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A home equity line of credit lets you borrow against equity, then forces a repayment schedule when the draw period ends. Before you use one to buy or carry a rental, write down the interest-only payment on the balance you expect to carry, the fully amortizing payment that replaces it, and the interest across both phases. The home that secures the line is the one you can lose if those payments fail.
By RentalAnalytics Editorial Team · Published October 19, 2026
The CFPB says a HELOC lets you borrow repeatedly against home equity, up to a credit limit, during the draw period. Equity is value minus the mortgage you already owe. If a first mortgage is in place, the line is a second mortgage and you pay both. One rental use is a line on the home you live in, with draws used to buy a rental. Another is a line on the rental itself, if a lender offers one. The payment math is the same. The house at risk is the one in the mortgage.
If that home is your principal dwelling, you have three business days to cancel in writing, counted from account opening or from receipt of the opening disclosures, whichever is later. The lender returns the fees.
The CFPB booklet says some plans require a payment of principal plus interest during the draw, and that principal piece typically does not pay the line off by the end of the draw. Other plans allow interest only, which means you pay nothing toward principal. The minimum usually follows the current balance, not the unused limit. You can pay principal during the draw if you want a smaller bill later.
This example uses an interest-only plan and keeps an illustrative $90,000 outstanding the whole time, at a flat 8 percent. Monthly interest is $90,000 times 0.08, divided by 12, or $600. The CFPB says a draw period could last 10 years. Over 120 months at a constant balance, interest is $72,000, and you still owe $90,000 when repayment starts.
The CFPB gives $300 as an example of a minimum draw, not as a universal fee. Plans can also charge an application fee, an appraisal, closing costs, or an annual fee in months you do not draw.
You stop borrowing when the draw period ends. The CFPB says the lender may schedule repayment of the full balance, often over 10 or 20 years, and the monthly payment is often much higher. The booklet, last updated August 2022, describes a common length as 10 or 15 years. Some plans instead demand the entire balance at once, which the booklet calls a balloon. If you cannot pay it, you could lose your home.
The example uses the current page's 10-year and 20-year lengths and keeps 8 percent flat. The payment is the balance times the monthly rate, divided by 1 minus (1 plus the monthly rate) raised to minus the number of months. The monthly rate is 0.08 divided by 12.
Interest on the repayment schedule is figured the way the amortization calculator builds a row: each month's interest is the prior balance times the monthly rate, rounded to the cent, and the last payment settles the remaining balance. On that schedule:
The shorter term costs less interest and a higher monthly bill. Neither total includes a rate increase. The amortization tool is a fixed-rate schedule. It opens on a $250,000 loan at 7.40 percent for 30 years, payment $1,730.95. Replace those inputs with the balance, rate, and repayment term you are testing.
HELOCs usually have a variable rate, so the payment can change even if you draw nothing more. The booklet splits that rate into an index plus a margin. Indexes it names include the U.S. prime rate and the Constant Maturity Treasury rate. A discounted introductory rate, sometimes for about six months, understates the later payment.
The lender can freeze or cut the line if the home's value falls sharply or your finances worsen. If you sell, the booklet says you generally must pay the HELOC off immediately.
A cash-out refinance replaces the first mortgage and can send a check. It has no draw period. The BRRRR method uses a later refinance to retire short-term money. A HELOC can fund part of the purchase or the work, and the schedule above still applies.
The cash flow analyzer builds a rental P&L from price, down payment, rate, term, rent, vacancy, taxes, insurance, maintenance, and a management fee. It models one amortizing loan, so use it for the repayment-period payment. Compare the $600 interest-only bill with rent left after vacancy and operating costs on its own line. If the line is a second mortgage on the home you live in, that home is the collateral even when the money bought a rental. The CFPB says falling behind can cost you the home. Rental property loans and cash flow asks the same coverage question for a first mortgage that amortizes from day one.
The CFPB says the borrowing window could last 10 years, for example. You can generally borrow up to the credit limit during that time. Your disclosures set the actual length.
Multiply the outstanding balance by the annual rate and divide by 12. A $90,000 balance at an illustrative 8 percent is $600 a month. Some plans also require principal.
Interest-only payments do not reduce principal. Repayment of the full balance, often over 10 or 20 years, costs more each month. In the example the bill goes from $600 to $752.80 over 20 years, or to $1,091.95 over 10 years.
The CFPB says you can generally spend up to the credit limit during the draw period. If the line is secured by the home you live in, that home is the collateral even when the money buys a rental. You still pay the first mortgage if you have one.
The CFPB booklet says you generally must pay the line off in full when you sell. Some plans also require a balloon of the full balance. Missing that payment can cost you the home.
Write the interest-only payment on the balance you expect to carry, then build the 10-year and 20-year repayment payments in the amortization calculator. Put the repayment-period payment next to rent and operating costs in the cash flow analyzer. If the rent does not cover the higher payment, the draw period's smaller bill is not the number to rely on.
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