You’ve got real money sitting in your house or your rental, and you’ve got a first mortgage in the twos or threes that you would be out of your mind to give up. Every lender you call tells you to refinance. There is another way to do this, and it’s now more than half the market.
I walk through the whole thing on video, about nine minutes. The written version continues below.
Let’s start with why you’re stuck, because it helps to know you’re not the only one.
Roughly four out of five homeowners in this country have a first mortgage under six percent. That’s almost everybody who bought or refinanced between 2020 and 2022. Meanwhile, mortgage holders are sitting on about eighteen trillion dollars in equity, and around eleven point seven trillion of that is what the industry calls tappable, meaning it’s money you could realistically borrow against. That works out to roughly two hundred and twelve thousand dollars per borrower.
So the money is real. The problem is that most people only ever get shown one door to get to it, and right now that door costs too much to walk through.
I want to be fair to the cash-out refinance, because there was a window earlier this year when it made sense and I did plenty of them. Rates dipped. Some people got a new first mortgage and a little cash and it worked out clean.
That window has closed. Rates moved up through the summer and they’re higher today than they were in August.
But the timing isn’t really the issue. The structure is. A cash-out refinance does not add a loan on top of your existing one. It replaces your existing one. In other words, you’re not borrowing against the house. You’re re-borrowing the whole house.
Say you owe three hundred thousand at three percent and you want a hundred thousand out. A cash-out refinance doesn’t put today’s pricing on the hundred thousand. It puts today’s pricing on all four hundred thousand. You just repriced money you already had cheap, in order to get access to money that was already yours.
I had an investor client this spring with four doors who wanted eighty thousand to pick up a fifth. We ran the cash-out refinance and his payment went up more than that eighty thousand was worth to him over any reasonable hold period. So we didn’t do it. We did the thing below instead.
There’s a second structure, and it barely gets talked about, which is strange because it’s now the majority of the market.
It’s a second mortgage, and that covers two shapes. A home equity line of credit that you draw on as you need it, or a home equity loan, sometimes called a closed-end second, that funds once for a set amount at a fixed rate. Which one fits you is further down this page.
In other words, your first mortgage doesn’t move. It stays exactly where it is. Same rate, same payment, same payoff date. You put a second loan behind it, and that second loan is where the cash comes from.
Yes, the second loan is priced at today’s market, and seconds price higher than firsts. That’s real. But you’re only paying today’s cost on the money you’re actually taking, not on the entire balance you already owe.
That’s the whole idea. Today’s cost on a hundred thousand instead of today’s cost on four hundred thousand.
And this is not some fringe workaround. As of the first quarter of 2026, second liens made up fifty-four percent of all equity extraction in the country, the highest share in eighteen years. Close to four million homeowners who took out first mortgages between 2020 and 2022 have already added one.
Put your real numbers in below. It’ll show you what comes out with your first mortgage left alone, and what the same amount of cash would cost you if you refinanced everything instead.
A couple of notes on reading that. The combined loan to value you choose is the total of both loans against the value of the property. What you actually qualify for depends on your credit, the property type, whether you live there, and which program fits, so treat the output as a starting point rather than an approval. And the rate fields are yours to set. I’m not publishing rate numbers on this page because they’d be wrong by next week.
Yes. And most people have no idea that is even possible, which is the whole reason this section exists.
If you call your local bank or your credit union and ask for a line of credit on a rental you own, they are probably not interested. It is not that you do not qualify. It is just not their thing. They do lines on primary residences, that is the product they built, and that is where the conversation ends.
This is the part where being a broker matters. Mortgage brokers have access to basically any product available in America, and there are lenders who actively want this type of loan on investment property. So the answer you got from your bank was a fact about your bank, not a fact about you.
The other thing worth knowing is that the problem most investors run into is not the equity. It is the paperwork.
You write off a lot, because you should. Depreciation, expenses, all of it. Your CPA is doing exactly what you pay them to do. Then you go ask for money against a property that cash flows fine, and the tax return makes it look like you are barely getting by.
Right? That is the whole game, and it works against you the moment a bank opens the file.
There are lenders that do not look at tax returns at all. Two ways that usually goes.
Bank statements. The lender looks at deposits going into your account over a stretch of months and works from that instead of from a return.
The digital version. Some lenders now do this through a service called Plaid. If you have ever used one of those apps that shows all your balances in one place, that is the same technology. You connect the account, the software looks at what is coming in, and if the deposits are there, that is your income verification. No tax returns, no pay stubs, nothing to gather. It is fast because there is almost nothing for you to do.
