These lenders can help you supercharge your real estate business.
Accessing the cash you need can be challenging as a real estate investor, and you may feel like insufficient capital is a significant factor holding your business back. You could take out a second mortgage on your home, but it might seem too risky. However, if you already own at least one investment property, you can also use the equity in that property to access cash.
One way to accomplish this is with a home equity line of credit (HELOC). The best HELOC for investment property makes it relatively easy to get cash, whether for a down payment on a new property or to make repairs. Benzinga has selected the best HELOC options to consider.
Quick Winners List
- Best HELOC for Fast Funding: Rate.com
- Best HELOC for Self-Employed: Angel Oak Mortgage Solutions
- Best HELOC for a Variety of Options: loanDepot
- Best HELOC for Online Loans: Figure
- Best HELOC Marketplace: eMortgage
- Best HELOC for Bad Credit: Point
Best HELOC for Fast Funding: Rate.com
Pros
- Funding within five business days
- Competitive rates
- Online application
- Fixed interest rate
- Possible to close with no upfront costs
Cons
- Smaller amounts than traditional HELOCs
- Relatively short draw period
- Lowest APR requires an origination fee
Rate.com is a Chicago-based financial services company. Its mission is to provide more value to customers than any other bank or mortgage lender. Rate.com has worked to achieve that goal by providing low rates and excellent customer service nationwide. The company offers HELOCs for primary and secondary residences and investment properties.
One of the main benefits of applying with Rate.com is speed: it says the application takes 5-10 minutes. Better yet, funding is typically complete in 5-10 days, compared to traditional lenders, which can take up to 60 days. However, loan amounts top out at $400,000, which won’t work for everyone. Traditional lenders may offer larger loan amounts.
Minimum credit score: 500
Maximum LTV: 85%
Local or national: National
Best HELOC for Self-Employed: Angel Oak Mortgage Solutions
- Best For:Flexible Mortgage OptionsVIEW PROS & CONS:securely through Angel Oak Mortgage Solutions's website
Pros
- Option to qualify with bank statements
- Up to 90% LTV
- Up to $750,000 loan with business bank statements
- Interest-only payments during the draw period
Cons
- Only allowed on investment properties in Tennessee and Maryland
- Minimum 660 credit score
Angel Oak Mortgage Solutions is a non-QM mortgage provider, making it our top pick for self-employed individuals. While traditional lenders typically require income from a job, Angel Oak allows other qualification methods, such as bank statements and proof of assets. One of its programs allows you to qualify for a HELOC with bank statements, and investment properties are eligible. You can make interest-only payments during the draw period, making this an affordable option.
However, availability is limited when getting a HELOC for investment properties with Angel Oak, as this is only permitted in Tennessee and Maryland. In addition, you must have at least a 660 credit score for this program. Despite these limitations, it can be a viable option for those who qualify.
Minimum credit score: 660
Maximum LTV: 90%
Local or national: National
Best HELOC for a Variety of Options: loanDepot
Pros
- Use the money for various purposes
- Application is fully online
- Extended support hours
- Offers HELOCs of $45,000 or more
- Get a rate quote with no credit score impacts
Cons
- Variable interest rate
- May require closing costs
- Short draw period
loanDepot is a mortgage lender founded in 2010 by Anthony Hsieh. Despite its relatively brief history, it has become the fifth-largest retail mortgage lender and second-largest nonbank retail mortgage originator. It offers several purchase and refinance options, including fixed- and adjustable-rate mortgages, plus VA and FHA loans. It also offers home equity loans, personal loans, and HELOCs.
loanDepot allows you to use a HELOC for many purposes, such as a down payment on an investment property or paying off your mortgage. You can also use it to pay for remodeling, a major purchase, or to consolidate debt. Support is available until 9 p.m. Eastern to help with any questions. However, it uses a variable interest rate, and the draw period only lasts three years. While you can make interest-only payments during the draw period, the repayment period lasts 27 years.
Best HELOC for Online Loans: Figure
Pros
- Funding in as little as five days
- Specializes in HELOCs
- Fixed rates
- Fully online application
- No pre-payment penalties
Cons
- Not available in all states
- Rates may be higher for additional draws
- Origination fee up to 4.99%
Figure is an online lender that specializes in HELOCs. It uses AI to help pair partner lenders with customers more quickly and effectively. This makes it possible to receive funding in as little as five days, with loans between $15,000 and $400,000. Rates are fixed, and the application is entirely online. Figure’s fixed-rate HELOC has rates ranging from 6.60% to 15.00%.
