Fairness Bank loan? Here’s What to Do

Gains of using a HELOC for an investment decision home

Here’s how using out a HELOC for your expense assets might assist you:

• Finance functioning expenditures and advancements: A HELOC can be a low-value way to borrow only what you need to have to run and correct up your investment residence. Ideally, your rental earnings will address all your functioning fees and continue to depart you with a earnings. But if you are running on a restricted margin, a HELOC can support in months when you really don’t have tenants.
• Lower earnings tax: As we pointed out previously, you can deduct the interest you pay on your HELOC from the income your investment property generates. To deduct the interest, you have to use your HELOC to pay for fees linked to your investment decision assets (not to go on holiday vacation or shell out off your own credit card debt).
• Consolidate personal debt: If you’ve financed improvements to your expense property with a significant-fascination hard-money personal loan, particular bank loan, or credit rating card, you may possibly help save income in the brief run by opening a HELOC and applying it to pay off all those balances.

Relevant: Refinancing to a 15-Yr Mortgage loan: Does It Make Perception?

Negatives of applying a HELOC for an financial commitment property

Right here are some of the considerably less-interesting features of taking out a HELOC versus your expense property:

• Larger curiosity level: Loan providers usually cost better interest premiums on loans secured by financial commitment homes. They know that if revenue is tight, a borrower will prioritize earning payments on their main residence and other necessities in excess of building payments on their expense assets. Shedding an expenditure residence to foreclosures will not disrupt a borrower’s lifetime as much as dropping their principal residence will.
• Reduced CLTV: You could be ready to borrow up to 100{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of your major home’s value, but only 70{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of your financial investment property’s price. CLTV needs fluctuate by loan provider, but in basic, because lending towards an investment assets is riskier, you won’t be ready to borrow as a great deal.
• Lessen borrowing limit: You may well be equipped to borrow up to $500,000 against a main home but only $100,000 towards an investment decision home. Yet again, limitations range by loan company and some might be extra comfortable than other folks featuring more substantial HELOCs on investment properties.

Options to HELOCs for expense homes

If you can not locate a financial institution who’ll give you a HELOC on your expenditure home at all or with the terms you want, right here are some other methods you could borrow:

Key home HELOC

Just take out a HELOC versus your key assets as a substitute. It may well be significantly less expensive and you could possibly be ready to borrow a lot more. That stated, you are going to enhance your risk of shedding the put you rest at night time if you can’t repay the bank loan.

Dollars-out refinance

A hard cash-out mortgage loan refinance on your expenditure assets (or primary dwelling) could give you a lump sum of funds with a preset curiosity price. Even so, closing fees are generally a lot bigger than with a HELOC, and it is only a superior choice when you can decreased your fascination level.

Particular loan

The desire fee on a own personal loan may well be lower than specified credit card rates, and the bank loan will have a fastened fascination price, regular payment, and expression.

A bonus: You won’t have to place up your most important residence or investment decision property as collateral. Even now, if you default, the loan company could sue you and you could possibly have to market your home to shell out the judgment.

Credit rating card

A credit score card also relies on your private credit rating historical past and does not call for collateral. As a substitute of a lump sum, it presents you an on-desire credit rating line to borrow versus, and you’ll only pay curiosity on what you borrow. What is extra, you can normally get accepted quickly.

Credit rating playing cards, nonetheless, normally have higher desire rates. Slipping at the rear of on payments can send you further more into debt. And, as with a personalized mortgage, even nevertheless the credit card debt is unsecured, the creditor could sue you if you really don’t repay what you owe. You might have to provide your property to pay out them back.

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About the creator

Amy Fontinelle

Amy Fontinelle is a home finance loan and credit card authority and a contributor to Credible. Her work has appeared in Forbes Advisor, The Motley Idiot, Investopedia, Worldwide Company Occasions, MassMutual, and much more.

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Property » All » Home loan Refinance » Can I Use a HELOC on an Investment decision Residence?

Can you get a HELOC on an investment property?

Taking out a HELOC on an investment property could help you access cash without reducing the equity in your primary home. Plus, investment and rental homes in desirable areas often see their values rise quickly — giving owners a substantial amount of real estate wealth to tap into.

On the downside, it can be harder to find investment property HELOC lenders. And the requirements to qualify are stricter. But if you’re eligible, this could be a smart way to get the cash you need.

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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.

