Many or all companies we feature compensate us. Compensation and editorial
research influence how products appear on a page.
Home Equity

Using a Home Equity Loan or HELOC on an Investment or Rental Property

After extensive research on HELOC lenders, our best overall choice is Figure, and we recommend using it for investment and rental properties.

You can use your home equity for many reasons—including a new investment or rental property. 

The concept: Take out a home equity loan or line of credit (HELOC) against your home or investment property, and use those funds toward your new property. It sounds crazy to use one home to buy another, but it’s a common practice. It can often save you money, too.

If you are considering using a HELOC or home equity loan on an investment property or rental, this guide can help.

In this guide:

Can you use a home equity loan or HELOC for an investment property?

If you own a home, it may be possible to take out a home equity loan or HELOC against it and use those proceeds to purchase a new property—or even cover the expenses of an existing one.

Doing so does have some drawbacks, though, and you will want to carefully consider these—as well as the lender’s requirements—before moving forward.

Need help? Here’s what you need to know about using your home’s equity to either purchase an investment property or cover the costs of one you already own.

Using a home equity loan or HELOC to purchase an investment property

If you’ve built up a lot of equity in your home, you might consider using it to purchase an investment or rental property that earns you income.

The process looks like this:

  • You apply for a home equity loan or HELOC with a reputable lender.
  • You receive the funds or line of credit after closing.
  • You use those funds to cover the down payment on the investment property of your choice. In some cases, it may even cover the full purchase price (if it’s a fixer-upper, for example).

As with any financial decision, this strategy has pros and cons, so proceed with caution. 

On the upside, it allows you to cover a large portion of your new property’s costs, and you may get better interest rates than you would on other financing options. Rates on mortgage HELOCs and home equity loans tend to be lower than personal loans or other financing options.

The major drawback is that it puts your property at risk of foreclosure. The bank could seize your house if you can’t pay on the HELOC or home equity loan.

The loan will require closing costs, and the closing process may take longer than an unsecured loan would. Personal loans, for example, often close in just a few days.

Using a home equity loan or HELOC to cover expenses from an investment property

You can also use your home equity to cover the costs of an existing rental or investment property you own. This might include repairs, maintenance expenses, furniture, marketing costs, or fees for a real estate agent.

You can take out a HELOC or home equity loan against one property and use the funds for expenses. Unless you know the exact amount of cash you need, a HELOC might be a better option since you can withdraw money over an extended period of time. Home equity loans provide a lump-sum payment.

Again, consider the pros and cons here. The most significant benefit is you have access to cash that can improve your rental or make your investment property more profitable, and you’ll likely get a lower interest rate than with a credit card or other type of loan.

The downside is you’re using other property as collateral, which can be dangerous—especially if you’re not sure the new property will produce enough income to cover the loan payment. You may pay closing costs and have to wait for the funds. Paying with a credit card, for example, is faster. 

Can you take out a home equity loan or HELOC from an investment property?

If you already have an investment or rental property, you may also be able to take out a HELOC or home equity loan against it and use those funds to purchase another investment, make repairs on the property, or cover other business expenses you might be facing.

With these loans, you will typically need to meet stricter requirements than you would on your primary residence, as it poses more risk for the lender.

The advantage here is you can use the funds for anything. It can be an effective way to leverage your investments and make them work for you.

On the downside, you’ll need to meet stricter standards to qualify, there are closing costs, and you put your investment property at risk of foreclosure. It might also be harder to find a lender since fewer companies offer this kind of financing.

Is it more difficult to take out a home equity loan for an investment property than it is on a primary residence?

Because of the added risk, taking out a home equity loan or HELOC on an investment property is usually harder than on a primary home. You might need to have more in cash reserves or provide proof of your property’s rental income to qualify. You also may need a higher credit score.

Home equity product on primary residenceHome equity product on investment property
Minimum credit score620720
Maximum loan-to-value90%80%
Maximum debt-to-income45%40% – 50%
Cash reserves3 – 12 months of payments6 – 15 months of payments

Every lender has its own requirements, though, so you’ll want to shop around if you’re considering this type of home equity product. Get quotes from at least a few companies and see which ones offer the best terms considering your credit score and other qualifying factors.

Should I take out a home equity loan for an investment or rental property?

