home equity line of credit
A home equity line of credit, also called a HELOC, allows homeowners to borrow against available home equity while keeping their current first mortgage in place.
Andes Mortgage can help you compare HELOC options, estimate payments, and decide whether a line of credit or fixed Home Equity Loan makes more sense for your goals.
Compare HELOC, Home Equity Loan, and refinance options with guidance from Andes Mortgage.
A home equity line of credit is a revolving credit line secured by your home. You’re approved for a maximum line, and you draw against it as needed — like a credit card, except the collateral is your house and the rate is far lower.
Most HELOCs sit in second lien position, behind your existing first mortgage. And that’s what makes them useful when rates are higher: if you locked a 3% mortgage in 2021, a HELOC lets you access equity without touching that rate. A cash-out refinance would replace it.
If you are considering a HELOC, you’ll want to get familiar with these terms:
During the draw period, you may be able to borrow funds as needed up to your approved credit limit. Your minimum monthly payment during the draw period is interest-only.
At Andes Mortgage, we offer draw periods ranging from 3 to 10 years on our prime programs and 3 to 5 on Non-QM.
The line closes and the balance amortizes into a fully amortized principal and interest payment.
Andes offers repayment terms from 15 to 30 years; Non-QM programs typically run 20 or 30 years total, leaving 10 to 20 years of repayment after the draw ends.
Nearly all HELOCs float with the Prime Rate plus a lender margin. Fixed-rate HELOC options exist and price higher. See how the rate is set below.
Some programs require a minimum initial draw at closing — commonly 75% to 100% of the line on Non-QM products. A line requiring a full initial draw is functionally a term loan with a revolving feature attached, and the interest math is completely different.
Tap into equity without changing the existing mortgage term and rate.
Borrow what you need, when you need it. You only pay interest on what you use during the draw period.
From home improvement and debt consolidation to education or unexpected expenses.
We offer different draw periods anywhere between 3 to 10 years and up to 30 years to repay.
Your rate is Prime plus a lender margin set by your credit profile, CLTV, occupancy, and documentation type. Rates are subject to change. Figures shown are market reference points, not an offer of credit.
HELOCs use the Prime Rate as the baseline index to set your rate. In consumer lending, this rate is widely used by lenders when offering products like HELOCs, credit cards and other types of consumer loans.
Every HELOC rate is built from two parts:
Prime Rate + Your margin = Your rate
The index (Prime). The same for every lender, shown on the left. It moves with the Fed.
The margin. Set by your credit score, CLTV, occupancy, and documentation type — and fixed for the life of your line. This is the part lenders compete on.
When you compare offers, compare margins, not starting rates. Everyone starts from the same Prime. The margin is the number you live with for the next 20 to 30 years.
Two entirely different sets of rules get called “HELOC requirements,” and which one applies to you depends on how you document income.
The main diffeerence: Prime HELOCs require deeper review of income documentation including tax returns for self-employed borrowers. Meanwhile, Non-QM HELOCs are built for business owners and investors and don’t require the same rules as Prime. Here are the rules side by side:
Track A
Income proof
W-2s, paystubs, tax returns
MINIMUM FICO
640+
MAX CLTV – PRIMARY
up to 90%
MAX CLTV – INVESTMENT
up to 75%
MAX dti
~50%
reserves
640+
Best for
W-2 employees with documented income
Track A
Income proof
Bank statements, P&L, WVOE, 1099, rental income, or none
MINIMUM FICO
680-720
MAX CLTV – PRIMARY
60-80%
MAX CLTV – INVESTMENT
60-75%
MAX DTI
~50%
RESERVES
0-6 months PITIA
best for
Self-employed, investors, retirees
If you can document income on tax returns, use the prime track — it’s cheaper and you can tap more equity.
The alternative-documentation track exists for everyone whose tax return doesn’t reflect what they actually earn, and it trades leverage for flexibility.
|
documenation type
|
occupancy
|
typical max cltv
|
|---|---|---|
|
Bank statement (12 or 24 months)
|
Primary
|
Up to 80%
|
|
WVOE or P&L
|
Primary
|
65%-75%
|
|
No income
|
Primary only
|
~60%
|
|
DSCR, no-ratio, WVOE or P&L
|
Investment
|
60-70%
|
|
No-ratio
|
Investment only
|
~60%, smaller caps
|
Recent purchase. Under six months of ownership commonly costs about 10 points of CLTV; six months to a year, about 5 points. At one year the transaction generally drops off.