Requirements 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{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of your property value, compared to 85{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} or 90{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} 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{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 0.75{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} 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.

Investment property HELOC requirements

Qualifying for a HELOC on a second home or an investment property is a little tougher than getting one on your primary home. According to experts, you typically need:

• More than 25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} equity accrued in the property
• A loan-to-value ratio that doesn’t exceed 75{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}
• A credit score of 720 or higher, in many cases
• A debt-to-income ratio of 43{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} or lower
• Cash reserves of at least six months

Cash reserves are savings you have banked in case of emergency. 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{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} 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 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 properties?

The good news is that HELOCs are offered by a wide variety of financial institutions, including national banks, community banks, credit unions, online lenders, and mortgage brokers.

The bad news is that it’s more difficult to find a lender willing to approve HELOCs for investment properties. That’s because it’s a bigger risk for the lender — especially if there is an unsatisfactory history of rental income generated by the property. Willing lenders may end up charging you more for an investment property HELOC in the form of a higher interest rate and/or increased fees.

Based on our research, a few nationwide lenders that may offer HELOCs on investment properties include:

• Wells Fargo
• Bank of America
• US Bank
• Flagstar
• PenFed Credit Union
• Alliant Credit Union
• Fifth Third Bank
• TD Bank

This is by no means an exhaustive list, only a place to get started. We’d recommend looking at these as well as local lenders; membership-based banks like credit unions can sometimes offer a wider variety of HELOC products and may be more accommodating about requirements and HELOC loan limits.

How to get HELOC on an investment property

To get a HELOC on your investment property, follow a few simple steps:

1. Determine how much equity you have

Remember that when you take a HELOC on an investment property, you’ll likely need to leave 25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of your equity untouched. So you need more than 25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} 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{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}. If your lender’s maximum loan-to-value for an investment property is 75{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, 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 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.

4 Formally apply for HELOC

Once you choose a lender for your HELOC, 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.

Investment property HELOC pros

One of the biggest benefits of getting a HELOC on an investment property is that it doesn’t put your primary home on the line. You won’t risk losing the house you live in if you can’t repay the line of credit as agreed upon.

Another benefit? You can use the funds for just about any purpose — from home improvements or renovations to consolidating debt, creating an emergency fund, or even buying additional investment properties. You might even qualify for a tax deduction if you use your HELOC to purchase or improve a property (but check with a tax advisor for specifics).

What’s more, with a HELOC you only tap into your equity and use the funds if and when you need them. Once approved, you aren’t required to use the credit line if you don’t need it.

By contrast, if you pursue a home equity loan, cash-out refinance, or personal loan, you get your money in a lump sum at closing and must begin repaying those borrowed funds soon afterward.

Investment property HELOC cons

On the downside, taking a HELOC on an investment property is generally more expensive than borrowing against your primary residence. Interest rates tend to be higher for investment and rental properties across the board. So while this might feel like a safer prospect, you could end up paying substantially more.

It’s also tougher to qualify for this kind of HELOC. “There are [much] stricter requirements on HELOCs for an investment property than there are for a primary residence, and you may need to look harder to find a lender who offers HELOCs to investors,” says Leonard Ang, owner of iPropertyManagement. A limited selection of lenders also makes it more difficult to compare options and find a lower interest rate.

Keep in mind that HELOC interest rates are variable, meaning your rate and payment can rise or fall with the market. When the Fed hikes interest rates, HELOC rates go up, too. By contrast, alternative options like a home equity loan or cash-out refinance come with fixed rates and predictable monthly payments.

Finally, depending on your HELOC’s terms and how much you borrow from the credit line, you might have to make a large balloon payment after your draw phase ends.

How an investment property HELOC works

A HELOC on an investment property works the same as it does on a primary residence. It’s a revolving line of credit that uses your home equity as security. But instead of using your primary residence to back the loan, you can use the rental property.

As always, the amount you can borrow will depend on your property’s value, your existing mortgage amount, your credit score, and current interest rates, among other factors.

With a HELOC, you have a draw period that typically lasts the first 10 years. Over this time, you can extract money (equity) from your line of credit any time you want, provided you don’t exceed your set credit limit.

During the draw period, you are only obligated to make minimum interest payments on any money you borrow from the credit line. Borrow no money and you will owe nothing (unless your lender charges an inactivity fee). After your draw phase concludes, you aren’t allowed to borrow additional cash unless your lender authorizes a HELOC renewal.

