Dscr Heloc do they exist
Member since 2026 · 1 post · 3 votes
Dscr Heloc do they exist
Most Popular Reply
Bryan MaddexBusiness Member
Lender · Charlotte, NC · Member since 2015 · 159 posts · 76 votesQuote from @Richard Mikelic:
Hello,
MY SITUATION:
I have a SFR which I own outright and have rented in which I would like to pull a DSCR HELOC to fund a SFR build on a property that I recently purchased cash. Once I rent the new SFR I plan to refi cash out to close the HELOC and get my cash back.
MY ISSUE:
I'm having a difficult time finding DSCR HELOC'S.
Has anyone had any experience/success with this strategy with recommendations and or leads?
Truly appreciate any feedback!
Sincerely,
Richard Mikelic
Most require a 1.0 ratio, one company allows down to a .75 ratio if it is a 1st position heloc.
Going to update some accurate info based on prior replies and give some general overview of guidelines.
-It is true, they will all fund something at closing. Typically a percentage (75% up to 100% of the limit), one has a minimum dollar amount required of $75k.
- rates on 2nd position helocs are higher, and can get into the teens with one company but can be in the 9s and 10s as well. 1st position can get into the 7s last i priced one out.
-You can pay the intiail draw back on some, others come with a 90 or 180 day "blackout period" so if you repay any you would not have access to funds for a bit. This is due to them needing to get the heloc setup with a servicer.
-They do allow you to close in an LLC.
-Most have up to a 5 year draw period, one lender only offers 3 year draw period.
-680 or 700 is minimum score for most, one lender goes down to 660.
-Most lenders allow 70% or 75% LTV with one lender going to 80% LTV.
Please post any other questions that you have!
9 Replies
- Lender · Nationwide · Member since 2024 · 74 posts · 23 votes1mo
Hey Richard,
As long as you have a DSCR ratio above 1.00 there are options.
You should defenitely look into it, if your property is cash flowing.
- 1moRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Richard Mikelic:
Hello,
MY SITUATION:
I have a SFR which I own outright and have rented in which I would like to pull a DSCR HELOC to fund a SFR build on a property that I recently purchased cash. Once I rent the new SFR I plan to refi cash out to close the HELOC and get my cash back.
MY ISSUE:
I'm having a difficult time finding DSCR HELOC'S.
Has anyone had any experience/success with this strategy with recommendations and or leads?
Truly appreciate any feedback!
Sincerely,
Richard Mikelic
I recently saw one advertised by one of the big DSCR wholesaler lenders however after digging into it a little bit they changed their advertising - it wasn't really a true "DSCR HELOC" since it was classified as a consumer mortgage etc
Harpoon Capital512 Reviews - 1moErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Richard Mikelic:
Hello,
MY SITUATION:
I have a SFR which I own outright and have rented in which I would like to pull a DSCR HELOC to fund a SFR build on a property that I recently purchased cash. Once I rent the new SFR I plan to refi cash out to close the HELOC and get my cash back.
MY ISSUE:
I'm having a difficult time finding DSCR HELOC'S.
Has anyone had any experience/success with this strategy with recommendations and or leads?
Truly appreciate any feedback!
Sincerely,
Richard Mikelic
It does exist now, however the rates are horrible. They also require you to withdraw 95% of the amount at closing.
LuxePrivate Investments LLC 572 Reviews - 1moBryan MaddexBusiness MemberLender · Charlotte, NC · Member since 2015 · 159 posts · 76 votesThey do indeed exist! I work with at least 5 lenders that do TRUE DSCR helocs. Some can even use short term rental for a DSCR heloc.
Quote from @Richard Mikelic:
Hello,
MY SITUATION:
I have a SFR which I own outright and have rented in which I would like to pull a DSCR HELOC to fund a SFR build on a property that I recently purchased cash. Once I rent the new SFR I plan to refi cash out to close the HELOC and get my cash back.
MY ISSUE:
I'm having a difficult time finding DSCR HELOC'S.
Has anyone had any experience/success with this strategy with recommendations and or leads?
Truly appreciate any feedback!
Sincerely,
Richard Mikelic
Most require a 1.0 ratio, one company allows down to a .75 ratio if it is a 1st position heloc.
