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Arizona’s real estate market continues to attract savvy investors looking to expand their portfolios. Whether you’re eyeing a rental home in Phoenix or a vacation property in Sedona, having the right financing in place is crucial. Two popular options stand out: Home Equity Lines of Credit (HELOCs) and Investment Property Loans. In this article, we’ll break down how each works, the benefits and drawbacks, and which might suit your Arizona expansion best.
What Is a HELOC?
A Home Equity Line of Credit (HELOC) allows homeowners to tap into the equity in their primary residence. It’s a revolving credit line that works much like a credit card—borrowers can draw, repay, and redraw funds up to a limit, often with an interest-only payment period.
Pros of a HELOC for Arizona Investors:
- Lower Interest Rates: Compared to traditional investment property loans, HELOCs often come with lower interest rates.
- Flexibility: Draw funds as needed, which is ideal for phased renovations or property acquisitions.
- Interest-Only Payments: During the draw period, borrowers often pay only the interest, preserving cash flow.
Cons:
- Risk to Primary Residence: Your home is used as collateral, which can be risky if your investment doesn’t perform.
- Variable Rates: HELOCs usually have variable interest rates, which can increase over time.
What Are Investment Property Loans?
Investment Property Loans are specifically designed to finance the purchase of properties not intended as primary residences. These loans are underwritten with different criteria and typically require a higher credit score and down payment.
Pros of Investment Property Loans:
- Purpose-Built: Tailored for rental or income-producing properties.
- Fixed Terms: Many loans offer fixed interest rates and amortized payments, which can make budgeting easier.
- No Risk to Primary Residence: The loan is secured against the investment property itself.
Cons:
- Higher Interest Rates: Compared to HELOCs, these loans tend to have higher rates.
- Larger Down Payment: Often require 15–25% down.
- Stricter Qualification: Lenders scrutinize credit, income, and sometimes existing property performance.
Comparing HELOC and Investment Property Loans
| Feature | HELOC | Investment Property Loan |
| Collateral | Primary residence | Investment property |
| Interest Rate Type | Variable | Fixed or Variable |
| Typical Interest Rates | Lower | Higher |
| Down Payment Requirement | None (uses home equity) | 15–25% |
| Use of Funds Flexibility | High | Limited to property purchase or rehab |
| Risk | Higher (home at risk) | Lower (risk tied to investment property) |
Which Is Right for Your Arizona Expansion?
When choosing between a HELOC and an investment property loan, consider:
- Your available home equity: A HELOC only works if you have substantial equity in your primary residence.
- Your risk tolerance: Are you comfortable using your home as collateral?
- Your investment strategy: Planning to flip homes? A HELOC’s flexibility may help. Want to hold long-term rentals? A fixed-rate investment loan might be more stable.
- Your financial profile: If your credit or debt-to-income ratio is stronger, you’ll likely qualify for better terms under either option.
Common Scenarios for Arizona Investors
- Scenario 1: First-Time Investor
If you own a home in Tucson and want to purchase a small rental in Mesa, using a HELOC can help fund the down payment or even the full purchase if the price is right. - Scenario 2: Portfolio Expansion
For experienced investors adding another Airbnb property in Scottsdale, a traditional investment property loan can offer long-term predictability and preserve your home equity for emergencies.
FAQs
Can I use a HELOC to buy an investment property in Arizona?
Yes. Many investors use HELOC funds as down payments or even for cash purchases of lower-cost investment properties.
Are investment property loans harder to get?
They typically have stricter qualifications, including a higher credit score (usually 700+), proof of rental income, and higher down payments.
Will a HELOC affect my ability to get other loans?
Yes, because it’s a form of revolving credit and increases your debt-to-income ratio.
Read Next
- HELOC Requirements for Real Estate Investors in 2025: Updated Guide
- How to Combine HELOCs and DSCR Loans for Maximum Leverage
Final Thoughts
Both HELOCs and investment property loans can serve as powerful tools in your Arizona expansion strategy—but they serve different purposes and carry different risks. Consider your financial situation, goals, and risk appetite before deciding.
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.