You can also redraw up to 100% of the original loan while repaying it. However, rates may be higher for additional draws on the line of credit. In addition, the origination fee may be up to 4.99% of the original draw. Figure is not yet available in all states, though the wording on its website suggests it is working to expand.
Minimum credit score: 680
Maximum LTV: Up to 100% (for additional draws)
Local or national: National
Best Marketplace: eMortgage
Pros
- Connects you to multiple lenders
- Quickly compare rates
- Specify details like your loan amount when comparing lenders
- Minimum 500 credit score
- Rates updated daily
Cons
- No option to filter for investment properties
- Relies on a middleman
- Potentially limited options for fair or poor credit
eMortgage is a mortgage comparison service owned by HSH.com. On the eMortgage website, you can quickly compare rates for refinancing, home purchase and home equity loans, and reverse mortgages. Regardless of the product you need, eMortgage presents you with a list of multiple lenders and their rates, updated daily. For HELOCs, it lets you specify your loan amount, property value, and remaining loan balance.
Upon checking the lenders it presented, I noticed that some, such as Figure, offer HELOCs for investment properties. However, your lender options may vary depending on your state and financial situation. You must check with each lender to see if HELOCs are available for investment properties.
Minimum credit score: Varies by lender
Maximum LTV: Varies by lender
Local or national: National
Best HELOC for Bad Credit: Point
Pros
- Minimum 500 credit score
- No monthly loan payments
- No income requirements
- Close as quickly as three weeks
- Application is entirely online
Cons
- The full payment is due at the end of the term
- The amount you pay depends on your home appreciation
- Not available in all states
Point is a company offering a home equity investment (HEI) product. While different from a HELOC, an HEI can be a good choice for those with imperfect credit or irregular income. The company was founded in 2015 after its founders had difficulty qualifying for traditional financing.
With an HEI, you receive a lump-sum cash payment in exchange for a share of your home’s future appreciation. This approach differs from a HELOC, which provides a line of credit similar to a credit card. With an HEI, there are no monthly payments, but you can pay off the HEI at any point during the 30-year term. Otherwise, the entire payment is due at the end.
This unique approach only requires a 500 credit score, making it a viable option for those with imperfect credit. However, it can be costly if your home appreciates significantly. It isn’t yet available in all states, though you can join the waitlist to find out when it is available in yours.
Minimum credit score: 500
Maximum LTV: N/A
Local or national: National
What is a HELOC?
A HELOC is a line of credit that uses your home’s equity as collateral. You can typically use a HELOC for various purposes, such as paying for renovations, covering major expenses, or putting money down on an investment property loan. Typically, a HELOC lets you borrow up to around 80% of your home equity, though the exact percentage might be higher or lower.
How Does a HELOC Work?
HELOCs are revolving lines of credit, similar to credit cards. They often require you to draw a certain amount of your home equity initially. Then, you can borrow as much as you need during the draw period and pay it off, freeing up credit to borrow again. You typically must make payments during the draw period, but some lenders allow interest-only payments. The draw period typically lasts 2-10 years.
After the draw period ends, the repayment period begins. You must repay the HELOC’s principal during this period, meaning your monthly payment will likely increase. In addition, you won’t be able to make additional draws on the HELOC. Instead, you’ll focus on repaying the loan over 10 to 20 years. Sometimes, the repayment period might be longer.
Your HELOC should be fully paid off by the end of the repayment period. You can often pay principal and interest during the draw period, though some lenders might charge prepayment penalties. Check with your lender to see if prepaying without penalties is possible.
How to Get a HELOC for an Investment Property
Getting a HELOC for an investment property is similar to getting one for your primary residence. The most significant difference is that getting a HELOC on an investment property means your investment secures the loan, not your primary or secondary residence. This may cause lenders to view investment property HELOCs as riskier, potentially making them more challenging.
As an investor, you may need good or excellent credit to qualify for an investment property HELOC. The lender may have other requirements, such as three months of cash reserves for the property and proof of income from your tenants. Lenders might also prefer a lower debt-to-income (DTI) ratio when you want an investment property HELOC.
