How to Use a HELOC or Home Equity Loan on an Investment Property: Pros, Cons, and How to Qualify

Using a home equity loan or HELOC on an investment property can be a powerful way to access capital—but it’s not as straightforward as tapping equity from your primary home. These financial products are less commonly offered for rental properties, come with stricter requirements, and pose different risks.

Whether you’re looking to renovate an existing investment property or borrow against it to fund other opportunities, it’s important to understand how home equity financing works in this context—and when it makes sense to use it.

In this guide, we’ll break down whether you can get a HELOC or home equity loan on an investment property, what lenders typically require, the pros and cons, and how these options compare to other forms of financing.

Can you get a home equity loan or HELOC on an investment property?

Yes, but it’s relatively rare. While home equity loans and HELOCs are commonly available for primary residences, only a small number of lenders allow you to take out one of these loans secured by the equity in an investment property.

If you already own a rental or other income-generating property with substantial equity, you may be able to borrow against it to fund improvements, pay for repairs, or cover other business-related expenses. However, fewer lenders offer these products for investment properties, and those that do tend to set stricter terms.

• A home equity loan on an investment property can be useful for one-time, large expenses like a major renovation or roof replacement. It typically comes with a fixed rate and predictable repayment schedule.
• A HELOC on an investment property functions as a revolving credit line, letting you draw funds as needed—useful for ongoing or seasonal maintenance needs.

Also keep in mind that investment properties and second homes aren’t always treated the same—though in some cases, they can overlap. Generally, an investment property is purchased primarily to generate rental income, while a second home is used by the owner for personal vacations or part-time living.

However, if a second home is rented out regularly, a lender may reclassify it as an investment property. This distinction matters when applying for financing, since investment properties are typically seen as higher risk, which can lead to stricter lending requirements, higher interest rates, or limited product availability.

Are there special considerations if it’s a rental property?

Yes—if the investment property is used as a rental, there are additional considerations that can affect your ability to get a home equity loan or HELOC.

Most lenders view rental properties as higher risk than second homes or primary residences. That’s because rental income can fluctuate, and vacancies or maintenance issues could impact your ability to repay the loan. As a result, lenders offering home equity products on rental properties tend to impose more stringent requirements and terms.

Here are a few key points to keep in mind:

• Occupancy matters: A rental property that’s leased to tenants year-round will generally be treated differently than a second home you use personally. Lenders often reserve second-home financing for properties used by the owner at least part of the year, without renters.
• Income expectations: You may need to show rental income history or lease agreements to qualify, especially if the lender evaluates your debt-to-income ratio using projected rental revenue.
• Property management: If you’re not managing the property yourself, lenders may want to see that a professional property manager is in place to help ensure consistent income and upkeep.
• Loan purpose: Lenders may ask how you plan to use the funds. If you’re renovating the property to increase rent or add value, this might strengthen your case.

In short, most investment properties are used to generate rental income—not just held as vacation homes—and lenders account for that added financial complexity when evaluating your application. Always clarify how the property is used when shopping for lenders.

Why is it harder to get use home equity on investment properties?

Lenders view investment properties—especially rentals—as riskier than primary residences or second homes. That’s the core reason it’s harder to get a home equity loan or HELOC on one.

When you live in the home securing your loan, you’re more likely to prioritize the monthly payments. But with an investment property, your ability (and incentive) to repay the loan often depends on factors outside your control, like rental income, tenant stability, or property market conditions. If the property sits vacant or needs expensive repairs, that can directly affect your cash flow—and increase the lender’s risk.

Because of that higher risk, lenders that do offer home equity products for investment properties typically apply stricter requirements:

• Higher credit score: A score of 720 or above is often required, versus 620 for primary residences. Lenders want reassurance that you’re a low-risk borrower—even without consistent rental income.
• Lower loan-to-value (LTV) limits: Most cap the LTV at 70% to 80%, meaning you need to retain at least 20% to 30% equity in the property. This gives the lender more protection in case of default.
• Stronger debt-to-income (DTI) ratio: You’ll likely need a lower DTI, since lenders assume you’re managing multiple mortgage payments and may face unexpected vacancies or repair costs.

In short, tapping home equity on an investment property is harder because lenders want to minimize their exposure to risk. These tighter standards help ensure you have the financial cushion to weather any disruptions in rental income or property expenses.

Lenders that offer HELOCs and home equity loans on rental properties

While it can be difficult to find lenders that allow you to borrow against the equity in an investment property, a handful of companies do offer these products—with varying terms, restrictions, and qualification requirements.

The lenders below provide either home equity loans or HELOCs that can be secured by rental properties. These options may be suitable if you’re looking to finance renovations, cover maintenance expenses, or unlock equity without refinancing the entire property. Just keep in mind that availability, loan limits, and approval criteria can vary based on your property type, rental income, and credit profile.

Figure

Best Overall HELOC

4.9 _/5

View Rates

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About Figure’s HELOC

Figure’s HELOC stands out for offering fast, fixed-rate funding on secondary homes, including investment properties. The application process is fully digital, with appraisals and approval completed online—often in under a week.

