Banks that Offer Heloc on Investment Property: A Comprehensive Guide

For real estate investors, leveraging equity in investment properties can be a powerful strategy to fund new acquisitions, renovations, or other ventures. A Home Equity Line of Credit (HELOC) is one of the most flexible tools available for this purpose. However, not all banks are eager to offer HELOCs on non-owner-occupied investment properties. This type of loan is considered riskier for lenders, leading to stricter requirements and a more limited field of providers. This article provides a detailed overview of banks that offer HELOC on investment property, the application process, key considerations, and alternative options for investors.

The fundamental difference between a HELOC on a primary residence and one on an investment property is occupancy. Lenders perceive a higher risk of default on loans for properties the borrower does not personally live in. Consequently, the landscape of banks offering this product is narrower, and the terms are often less favorable. You will typically encounter higher interest rates, lower loan-to-value (LTV) ratios, and more stringent credit score requirements.

Despite these challenges, several financial institutions do provide HELOCs for investment properties. These can be broadly categorized into large national banks, community banks, and credit unions.

1. Large National Banks: Some of the biggest players in the banking industry have programs for investment properties, though they may not be widely advertised. It is crucial to speak directly with a mortgage officer or a representative in the wealth management division. Banks like Wells Fargo, Bank of America, and Chase have been known to offer such products, but their availability is highly dependent on the investor’s overall financial profile, existing relationship with the bank, and current market conditions. These institutions often reserve their best terms for high-net-worth clients.
2. Community Banks and Regional Banks: Often, local and regional banks are more flexible and willing to work with real estate investors. They tend to have a better understanding of the local real estate market and may be more comfortable underwriting loans on investment properties within their community. Building a relationship with a local banker can be incredibly beneficial, as they can often structure a loan based on your entire banking history with them.
3. Credit Unions: Some credit unions offer HELOCs on investment properties to their members. As member-owned institutions, they can sometimes offer more competitive rates and personalized service. However, membership is usually required, which can be based on your location, employer, or membership in a particular association.

Beyond traditional banks, numerous online lenders and specialty finance companies focus exclusively on real estate investors. While they may not always offer a true revolving HELOC, they provide similar products like rental property equity loans or investor lines of credit. Companies like Figure, LendingHome, and Kiavi are examples of lenders that cater to this niche. Their application processes are often fully digital and faster than traditional banks, but their rates can be higher.

Qualifying for a HELOC on an investment property is more rigorous than for a primary home. Lenders will scrutinize several key factors.

• Credit Score: A excellent credit score is almost always mandatory. Most lenders will require a FICO score of 720 or higher, with some demanding scores above 740. A strong credit history demonstrates financial responsibility and lowers the perceived risk for the lender.
• Loan-to-Value (LTV) Ratio: This is a critical metric. LTV is the amount of the loan compared to the property’s appraised value. For investment properties, lenders are much more conservative. You might see maximum combined LTV ratios (including your first mortgage and the HELOC) capped at 70-80%, compared to 85-90% for a primary residence. This means you need significant equity in the property.
• Debt-to-Income (DTI) Ratio: Lenders need to ensure you can manage the payments. They will calculate your DTI by comparing your total monthly debt obligations to your gross monthly income. A DTI ratio below 43% is typically required, though lower is always better.
• Property Cash Flow: For an investment property, the lender will heavily weigh the property’s ability to pay for itself. They will want to see documented rental income that comfortably exceeds the total monthly mortgage payments (for both the first mortgage and the projected HELOC payment), often by a margin of 25-30%. This provides a cushion for vacancies or repairs.
• Reserves: Lenders will want to see that you have sufficient cash reserves left after closing. It is common for them to require enough reserves to cover 6-12 months of payments on all your mortgaged properties, including the new HELOC.

The application process is similar to applying for a primary mortgage but with added scrutiny. It begins with researching and identifying potential lenders. You will then need to submit a formal application, providing extensive documentation. This includes personal tax returns (often two years), W-2s, proof of rental income (lease agreements), bank statements, and information on all other outstanding debts. The lender will order an appraisal to determine the current market value of your investment property. This appraisal is crucial as it determines the amount of equity you can tap into. Underwriting will then thoroughly analyze your entire financial picture before making a final approval decision.

If a traditional HELOC on an investment property proves too difficult to secure, several alternatives are worth exploring. A cash-out refinance involves replacing your existing mortgage with a new, larger loan and taking the difference in cash. This can be a good option if you can secure a lower interest rate on the new first mortgage. A business line of credit, secured by your assets or unsecured, can provide flexible capital, though it may have a higher rate. For larger portfolios, a portfolio loan from a local bank that holds the loan on its books instead of selling it can offer more flexibility. Finally, using equity from your primary residence through a HELOC or cash-out refinance is often easier and comes with better terms, though it personally obligates you and adds risk to your home.

Securing a HELOC on an investment property requires preparation, research, and a strong financial standing. While the path is more complex than for a primary residence, it is far from impossible. By understanding the landscape of banks that offer HELOC on investment property, knowing what lenders are looking for, and ensuring your financials are in impeccable order, you can successfully access your property’s equity to grow your real estate portfolio and achieve your investment goals.