Declining market. If the appraiser flags the subject property area as a declining market, expect lenders to cut 5 points off of the max CLTV.
|
Credit score
|
Primary - PRIME HELOC
|
Primary - ALT DOC
|
investment
|
|---|---|---|---|
|
740+
|
90% CLTV
|
up to 80%
|
70-75%
|
|
720-739
|
90% CLTV
|
Up to 80%
|
70-75%
|
|
700-719
|
90% CLTV
|
75%-80%
|
65%-70%
|
|
680-699
|
|||
|
660-679
|
80% LTV
|
Generally unavailable
|
--
|
|
70% LTV
|
--
|
||
EQUITY ACCESS OPTIONS COMPARED
A HELOC is not the only way to access home equity. Depending on your goals, a fixed Home Equity Loan or cash-out refinance may be a better fit. The right option depends on whether you want flexible access to funds, a fixed monthly payment, or one larger lump sum at closing.
|
Option
|
Best For
|
Rate Type
|
Payment Structure
|
Keeps Current Mortgage
|
Access Funds As Needed
|
|---|---|---|---|---|---|
|
HELOC
(Home Equity Line of Credit)
|
Flexibility, revolving line, on going expenses
|
Variable
|
Interest-only during draw period
|
✅ Yes
|
✅ Yes
|
|
HELOAN (Home Equity Loan)
|
One time expenses, fixed rate & payments
|
Fixed
|
Fixed principal & interest payments
|
✅ Yes
|
❌ No
|
|
Cash-Out Refinance
|
Large expenses, debt consolidation
|
Fixed or Variable
|
Principal & interest payments
|
❌ No
|
❌ No
|
Your line is capped by CLTV — combined loan-to-value. That’s every lien on the property, including the new HELOC, divided by the appraised value.
(Home value x maximum CLTV) – existing mortgage balance = estimated available line
|
MAXIMUM CLTV
|
COMBINED CEILING
|
AVAILABLE LINE
|
|---|---|---|
|
90%
|
$540,000
|
$240,000
|
|
80%
|
$480,000
|
$180,000
|
|
70%
|
$420,000
|
$120,000
|
|
60%
|
$360,000
|
$60,000
|
|
Illustration only. Not a commitment to lend
|
Same house, same equity, same borrower. The CLTV tier moves the answer by $180,000. What sets that tier is your credit score and, more than anything, your documentation type.
Yes, and it’s one of the more underserved corners of the market. Most retail banks either decline investment HELOCs outright or cap them so low the closing costs aren’t worth it.
Non-QM investor programs use DSCR — the property’s gross rent divided by its housing expense. Personal income and DTI aren’t calculated at all.
At Andes Mortgage, we do not decline investment property HELOCs – we embrace them. Below are some of the common tiers for our DSCR HELOC program:
Up to 70% CLTV available
Leverage percentage is reduced to a maximum CLTV of ~55-65%
Still doable but expect further CLTV reduction and reserves may be required
Yes, absolutely and we help our investor clients with these.
Here’s what you need to know: Short-term rental income is usable on many programs with adjustments: gross rent discounted 20%–25% for operating costs, CLTV down another 5 points or so, and a higher minimum DSCR. Whereas the maximum CLTV allowed for a long-term rental HELOC is 70% on most cases, for short-term rental expect a maximum CLTV of 65%.
More on our DSCR HELOC Program →
Some programs calculate DSCR on the interest-only payment, others on the fully amortizing payment. The same property at the same rent can produce a 0.85 under one method and a 1.15 under the other — crossing a tier boundary and moving your available line by tens of thousands of dollars. Almost no borrower knows to ask which method a program uses. Ask us.
This is the most common reason a well-qualified homeowner gets declined. Your business is healthy, deposits are strong, and your tax return shows very little — because your CPA did the job you hired them to do.
Unfortunately, this type of client gets penalized by most lenders, big box banks and Credit Unions. But not with us.
Bank statement programs calculate income from 12 or 24 months of deposits instead of tax returns.
The mechanic that decides your outcome is the expense ratio. Lenders deduct an assumed business expense percentage from deposits before calling the remainder income. The default is commonly 50%. A letter from a licensed tax preparer stating your actual ratio can reduce it to as low as ~10%, lower by exception.