Going to update some accurate info based on prior replies and give some general overview of guidelines.
-It is true, they will all fund something at closing. Typically a percentage (75% up to 100% of the limit), one has a minimum dollar amount required of $75k.
- rates on 2nd position helocs are higher, and can get into the teens with one company but can be in the 9s and 10s as well. 1st position can get into the 7s last i priced one out.
-You can pay the intiail draw back on some, others come with a 90 or 180 day "blackout period" so if you repay any you would not have access to funds for a bit. This is due to them needing to get the heloc setup with a servicer.
-They do allow you to close in an LLC.
-Most have up to a 5 year draw period, one lender only offers 3 year draw period.
-680 or 700 is minimum score for most, one lender goes down to 660.
-Most lenders allow 70% or 75% LTV with one lender going to 80% LTV.
Please post any other questions that you have! - Banker · MA · Member since 2026 · 120 posts · 31 votes1mo
They do exist, though the market for them is thin compared to standard DSCR term loans, so the search is genuinely harder than it should be.
The prior reply covered the basics well. A few things worth adding from 31 years in this business. On the HELOC itself: most DSCR HELOC products are portfolio or non-QM programs, meaning each lender sets their own rules and those rules shift more often than conventional guidelines do. The 1.0 DSCR floor is pretty standard, though some will flex to 0.75 in first lien position as noted. Because your existing SFR is free and clear, first lien position is on the table, which opens up better pricing and more lender options than a second lien situation.
The strategy you're describing (HELOC to fund the build, then DSCR cash-out refi once it's rented) is a reasonable sequence, but the exit leg deserves as much attention as the entry. A few things to think through now: lenders doing the DSCR cash-out refi on a newly completed SFR will want to see a lease in place or at minimum an appraiser's market rent opinion. Some have seasoning requirements on the title, typically 6 to 12 months from the date you took ownership, before they'll lend against the as-completed value. If you purchased the land cash and then build, the seasoning clock on the finished structure may reset depending on the lender. Worth verifying before you assume the refi is available on day one of tenancy.
Also, when you're comparing DSCR HELOC offers, pay attention to the draw structure and any blackout/repayment restrictions as mentioned above. If you're using the HELOC to fund a build in stages, you want a product that lets you draw incrementally rather than one that forces a large lump sum at closing that you're paying interest on before the money is even deployed.
Solid plan overall. The execution just requires lining up the right product sequence before you commit.
Jim Driscoll
- Lender · Nationwide · Member since 2024 · 74 posts · 23 votes1mo
Quote from @Richard Mikelic:
Hello,
MY SITUATION:
I have a SFR which I own outright and have rented in which I would like to pull a DSCR HELOC to fund a SFR build on a property that I recently purchased cash. Once I rent the new SFR I plan to refi cash out to close the HELOC and get my cash back.
MY ISSUE:
I'm having a difficult time finding DSCR HELOC'S.
Has anyone had any experience/success with this strategy with recommendations and or leads?
Truly appreciate any feedback!
Sincerely,
Richard Mikelic
Hey Richard,
You might also want to look into a DSCR HELOAN (a closed-end second lien), as there are some great options available right now with really decent rates.
Hope this helps, and best of luck with the new build! - 1moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
DSCR HELOCs are less common than standard DSCR first-lien loans, but a handful of lenders do offer them, worth checking with a broker who specifically works DSCR products since not every lender advertises the HELOC version even if they can do it.
Where the tax side matters, keep the HELOC proceeds tracked separately and used specifically for the new build, that's what keeps the interest deductible against the new SFR's future rental income once it's placed in service, mixing it with anything else muddies that trail if it's ever questioned. During the actual construction period before that new property is rented, interest on funds used for the build generally has to be capitalized into the property's basis rather than deducted currently, so don't expect a current year deduction on that HELOC interest until the property's rented and the construction interest capitalization period ends.
Once you refinance to pay off the HELOC and pull your cash back out, that refi itself isn't a taxable event, it's just debt, and cost segregation is worth doing on the new build once it's finished and rented, ground-up construction usually has a lot of separable components to accelerate.
Happy to connect!
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