March 2024 Client Profile

Marlene owns rental property inherited from her father. She’s looking for money to expand her veterinary clinic and diversify her investments. One option is a home equity loan.

Checking with local banks, Marlene has found that not all banks offer home equity loans on rental property and that lenders share standard requirements for these loans:

1. 15% to 20% equity minimum,


2. minimum credit score of 620 to 700, and


3. debt-to-income ratio of 43% or less.

Some lenders may also have limited Loan-to-Value caps for investment properties, 60%, for example.

She’s also learned that the rental property home equity loan interest may be tax deductible, but, generally, only if she uses the loan to improve the property and designates it as a qualified residence for the tax year claimed rather than renting it.

Marlene also has found some alternatives—a home equity line of credit, a cash-out refinance, and a personal loan. She’s going to discuss her possibilities with her financial professional.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.