The next phase is the repayment phase, often lasting 10 to 20 years, over which time you must pay back your owed balance with interest. Since HELOC rates are variable, your monthly payment could go up and down throughout the repayment period.

Investment property HELOC FAQ

Your next steps

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 a HELOC lender to learn what you qualify for an explore all your options.

The median price of a single-family home in the U.S. in February 2022 was $363,800, a 15.5{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} jump from February 2021, according to the National Association of Realtors. This increase in home prices across the country, spurred by low supply and high demand in the housing market, means many homeowners have gained substantial amounts of equity they can now borrow against for quick cash through a home equity line of credit (HELOC). 

If you own an investment property and want to tap into funds for a home improvement project, to consolidate debt, or to purchase another property, you may be considering getting a HELOC on your investment property instead of putting your own house up as collateral.

While HELOCs on investment properties are available, they tend to be more expensive and are harder to get than if you were getting one on your primary residence. Before you decide whether getting a HELOC on your investment property is the right financial move for you, you’ll want to know the requirements to get one, the pros and cons, and how it stacks up against other financing options. 

Can You Get a HELOC on an Investment or Rental Property?

While it is possible to get a HELOC on an investment or rental property, it’s more difficult to find and get approved for one. That’s because lenders usually see them as bearing higher risks than if you were getting one on your primary residence. There’s an assumption that there’s less incentive for you to stay on top of your payments because you don’t live in that home.

“With an owner-occupied property, the bank is assuming [that since] you live there, you’re going to make sure you pay for it so you don’t lose the house,” says Monick Halm, an investment property expert and founder of Real Estate Investor Goddesses. “They don’t feel that with a non-owner occupied [property] that there’s the same incentive.”  

Not all lenders offer HELOCs for investment properties, says Mike Carpenter, a mortgage originator based in Kirkland, WA, and founder of Mike the Money Man. Even if your financial profile would qualify you for a HELOC on your investment property, you may still find your options limited simply because fewer lenders offer this type of product. 

Requirements to Get a HELOC on an Investment property

The requirements to get a HELOC of any kind — whether on an investment property or principal residence — vary by lender, but there are some common factors lenders look for when evaluating an application:

• Home equity and loan-to-value ratio: your home equity represents how much of your home you actually own. Loan-to-value ratio (LTV) is one way to measure your home equity, and is calculated by dividing your current mortgage balance by the appraised value of your home. HELOC lenders typically allow a maximum LTV of 80{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 90{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, meaning you’ll need to have at least 10{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 20{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} equity in your home.
• Debt-to-income ratio (DTI): your debt-to-income ratio is calculated by dividing your total monthly debt obligations by your monthly gross income. The lower your DTI, the better you’ll look to lenders, since it shows that you’re less likely to overextend yourself if you take on new debt. 
• Credit score: Your credit score is calculated based on information in your credit report and helps a lender determine how likely you are to repay your debts — and how risky it is to lend you money. The higher your credit score, the more likely you’ll qualify for a HELOC, and the lower the rate you’ll likely get.
• Cash reserves: Some lenders may require you to have a certain amount of cash in reserves before they’ll grant you a HELOC. This is to ensure you have adequate funds to cover any unexpected expenses and won’t immediately default on your loan if you have an emergency.

Typically, lenders will have more stringent requirements on all of these factors if you’re taking out a HELOC on an investment property instead of a principal residence. To get approved for a HELOC on an investment property, you may need to have a lower loan-to-value ratio (meaning more equity in your home), lower debt-to-income ratio, higher credit score, and more cash reserves. The exact thresholds required will vary by lender, and it may be difficult to find out that information until you apply.

Lenders might also look to see if you have a long-term tenant on your investment property, explains Halm. “They generally want to see a long-term lease versus a short-term one, and then they want [the property] to be occupied,” she says. “They’ll also want to see proof of income.”

The lender will also want information about your other properties, says Halm. “They want to make sure you’re not using [the HELOC] to pay debt down on other mortgages you owe,” she says. 

Advantages and Disadvantages of a HELOC on an Investment Property

Is It a Good Idea to Get a HELOC for My Investment Property?

Whether it’s a good idea to get a HELOC for your investment property depends on your individual circumstances, financial goals, and intended use for the HELOC. 