On $500,000 of annual deposits:
|
EXPENSE RATIO
|
QUALIFYING INCOME
|
|---|---|
|
50% - program default
|
$250,000
|
|
40% - with CPA letter
|
$300,000
|
|
30% - with CPA letter
|
$350,000
|
|
10% - Lowest expense ratio allowed
|
$450,000
|
A $100,000 swing in qualifying income from one letter — frequently the difference between an approval and a decline.
Most declines trace to a single binding constraint. Knowing which one is yours tells you whether the file is fixable.
25% equity on a program capped at 70% CLTV. Fixable by changing documentation type, not by waiting.
A 690 targeting 80% often needs 720. Sometimes 30 days and a paid-down revolving balance.
Four months in, and seasoning costs 10 points of CLTV. The one constraint that time genuinely solves.
0.92 against a 1.00 threshold. A modest rent increase — or the interest-only qualification method — can move it.
Six to twelve months of PITIA is real money on an investor file, and it scales up as DSCR drops.
Manufactured and mobile homes, condotels, non-warrantable condos, co-ops, mixed-use, leasehold, land trusts. Room-by-room, co-living, and pad-split models are explicitly ineligible on multiple programs — relevant for metro Atlanta investors. Not a documentation fix.
Texas home equity lending runs under Section 50(a)(6) constitutional rules — a 12-day cooling-off period, one 50(a)(6) at a time, 12 months between closings, spousal acknowledgment, and fixed-rate-only structures on many products. A number of Non-QM HELOC programs exclude Texas outright. Florida carries tighter overlays on some investment products. Ask us about this and we'll guide you.
Looking for a HELOC instead?
We compare rates from 40+ lenders to find competitive options that fit your needs. You’ll get expert guidance, personalized solutions, and a partner who works for you.
We compare rates from 40+ lenders to find competitive options that fit your needs. You’ll get expert guidance, personalized solutions, and a partner who works for you.
Confused because you don’t know if you should get a HELOC from a bank, credit union or mortgage broker? This video breaks down the places you need to consider for a HELOC.
Our DSCR HELOC has become one of our hottest HELOC programs designed for real estate investors. No need for income documentation to qualify. We qualify you based on the DSCR of the property.
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home’s equity. Similar to a credit card, you can borrow funds as needed up to your approved credit limit during the draw period and repay the balance over time.
HELOC rates are typically based on the Prime Rate plus a lender margin. Factors such as your credit score, loan-to-value ratio (LTV), occupancy, loan amount, and overall financial profile can impact the rate you receive.
Most HELOCs have variable interest rates that can change over time as market conditions and the Prime Rate change.
At Andes Mortgage, we offer both variable and fixed-rate HELOC options.
At Andes Mortgage, we offer HELOCs with credit scores as 640. However, higher credit scores are preferred as you will receive better rates, terms and more equity access.
The amount you can borrow depends on your home’s value, current mortgage balance, available equity, and lender guidelines.
We at Andes Mortgage, we access HELOCs for up to 90% combined loan-to-value (CLTV).
No. A HELOC is a separate loan that is typically recorded as a second mortgage behind your existing first mortgage. Obtaining a HELOC does not change the interest rate, payment, or terms of your current mortgage.
Both a HELOC and a Home Equity Loan allow you to borrow against your home’s equity, but they work differently.
A HELOC functions like a revolving line of credit. You can draw funds as needed during the draw period and only pay interest on the amount you use. Most HELOCs have variable interest rates.
A Home Equity Loan (HELOAN) provides a lump sum of money upfront and typically comes with a fixed interest rate and fixed monthly payment.
HELOC funds can be used for a variety of purposes, including home renovations, debt consolidation, education expenses, emergency reserves, business investments, and other major expenses.
A HELOC is a separate line of credit that leaves your existing mortgage intact. A cash-out refinance replaces your current mortgage with a new loan and provides cash from your home’s equity at closing.
Home equity is the difference between your current home’s value and it’s current liens. The more equity you have, the bigger the line of credit you can generally take.
Yes. During the draw period, many HELOCs offer interest-only payment options. Once the repayment period begins, borrowers typically make principal and interest payments on the outstanding balance.
HELOC funds can be used for a variety of purposes, including home renovations, debt consolidation, education expenses, emergency reserves, business investments, and other major expenses.
No! You can pay off the balance of your HELOC in full and you will never be penalized or be charged any fees.
Absolutely! Homeowners who take out a HELOC often pay off high interest revolving debt, personal loans and even auto loans and student loans if the numbers make sense.
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