If your rental has gone up in value, you may be wondering if you can borrow against it for repairs, upgrades, or even your next property.
The short answer is yes, you can get a HELOC on a rental property. But it’s harder than getting one on the home you live in. Fewer lenders offer it, and the rules are stricter.
This guide explains how a HELOC on an investment property works, what lenders look for, how much you might borrow, and other options to consider.
This is general information, not financial or tax advice.
What Is a HELOC?
A HELOC, or home equity line of credit, lets you borrow against your equity again and again, up to a set limit. Equity is what the property is worth minus what you still owe on it.
A HELOC works in two stages:
- Draw period: You can borrow money as you need it, often for around 10 years.
- Repayment period: You can’t borrow anymore, and you pay back what you owe, often over 10 to 20 years.
Most HELOCs have a variable rate, which means your payment can go up or down over time.
Why Is It Harder to Get a HELOC on a Rental?
Lenders see a rental as riskier than a home you live in. So fewer lenders offer HELOCs on rentals (though some banks and credit unions do), rates are usually higher, and approval rules are stricter.
What Lenders Usually Look For
Every lender sets its own rules, but here’s what’s common for a HELOC on a rental property:
| Requirement | What’s typical for a rental |
|---|---|
| Credit score | Often 700 to 720 or higher |
| Debt-to-income ratio | Often 40 to 50% or less |
| Maximum loan-to-value (all loans combined) | Often 70 to 80% |
| Cash savings (reserves) | Often at least 6 months of payments |
| Rental history | A lease and proof of rent may be needed |
Two of these terms are worth explaining:
- Debt-to-income ratio is your monthly debt payments divided by your monthly income. For example, $4,000 in debts on $10,000 of income is 40%.
- Loan-to-value compares everything you owe on the property to what it’s worth.
How Much Can You Borrow?
Here’s a simple example (the numbers are only an example):
- Your rental is worth $400,000.
- You still owe $220,000 on the mortgage.
If the lender allows 80% loan-to-value, the most you can owe in total is $320,000. Subtract your $220,000 mortgage, and your HELOC could be up to about $100,000.
If the lender allows only 75%, the total limit is $300,000, so your HELOC could be up to about $80,000.
What Does a HELOC Cost Each Month?
Your payment depends on how much you borrow, your rate, and the stage of your loan.
For example, if you borrow $100,000 at 8% and pay only the interest during the draw period, your payment would be about $667 a month. (The 8% rate is only an example, not a quote.) Once the repayment period starts, your payment goes up because you’re paying back the amount you borrowed too.
Pros and Cons of a HELOC on a Rental Property
| Pros | Cons |
|---|---|
| You only pay interest on what you use | Fewer lenders offer it |
| Flexible for repairs and upgrades | Higher rates, and they can change |
| Often cheaper than personal loans or credit cards | Fees may apply |
| You can borrow again during the draw period | If you can’t pay, you could lose the property |
Is a HELOC on a Rental Property a Good Idea?
It can be, if you use it wisely. A HELOC usually makes the most sense when:
- The money goes toward something that adds value or rent, like a new roof or an updated kitchen.
- Your rent still covers all your costs, including the new HELOC payment.
It’s riskier if the money goes toward personal spending or if your rent barely covers your costs already.
Is HELOC Interest Tax Deductible on a Rental?
It depends on how you use the money. According to IRS guidance, interest on money used for the rental can generally be deducted as a rental expense. Interest on money used for personal things, like buying a car, generally can’t.
That’s why it’s smart to keep clear records of how you spend every dollar. For the bigger picture, see how rental income is taxed, and check with a tax professional.
Alternatives to a HELOC on a Rental Property
| Option | How it works | Keep in mind |
|---|---|---|
| Home equity loan | One lump sum at a fixed rate | Payments stay the same, but you get the money all at once |
| Cash-out refinance | Replace your loan with a bigger one and take the difference in cash | For rentals, lenders often limit it to about 70 to 75% of the value |
| HELOC on your main home | Borrow against the home you live in | Often easier to get, but it puts your own home at risk |
| Personal loan | A loan with no property as backup | Usually a higher rate |
If you’re thinking about using your equity to buy another rental, our beginner’s guide to buying an investment property is a good place to start.
Local Update: Using a HELOC on a Montana Rental
If your rental is in Kalispell, Whitefish, Columbia Falls or elsewhere in the Flathead Valley, two Montana rules are worth keeping in mind:
- Keep it a long-term rental for a lower tax rate: Starting in 2026, Montana offers a lower property tax rate for long-term rentals (leases of 28 days or more, rented at least 7 months a year). Homes owned by an LLC can qualify too. Short-term rentals and empty homes may be taxed at a higher rate. A lower tax bill leaves more rent to cover a HELOC payment. You need to apply by March 1 each year.
- Plan for required repairs: Montana landlords must keep rentals “fit and habitable.” That includes working heat, plumbing and hot water, and reasonable heat between October 1 and May 1. A HELOC is one way owners pay for big repairs, like a new furnace before winter.
Frequently Asked Questions
What disqualifies you from a HELOC on a rental?
Common reasons include a low credit score, high debt compared to income, not enough equity, or too little money in savings.
Can I use a HELOC to buy another rental?
Yes. Many investors use a HELOC for a down payment. Just make sure both properties can cover their costs.
Do credit unions offer HELOCs on investment properties?
Some do. Since each lender has its own rules and rates, it’s worth comparing a few.
The Bottom Line
You can get a HELOC on a rental property, but expect stricter rules and higher rates than on your own home. Know what lenders want, run the numbers, and use the money for things that add value.
Lenders also like steady rent and clean records. If you’d like help keeping your rental full and well documented, it may be worth hiring a property manager.
