HELOC, home equity loan or cash-out refinance on a rental?
All three turn a rental's equity into cash. They differ in how you get the money and what happens to the mortgage you have now. FLO Mortgage arranges HELOCs and cash-out refinances. Ask a licensed loan officer about other options for your property.
| HELOC | Home equity loan | Cash-out refinance | |
|---|---|---|---|
| How you get the money | Draw as you need it during the draw period | One lump sum | One lump sum at closing |
| Your current first mortgage | Stays in place | Stays in place | Paid off and replaced |
| Rate | Usually variable | Usually fixed | Fixed or adjustable |
| Interest | Only on what you've drawn | On the full amount | On the full new loan |
| Repayment | A draw period, then a repayment period | A set schedule from the start | A new loan term |
A cash-out refinance on a rental can also be a DSCR loan, which qualifies on the property's rent instead of your personal income. See DSCR loans in Florida and the DSCR cash-out refinance overview.
What the lender looks at on a rental
A partner lender makes the credit decision. Each program sets its own rules, and these are the areas it reviews.
- The property: what kind of property it is and whether it meets the program's rules. Not every property type qualifies.
- How you use it: a rental, a second home or your principal residence.
- Rental income: the lender may ask for a lease or rent history.
- Your credit: your score and history shape the line amount and rate you're offered.
- Your income and debts: you show income that covers your current debts plus the new line.
- Your current mortgage and equity: lenders cap the total of the mortgage balance plus the line at a share of the property's value, so you need equity left over.
Florida costs and rules for a rental line
Insurance
The lender requires hazard insurance on the property. If it sits in a FEMA special flood hazard area, federal rules also require flood insurance. Wind coverage on coastal property can be a large part of your carrying cost, so price it before you borrow.
Condos and HOAs
If the rental is a condo, the lender may review the association. Florida's condo safety law requires milestone inspections and reserve studies for many older buildings, and a special assessment can add to your costs while the line is open.
Short-term rentals
Florida requires a vacation rental license from the Department of Business and Professional Regulation (DBPR) for many short-term rentals. Cities and counties add their own registration and parking rules, so check them for your property.
Taxes at closing
Florida charges documentary stamp tax and nonrecurring intangible tax when the county records the mortgage that secures the line (Florida Statutes 201.08 and 199.133). Your closing documents list both amounts.
How investors use a line, and the risks
Investors often look at a rental HELOC for repairs and upgrades, money toward the next purchase, or a cushion for vacancies and repairs. Before you draw, weigh the risks:
- The property secures the line. If you can't repay, you could lose it.
- Most HELOC rates are variable, so your payment can rise.
- The lender can freeze or reduce the line in some cases, such as a drop in the property's value.
- You still owe the payment while the unit sits vacant.
- If you use the line toward another property, you carry payments on both.
Taxes on the interest
Whether you can deduct the interest depends on how you use the money and on your own tax situation. Ask a tax professional before you count on a deduction.
How FLO Mortgage helps
You start online through FLO Mortgage. A partner lender makes the credit decision, provides the line and funds it. A licensed loan officer can walk you through whether a HELOC or a cash-out refinance fits your rental. Start with Florida HELOCs, or see Georgia HELOCs for a property in Georgia.
Common questions
Can you get a HELOC on a rental property in Florida?
Yes. Some HELOC programs accept rental and investment properties in Florida. Line amounts and terms differ from a HELOC on the home you live in, and not every property or applicant qualifies.
Is a HELOC on an investment property different from one on my home?
Yes. The lender reviews the rental itself, including any lease or rent history, and sets the line amount and terms to match. Requirements vary by program.
Does the 3-day right to cancel apply to a rental?
No, unless the property is your principal residence. The federal 3-business-day right to cancel applies only to your principal residence, including a unit you occupy in a 2-4 unit property. A line on a rental or a second home has no federal right to cancel.
Can I use a HELOC on one rental to buy another property?
You can use the funds for many purposes, including money toward another purchase, if the line's terms allow it. Plan for paying both the line and any new loan.
Can I get a HELOC on a Florida vacation rental?
It depends on the program and the property. Vacation rentals in Florida often need a DBPR vacation rental license, and local rules apply. Ask a licensed loan officer before you apply.
Is a HELOC or a cash-out refinance better for a rental?
It depends on what you need the money for and how you want to repay it. A HELOC keeps your first mortgage and lets you draw only what you need. A cash-out refinance takes out a new first mortgage, pays off any current one, and pays you the difference in one lump sum.
Check your options for a Florida rental
Check your HELOC options online, or call and a licensed loan officer will help you compare a line with a cash-out refinance.
Check My OptionsCall (386) 882-9980This page is general education, not a commitment to lend or an offer of specific terms. All loans are subject to credit approval, underwriting guidelines, property eligibility and program availability. Not all applicants or properties will qualify. Terms and programs may change without notice. FLO Mortgage arranges HELOCs through a partner lender, which makes the credit decision and funds the line. A HELOC is secured by the property, and failing to repay can result in the loss of the property. FLO Mortgage, LLC, company NMLS #1835856. Licensed mortgage lender in Florida (MLD2621), Georgia and Tennessee. Joy McCoy Flores, Broker Owner and licensed loan officer, individual NMLS #1096400. Equal Housing Opportunity.