Best Non-Owner-Occupied HELOCs
Investment properties come with ongoing costs, and maintenance is often one of the most expensive. Replacing kitchen appliances, for instance, could cost up to $10,600, depending on the scope of your project. And if you opt to renovate an entire kitchen, it’ll cost an average of $26,183 according to recent HomeAdvisor data.
If you own a one- to four-unit non-owner-occupied property, including a rental or second home, you may wonder about your options for financing home improvements.
Non-owner-occupied HELOCs are one option, but qualifying for these lines of credit may be challenging. Here’s what to know about this financing option, where you might get it, how to qualify, and available alternatives.
In this guide:
Best non-owner-occupied HELOCs
In the first two quarters of 2022 alone, lenders issued around 807,000 new HELOCs. HELOCs are a common way to tap into your primary residence’s home equity but are less common for non-owner-occupied properties. Lenders may view these lines of credit as having a higher risk of default.
If you’re interested in a non-owner-occupied HELOC, you’ll likely need the following to qualify:
- Significant equity
- A relatively high income
- A good credit score
The same requirements may apply for home equity loans on investment properties, which are also less common.
Many lenders don’t offer home equity options for non-owner-occupied properties—but some do for borrowers who meet their HELOC requirements.
So if you want to tap the equity in your investment property to finance a renovation or home improvement project, we’ve researched the best non-owner occupied HELOCs available.
Figure
HELOC
- Credit lines up to $400,000
- Available for second homes
- Fast closings possible
For borrowers interested in financing a home project in a second home, Figure’s home equity line of credit may be worth considering. Figure is a financial technology company founded in 2018.
As of February 2023, it offers HELOCs in 42 states and the District of Columbia. Figure leverages artificial intelligence and blockchain technology to simplify and expedite the closing process for borrowers.
HELOCs as small as $15,000 or as large as $400,000 are available through Figure, and you may be able to close on your loan and get funding in five business days.
The largest lines of credit are reserved for borrowers with the best credit. Another caveat: You can’t get a Figure HELOC on a multifamily (two-plus-unit) property. Given that, this option is best for renovating a second home.
Key features:
- Interest rates (APR): 6.10% – 14.74%
- Minimum credit score: 680
- Maximum LTV: Not disclosed
- Draw period: Not disclosed
- Repayment period: 5 – 30 years
- Discounts: 0.25% autopay
- Fees: 0% – 4.99% initial draw fee
Spring EQ
HELOC & home equity loan
- Credit lines up to $500,000
- Available for second homes
- Home equity loans available for 2-unit properties
Spring EQ, founded in 2016, offers HELOCs and home equity loans for qualifying borrowers in 42 states (as of February 2023).
Its HELOCs are available for second homes, and its home equity loans are available for second homes and two-unit properties. This makes it an option whether you’re planning a home project in your vacation home or need financing to cover the renovation of an investment property.
This lender’s HELOCs range from $50,000 to $500,000, and it indicates most of its loans close within 21 business days. Given this, Spring EQ may be best for those who want to borrow a large amount and don’t mind waiting several weeks for funding. Terms of 30 years are available, with initial draw periods of 10 years.
Key features:
- Interest rates (APR): Not disclosed
- Minimum credit score: 700
- Maximum LTV: 80%
- Draw period: 10 years
- Repayment period: 20 years
- Discounts: Not disclosed
- Fees: Closing fees (undisclosed amount); $99 annual fee
SECU
HELOC
- Only available in 4 states (listed below)
- Second homes and investment properties are eligible
- No origination fees
SECU HELOCs are available to qualifying members in the following states:
- Georgia
- North Carolina
- South Carolina
- Virginia
Though availability is limited, we found the benefits these lines of credit offer worth inclusion on our list. Unlike many competitors that don’t offer HELOCs for multifamily properties, borrowers can use a SECU HELOC to finance improvements on an investment property.
Note: You can only borrow up to 65% LTV for investment properties. You may also be eligible for financing through SECU if you have a second home, and the LTV is up to 90%.
SECU’s HELOCs also have an impressive low minimum APR of 4.50% and no origination fees. Origination fees can total up to 4% of the borrowed amount, so their absence is an appealing perk. This lender also offers draw periods of up to 15 years, making it a good choice for those seeking flexibility.