A HELOC in general could be a good fit if you want a flexible, ongoing source of financing that you can tap into for virtually any purpose. However, make sure you’re comfortable with the variable-rate structure of a HELOC, which can cause your rate — and monthly payment — to unexpectedly change in the future. 

One benefit of a HELOC is that you only need to pay interest on the balance you withdraw, not the amount of your entire credit line. “It’s a line of credit that you can tap into, or not tap into, as needed,” says Halm. “But if you’re not tapping into it, you’re not paying for it.”

Compared to a HELOC on a primary residence, a HELOC on an investment property will typically be both harder to get and more expensive. But, sometimes you may not feel comfortable putting your own house up as collateral, or you may be unable to get a HELOC on your primary residence — for example, if the loan-to-value ratio on your primary residence is too high. In that case, getting a HELOC on your investment property can be a viable alternative. 

Experts don’t recommend using a HELOC — or any type of debt — to finance an unsustainable lifestyle, but a HELOC can be a good strategy if you use the money wisely. For example, you can use a HELOC to pay for renovations on your property to increase its value, or use it for a down payment on another rental property, says Halm. In both those cases, the money spent could be considered an investment that will pay off in the future, and a HELOC can be an affordable and accessible way to access the funding you need. 

Alternatives to a HELOC for Your Investment Property

If you want to tap into your home equity or you need fast funding, here are some alternatives to getting a HELOC on your investment property:

• A HELOC on your primary residence: HELOCs on an investment property are considered riskier for the lender because the borrower has less incentive to keep up with payments, since their own home isn’t at risk. Because of this, lenders typically set stricter borrower requirements and charge higher interest rates. HELOCs on a primary residence don’t have this issue, which is why they might be easier to qualify for and offer lower interest rates. 
• A home equity loan: a home equity loan works similarly to a HELOC, letting you borrow against your home equity. Home equity loans are fixed-rate installment loans with the full loan amount paid in a lump sum when you take out the loan, instead of the revolving credit line structure of HELOCs. Like with HELOCs, home equity loans on investment properties are possible, but you may be faced with fewer options, stricter borrower requirements, and higher interest rates.
• A cash-out refinance: Unlike a HELOC or home equity loan, which acts as a separate loan on top of a primary mortgage, a cash-out refinance replaces your existing mortgage with another one in a larger amount. Then the difference is then doled out to you as cash. You can get a cash-out refinance on both investment properties and primary residences, but just like with a HELOC or home equity loan, a cash-out refinance on an investment property will typically come with stricter borrower requirements and higher interest rates.
• A personal loan: If you need cash, you can also take out a personal loan from a bank or online lending company, suggests Carpenter. Personal loans are generally unsecured, meaning they don’t require your home as collateral like a HELOC or cash-out refinance. However, this means they’ll typically have a higher interest rate than HELOCs.

Best HELOC Lenders for Investment Properties

Fifth Third Bank

Fifth Third Bank offers HELOCs with line amounts ranging from $10,000 to $500,000. There are no closing costs, but there is an option to lock in a fixed interest rate on your HELOC for a $95 fee. HELOCs from Fifth Third Bank come with a draw period of 10 years with interest-only payments, followed by a 20-year repayment period. Fifth Third Bank offers HELOCs on condos, multi-unit, and non-owner occupied properties, but 0.25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} will be added to your interest rate for each applicable factor. There may be additional benefits for customers with a Fifth Third Preferred Checking Account.

PenFed Credit Union

PenFed Credit Union offers HELOCs on non-owner occupied properties for line amounts ranging from $25,000 to $500,000. The maximum combined loan-to-value ratio (CTLV) is 80{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, meaning that the total value of all loans secured by the property (including HELOCs, home equity loans, and primary mortgages) cannot exceed 80{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of the property’s value. Borrowers have a 10-year draw period, and the repayment period is 20 years. PenFed HELOCs feature the option to switch from a variable to a fixed interest rate. 

TD Bank

TD Bank offers HELOCs on investment properties with a credit line between $25,000 and $500,000. Customers with a TD Bank personal checking account are eligible for an interest rate discount of 0.25{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}. There is an origination fee of $99, an annual fee of $50 after the one-year anniversary, and an early termination fee of 2{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of outstanding principal balance ($450 max) if the line of credit is paid off and closed within 24 months of account opening. There may be additional closing costs on lines of credit greater than $500,000, investment properties, and co-ops.