And with strong enough credit you can use a business account for this. So if you have an LLC that all your rental income runs through, that account can be the one that qualifies you. It does not have to be personal.
And this is not only an investor thing. If you are self-employed and this is your primary residence, it is the same problem and the same fix. Deposits instead of returns, first mortgage untouched. See bank statement loans for how that side works.
There is also a DSCR loan, which takes it a step further and qualifies the property on its own rent against the payment. Same idea, different mechanism. Which one fits depends on the property and how much you are pulling out.
And if the cash you pull out is going toward the next rental, that one can close in an entity from day one. Here is how buying an investment property in an LLC actually works, including why a conventional loan cannot do it.
Once you know you can do this, there is one more choice, and it is worth getting right.
A home equity line of credit is a line you draw on as you need it. Take fifty now, leave the rest sitting there, pay interest only on what you have actually used. The rate is usually variable, so it moves.
A home equity loan, sometimes called a closed-end second, funds once at closing for a set amount at a fixed rate for a set term. It does not move. You know the payment on day one and it stays that way.
So the honest version is this. If you are not sure exactly how much you need or when you will need it, the line gives you flexibility and you pay for that flexibility in rate movement. If you know the number and you want to sleep at night, the fixed loan is the one.
Draw what you need when you need it. Interest only on what you have used. Rate usually variable. Good when the timing or the amount is still open.
One funding, fixed rate, fixed term, known payment. Good when you know the number and you are done shopping.
Either way your first mortgage does not move. That is the part that matters.
I’d rather tell you when not to do this than have you call me and waste both our time. So here’s the honest list.
The short version is that you need an exit strategy for the money. Repairs that raise what the place is worth, improving a unit, or pulling from one or two properties so you can pay cash for the next one. I have an investor right now doing exactly that, a line of credit on his rental so he can buy the house next door to it. That is a plan. “Just in case” is not.
The entire reason this strategy exists is that you have something worth protecting. If you don’t, you don’t need the workaround.
What the property is worth, what you owe on it, and what it rents for if it’s a rental. That’s all I need to tell you what’s actually possible. It takes about twenty minutes, and I’ll tell you if it’s a bad idea. I do that a lot.
Scott Hastings, NMLS #926762
Call or text 704-890-7168
Yes. That’s exactly what a closed-end second mortgage does. Your first loan keeps its rate, payment and payoff date, and the second loan sits behind it. The two are separate loans with separate payments.
Both sit behind your first mortgage, but they behave differently. A HELOC is a revolving line you draw on as you need it, usually at a variable rate. A closed-end second is a fixed amount at a fixed rate with a set term, funded once at closing. If you know what you need the money for and how much, the fixed version is usually easier to plan around.
In many cases yes, using a DSCR loan, which qualifies the property on its rental income rather than qualifying you on your personal income. Approval still depends on credit, the property, and how the rent compares to the payment.
It depends on the combined loan to value the program allows, which varies by occupancy, property type, credit and documentation. The calculator above lets you model a few different levels so you can see the range before you talk to anyone.
No. Your first mortgage is a closed contract. Adding a second lien behind it does not change its rate, its payment or its term.
It depends which version you use. The streamlined ones can fund in roughly a week, using an automated valuation and lighter documentation. A full documentation second mortgage with an appraisal generally takes a few weeks and usually prices better in exchange for the wait.
Neither is better in the abstract. The fast version costs a little more and wins when you are on a deadline. The full documentation version generally prices better, allows larger loan amounts, and covers more property types. Larger amounts and investment properties usually push toward full documentation.
Yes, though most local banks and credit unions do not offer it. They generally do lines on primary residences only. Independent brokers can place these with lenders that specialize in investment property, which is why the answer changes depending on who you ask.
In many cases yes. If you hold your rentals in an LLC and the rental income runs through that account, some lenders will qualify you on those deposits rather than on personal income or tax returns. Credit requirements are usually higher for that option.
Two common paths. One is bank statements, where the lender reviews deposits over a set number of months. The other is a digital connection through a service like Plaid, where you link the account and the software reads the deposit activity directly. Neither requires tax returns or pay stubs, and the digital version is faster because there is almost nothing for you to gather.
Yes, though terms on investment property are different from terms on a primary residence, and fewer lenders offer it. That’s most of what I do, so it’s worth a conversation.