However, you must be a SECU member to take out a HELOC; membership requirements are fairly restrictive. To qualify for membership, you must be one of the following:
- A retired or current employee of the state of North Carolina
- Employed by an eligible North Carolina state agency or the board of education
- A member of the North Carolina National Guard,
- An eligible family member
Key features:
- Interest rates (APR): Starting at 4.50%
- Minimum credit score: Not disclosed
- Maximum LTV: 90% for second homes, 65% for investment properties
- Draw period: 15 years
- Repayment period: Not specified
- Discounts: Not disclosed
- Fees: No origination, application, or credit report fees
Bank of the West
HELOC
- Multiple rate discounts available
- Investment properties may be eligible
- Up to $2 million credit lines
Acquired by BMO Harris in January 2023, Bank of the West is an established lender with a history dating back to 1874. This lender offers financial products for businesses and consumers, including HELOCs with competitive rates.
At the time of writing, its HELOCs are available in 19 states, but the bank’s recent acquisition could expand its lending footprint. Bank of the West states that its HELOCs may be available for investment properties, but it’s wise to contact a loan officer to discuss your situation.
HELOC borrowers can access several rate discounts with this lender, including:
- Autopay discount
- Balance-based discount
- Energy improvement discount
- Relationship discount
Compared to competitor offerings, this is a significant number of discounts, so this lender could be a good option for those seeking a low-rate HELOC. It might also be a decent choice for those who want to borrow a large amount because HELOCs of up to $2 million are available for qualifying borrowers.
Key features:
- Interest rates (APR): 6.515% – 13.075%
- Minimum credit score: Not disclosed
- Maximum LTV: 89.9%
- Draw period: 10 years
- Repayment period: Up to 20 years
- Discounts: 0.125% APR autopay discount; 0.50% APR balance-based discount; 0.125% APR energy improvement discount; 0.25% relationship discount
- Fees: Annual fees up to $75; Fixed-rate loan option fee of $100
How to choose the best non-owner-occupied HELOC for you
You might have a more limited selection of lenders for a non-owner-occupied HELOC, but it’s still important to shop around. Start by doing your research and creating a list of options. After this, compare the following to narrow your options further:
- Rates
- Maximum LTV
- Borrower requirements
Once you’ve found a non-owner-occupied HELOC that seems right, it’s time to apply. Depending on the lender, you might be able to apply online, in person, or over the phone. It could be useful to speak with a loan officer to explain your situation and get guidance on the application process.
Your lender may request copies of the following documents to help verify your identity, income, and employment. Be aware that your lender might require more documentation than you’d need to take out an owner-occupied HELOC, including:
- Drivers license or another government-issued ID
- Pay stubs
- W-2s
- Tax returns
- Utility bills
- Bank statements
- Mortgage statements
- Property tax bill
- Homeowners insurance policy
Alternatives to non-owner-occupied HELOC
If you’re struggling to find a lender that offers a non-owner-occupied HELOC that meets your needs or you aren’t able to qualify, other types of financing may be available, including the following.
Home equity loan
Certain lenders may allow you to take out a home equity loan on a rental or investment property but not a HELOC. Like HELOCs, home equity loans allow you to borrow against your home, but you get the funds in a lump sum instead of a credit line.
In general, home equity loans have slightly higher rates than HELOCs. It might be challenging to get one for certain property types. For instance, you may be able to get a home equity loan for a second home but not a three- or four-unit multifamily. Lenders will have different rules, so do your due diligence to find the best home equity loan.
Cash-out refinance
As an alternative to a HELOC, you may be able to tap into your investment property’s equity with a cash-out refinance. This type of refinance involves borrowing a larger amount than you owe on your existing mortgage and using the difference to cover home projects or other costs.
Remember that you may see higher interest rates or need more equity than for a cash-out refinance on your primary residence. Generally, a cash-out refinance for an investment property is a better option in a low-interest-rate environment.
>>Read more: Cash-out refinance vs. home equity loan
Personal loan
A personal loan can be a favorable alternative to a non-owner-occupied HELOC due to its quick disbursement and the ability to use loan funds for many purposes, including home improvement projects.
They may come with higher rates than a HELOC or cash-out refinance, especially if your credit is less than stellar. But if you have excellent credit, you might be able to qualify for a low-rate loan from one of the best personal loan lenders.
Credit card with a 0% introductory APR
If you’re financing a small or inexpensive project, you may consider applying for a credit card that offers a 0% introductory APR on new purchases. This type of card offers deferred interest for a set time period, often 12 to 21 months.
Ensure you can repay the full balance on the card before the introductory APR expires, or interest charges could add up. Check out our research on the best 0% APR credit cards.
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