Follow these steps to get a HELOC for an investment property:
- Determine your loan amount: First, determine the amount you want to borrow based on your home equity. Remember, lenders typically let you borrow up to 80% of your home equity, but the limit may vary by lender.
- Research lenders: Next, see which lenders offer HELOCs where you live. Availability is state-specific, so you may not be eligible with all the lenders on this list. A site like eMortgage can help you quickly find HELOC lenders in your state.
- Check whether investment properties qualify: Not all lenders offer HELOCs for investment properties. Double-check that investment properties are eligible before adding a lender to your short list.
- Compare rates and fees: Rates and fees may vary significantly, but you often must pay some fees on a HELOC, such as origination fees. Currently, rates range from about 6.5% to around 15%.
- Apply: Once you have found a lender that meets your needs, it’s time to apply. Many lenders have entirely online applications. However, your investment property may have to undergo standard checks, such as an appraisal.
Rates are important when comparing HELOC options, says Paul Gabrail, founder & host of Everything Money. “In the past, when HELOC rates were low (sub 5%), it made a great deal of sense to take a HELOC in order to buy an investment property.”
However, Gabrail says rates are now 8-12% in some areas, which can make investing tougher. “Even though it can make sense if you are making 15% on an investment property, those rates are still quite steep,” Gabrail says.
Why You Should Trust Us
I began writing about personal finance in 2018 and have written for many of the most popular publications. Finding a HELOC for an investment property can be challenging, as lenders often place high levels of scrutiny on these products. I have spent hours researching the best HELOC lenders, focusing on those offering their products for investment properties. I’ve also polled experts who helped me identify the best choices available.
Paul Gabrail, whom I interviewed for this piece, is an experienced real estate investor. He began investing in real estate in 2004 and continued through the 2007-2008 financial crisis. His YouTube channel, Everything Money, has over 265,000 subscribers and focuses on evaluating stocks and real estate as long-term investments.
Benzinga was founded in 2010 and is a trusted source for news on investing, insurance, mortgages and other topics. Our audience of over 25 million readers trusts Benzinga to provide consistently informative, high-quality content.
Methodology
Using Benzinga's multi-point methodology, I compared 23 mortgage lenders to find the best HELOCs for investment property. The factors that weighed heavily in my selections were rates and fees, various choices, and customer service ratings. In addition, lenders that approve borrowers with lower credit scores received a boost. Lenders sometimes have high requirements for investment property HELOCs, so more lenient requirements work in their favor.
I also considered scores and reviews on independent real estate platforms, including TrustPilot, BBB and Zillow. Although none are perfect, the lenders that fared well often score high on one or more third-party review sites.
Applying for a mortgage can be challenging, so I looked for lenders with a simple application. Those allowing borrowers to apply online received high marks. The application process shouldn’t be a barrier to applying for a HELOC for investment property.
See Benzinga's full methodology for a complete overview of how we determine the best mortgage lenders.
FAQ
Is a HELOC a good idea for an investment property?
A HELOC can be a good idea for an investment property, as it may allow you to expand your business faster than you otherwise would. However, investment properties are risky on their own. “If you have cash flow issues, short term it could be quite the squeeze; not to mention you are also taking more debt on your personal residence to do so,” Gabrail says. If these issues make it challenging to repay the HELOC, you risk losing your investment property. This is why it is necessary to have sufficient cash reserves and reliable tenants.
What is the monthly payment on a $50,000 HELOC?
A $50,000 HELOC with a 6.60% interest rate, 5-year draw period and 10-year repayment period would initially have a monthly payment of $275. During the repayment period, the full monthly payment would be $570.29. This is one example, but your payments will likely differ.
Who offers HELOCs for investment properties?
You can potentially get a HELOC for investment properties in many places, including large traditional banks, local and regional credit unions, online nonbank lenders, and mortgage brokers.
Sources
- Current HELOC Rates – Home Equity Line of Credit | Rate.com
- How Much Can I Borrow with a HELOC? | Rate.com
- loanDepot Adds Home Equity Loan to its equityFREEDOM Suite of Home Equity Products | loanDepot
- About Us | loanDepot
- Home Equity Line of Credit (HELOC) | Figure
- FAQs: Loan Officers | Figure
- Home Equity Line FAQs | Figure
- In what states is Point available now? | Point