Borrowers must draw the full amount upfront, which makes this a better fit for large, planned expenses like property acquisitions or major renovations. However, it’s less ideal for borrowers seeking flexible, incremental access to funds over time.

• Fixed rate
• 100% online application and appraisal
• Receive funds in as little as five days
• Redraw up to 100% of your funds
• No closing costs

• Must draw the full HELOC amount at origination
• Charges an origination fee

Rates (APR)	7.45% – 16.15%
HELOC amounts	$20,000 – $750,000
Repayment terms	Draw: 5 years / Repayment: 5, 10, 15, or 20 years

Spring EQ

Home Equity Loan

4.1 _/5

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About Spring EQ’s home equity loan

Spring EQ offers both home equity loans and HELOCs that can be used on investment properties, with flexible terms and loan amounts up to $500,000. Its fixed-rate home equity loan is ideal for investors who want predictable monthly payments and a lump sum of capital to fund improvements or consolidate property-related debt.

Just note that funding typically takes longer—about three weeks—and most details are only available after submitting an application.

• See whether you qualify for a home equity loan and HELOC with one application

• Limited information available outside of its online application
• Funds take 21 business days, on average

Rates (APR)	Starting at 9.50%
Loan amounts	$25,000 – $500,000
Repayment terms	5 – 30 years

Pros and cons of getting a home equity loan or HELOC on an investment property

Using a home equity loan or HELOC on an investment property can be a smart way to tap into your property’s value without selling it — but it’s not without risk. These financing tools can help you fund renovations, cover operating costs, or expand your portfolio, but they also add another layer of financial responsibility to an asset that may not produce consistent income.

Below are the key advantages and potential drawbacks to consider before using your rental property’s equity as collateral.

Pros

• Access to capital

  Using home equity provides funds for purchasing or improving investment properties without depleting personal savings.

• Potential tax benefits

  Interest on loans used for investment properties may be tax-deductible, depending on current tax laws and how the funds are used.

Cons

• Risk of foreclosure

  The property used as collateral is at risk if loan repayments are not met.

• Variable interest rates

  HELOCs often come with variable rates, which can lead to fluctuating monthly payments.

HELOC vs. home equity loan on an investment property

If you qualify for home equity financing on your rental property, the next decision is whether to choose a home equity loan or a HELOC. While both let you borrow against the property’s equity, they function differently—and the right fit depends on how and when you plan to use the funds.

Here’s how they compare:

Feature	Home equity loan	HELOC
Payout structure	Lump sum at closing	Revolving credit line you can draw from as needed
Interest rate	Fixed	Variable (some offer initial fixed-rate periods)
Best for	Large, one-time expenses (e.g., roof replacement)	Ongoing or unpredictable costs (e.g., maintenance)
Repayment	Immediate, fixed monthly payments	Interest-only during draw period, then repayment phase
Budgeting	Easier to predict and plan	Less predictable if rates rise or usage varies
Flexibility	Less flexible—entire amount disbursed at once	Highly flexible—borrow only what you need

Can you use a home equity loan to buy an investment property?

Yes, you can use a home equity loan to buy an investment property—but not all lenders will allow it, and the property you’re purchasing won’t be the collateral. Instead, you’d be borrowing against the equity in your primary residence or another existing property to fund the purchase.

This strategy can be useful if:

• You don’t want to—or can’t—take out a traditional investment property mortgage.
• You want to make a cash offer on a rental property.
• You’re trying to avoid tapping into savings or liquidating investments.

Keep in mind that using a home equity loan this way increases your debt burden and puts your existing home at risk if you can’t repay. It’s also important to run the numbers: your monthly payment on the loan may begin immediately, long before the investment property generates any rental income.

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Assuming the investment property income will first be used to pay contractors, managers, and the HELOC or home equity loan, a timeline should be understood to weigh the pros and cons of a variable or fixed rate. I recommend reducing as many fluctuating costs as possible and, therefore, electing a fixed-rate HELOC or home equity loan.

Alternative financing options

If a home equity loan or HELOC isn’t suitable, consider these alternatives:

• Cash-out refinance: Refinance your mortgage for a higher amount and use the excess funds for investment purposes. (Best cash-out refinance companies)
• Personal loan: Unsecured loans that don’t require collateral but may come with higher interest rates and shorter repayment terms. (Best personal loans)
• Investment property loan: Loans specifically designed for purchasing rental properties, which may offer terms better suited for investment purposes.

Using a home equity loan or HELOC to finance an investment property can be an effective strategy for expanding your real estate holdings. However, it’s crucial to understand the associated risks and eligibility requirements and to explore all available financing options to make an informed decision.

How we chose HELOCs and home equity loans for investment properties

Since 2018, LendEDU has evaluated home equity companies to help readers find the best home equity loans and HELOCs. Our latest analysis reviewed 850 data points from 34 lenders and financial institutions, with 25 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.