Using a home equity loan for an investment property isn’t right or wrong. Instead, you’ll need to consider all the pros and cons, how those align with your goals and budget, and your overall tolerance for risk.

You should also consider the process for these loans. While their rates are often more attractive than other financing options, the process is often more complex and longer, and it may be more difficult to find a lender than it would be for other types of loans.

To be sure you’re making the right choice, you should also consider alternative forms of financing.

Where can I find a lender that offers home equity loans or HELOCs on an investment property?

There are several lenders that offer primary residence home equity loans and HELOCs, which you can use to purchase an investment or rental properties or cover expenses on them.

Some may also allow you to take out these loans on existing investment properties, but not all. If this is the type of financing you’re seeking, make sure to double-check with the lender you’re considering before moving forward.

Here are a few home equity loan and HELOC lenders you might want to consider:


HELOC for investment or rental properties

  • Access up to $400,000 in your home’s equity
  • 100% online application
  • Check your rate without affecting your credit

If you’re considering a HELOC, Figure is one option. The online lender offers a HELOC product, as well as other mortgages, including crypto loans.

Here’s a look at Figure’s HELOC requirements and specs:

Figure HELOC
Rates (APR)4.24%11.16%
Loan amount$20,000 – $400,000
Credit score640 or higher
Maximum LTV85%
FeesAn origination fee of up to 4.99%
Repayment terms5, 10, 15, or 30 years
Draw terms5 years
Discounts0.25% rate discount for autopay

Spring EQ

Home equity loan & HELOC

  • See whether you qualify for a home equity loan and HELOC with one application
  • Access up to 95% of your home’s equity

If a home equity loan is something you’re eyeing, you might consider Spring EQ. You can access up to 95% of your home’s equity and check your eligibility for a home equity loan and HELOC with one online application.

Here’s a look at Spring EQ’s home equity loan requirements and specs:

Spring EQ home equity loan
Rates (APR)Starting at 9.50%
Loan amount$25,000 – $500,000
Credit score680
Maximum LTV95%
FeesNot all disclosed, but origination fee of $1,395
Repayment terms5 – 30 years

How to choose between a home equity loan and a HELOC

Both home equity loans and HELOCs can be smart ways to turn your equity into cash, but they’re not the same.

Home equity loans, which come with a single, lump-sum payment after closing, are typically best if you know how much cash you need upfront. This might make them good for covering a down payment, for instance.

On the other hand, HELOCs give you a line of credit you can pull from for many years. These might be best if you’re unsure how much you need or want access to cash for an extended period, such as for covering recurring maintenance or repairs on your rental.

Another key difference is in their interest rates. Home equity loans typically come with fixed interest rates, meaning your rate and payment remain consistent for the entire loan term. HELOCs usually have variable rates, which means they can increase over time.

In both cases, your home is used as collateral, so if you fail to make your payments, the lender could foreclose on the property.

Are there tax benefits for using a home equity loan or HELOC on an investment property?

In some cases, you may be able to deduct the interest you pay on a HELOC or home equity loan, though it depends on how you use the funds.

If you use the money as a down payment on an investment property, you won’t be able to write off your interest.

If you use the funds to “substantially improve” the property you took the loan against, your interest will be tax-deductible. However, you can’t deduct the interest if the improvements are made on your investment property unless that is the property you’re borrowing against.

Are there alternative sources of financing that should be considered?

Home equity loans and HELOCs aren’t your only options if you want to purchase a new property or cover the costs of repairs and other expenses.

You might also consider a:

  • Cash-out refinance: This replaces your existing mortgage loan with a larger one, giving you the difference back in cash. You can then use the funds for any purpose.
  • Reverse mortgage: These are mortgages for seniors. They allow you to turn your equity into a one-time payment, a line of credit, or regular monthly payments over time.
  • Personal loan: These are unsecured loans you don’t need any sort of collateral for. Because of this, they typically have higher rates than other loan options.
  • Credit card: Credit cards can help you cover expenses, but you won’t be able to use one as a down payment on a property. Lenders typically require you to wire funds or pay by cashier’s check for a down payment.

If you need cash, consider each option, keeping in mind your use for the funds and the risk they’d present to your home or finances.

And if you opt for a home equity loan or HELOC—especially on an investment property—make sure you shop around for your lender. This will ensure you not only find a loan you qualify for but that you find one that aligns with your budget and goals, too.