Unlock Your Home Equity with Figure
- 100% online application—no in-person appraisal needed
- Pre-qualify in minutes; funding in as few as 5 days
- Borrow up to $400,000 with flexible terms
- Soft credit check—no impact on your score
Want to buy your next rental property—but don’t have the cash for a down payment or rehab? You might be sitting on the solution.
A HELOC (Home Equity Line of Credit) lets you tap into your home’s built-up equity to fund investment deals—without selling, refinancing, or draining your savings.
In this guide, you’ll learn exactly how to use a HELOC to buy rental property, the pros and cons, and best practices for maximizing returns while managing risk.
What Is a HELOC?
A HELOC, or Home Equity Line of Credit, is a revolving credit line secured by the equity in your primary residence or investment property. It functions like a credit card with:
- A credit limit (based on equity and LTV)
- A draw period (usually 5–10 years)
- A repayment period (typically 10–20 years)
- Variable interest rates that you only pay on what you borrow
Unlike a cash-out refinance, a HELOC doesn’t replace your current mortgage—it’s a second position loan that gives you flexible access to funds.
Why Use a HELOC for Real Estate Investing?
- Fast access to capital for down payments or full purchases
- Interest-only payments during the draw period = increased cash flow
- No disruption to your existing low mortgage rate
- Can be reused as you repay and redeploy
- Works well for BRRRR, rehabs, or short-term financing needs
A HELOC turns your home’s equity into a tool for growing your rental portfolio.
How Much Can You Borrow With a HELOC?
Most lenders allow up to 85–90% Combined Loan-to-Value (CLTV) on your home.
Example:
- Home value: $400,000
- Current mortgage balance: $250,000
- Max CLTV: 85% of $400K = $340,000
- Available HELOC: $340K – $250K = $90,000
You can borrow this amount and use it however you need—no restrictions if it’s from your primary home.
3 Smart Ways to Use a HELOC to Buy Rentals
✅ 1. Use It for the Down Payment on a Rental Property
Need 20–25% down for a DSCR or conventional loan? A HELOC gives you fast access to funds without liquidating other assets.
Strategy:
- Use HELOC for down payment
- Use a DSCR loan for the rest
- Refinance later to pay off the HELOC
✅ 2. Fund a Full Cash Purchase for a BRRRR Deal
If the HELOC limit is high enough, you can buy a property in cash—then refinance to pull the money back out.
Strategy:
- Use HELOC to buy + rehab
- Rent it out
- Refinance with a DSCR loan
- Pay back the HELOC and repeat
This is a perfect BRRRR model for investors with strong home equity.
✅ 3. Cover Rehab or Holding Costs
Already have a deal under contract but need capital for renovations or cash reserves?
HELOCs are ideal for:
- Light to moderate rehab work
- Paying contractors or vendors
- Holding costs during the renovation or lease-up phase
📌 Pro Tip: Only draw what you need—interest is charged only on the amount borrowed.
Unlock Your Home Equity with Figure
- 100% online application—no in-person appraisal needed
- Pre-qualify in minutes; funding in as few as 5 days
- Borrow up to $400,000 with flexible terms
- Soft credit check—no impact on your score
HELOC Requirements for Investors
To qualify for a HELOC, you’ll typically need:
| Requirement | Typical Minimum |
| Credit Score | 660+ (700+ preferred for best rates) |
| Home Equity | At least 15–20% post-HELOC |
| DTI Ratio | Under 43% (for conventional HELOCs) |
| Property Type | Primary residence or rental (case-by-case) |
| Documentation | Income, credit, and appraisal |
Some lenders also offer HELOCs on investment properties, though with stricter terms and lower CLTV.
Pros and Cons of Using a HELOC to Buy Rentals
✅ Pros:
- Access capital without selling or refinancing
- Use funds as needed
- Interest-only during draw period
- Can fund multiple deals or uses
- Reuse the line as you repay it
❌ Cons:
- Variable interest rates can rise over time
- Your home (or asset) is collateral
- Risk of overleveraging if not managed carefully
- Not all lenders allow HELOC use for investment purposes
Is a HELOC Better Than a Cash-Out Refinance?
| Feature | HELOC | Cash-Out Refi |
| Existing Mortgage | Stays intact | Replaced with new mortgage |
| Access to Funds | Revolving, as needed | Lump sum at closing |
| Interest Type | Variable | Fixed or variable |
| Ideal Use | Ongoing capital needs | One-time large equity withdrawal |
| Closing Costs | Lower | Higher (new loan fees) |
If you have a low mortgage rate you want to keep, a HELOC may be the smarter option.
Final Thoughts
A HELOC is one of the most flexible and accessible tools in a real estate investor’s toolkit. Whether you’re funding a down payment, a full BRRRR deal, or a short-term rehab, tapping into your home equity can unlock the capital you need to scale.
Just remember: a HELOC is a powerful form of leverage. Use it wisely, pair it with the right investment strategy, and it can accelerate your path to financial freedom.
Unlock Your Home Equity with Figure
- 100% online application—no in-person appraisal needed
- Pre-qualify in minutes; funding in as few as 5 days
- Borrow up to $400,000 with flexible terms
- Soft credit check—no impact on your score
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
