Recent analysis of Home Mortgage Disclosure Act (HMDA) data reveals a striking gap between home‑equity lines of credit (HELOCs) taken out by owners who live in their homes and those taken out on rental properties. While most homeowners use HELOCs for modest projects such as kitchen remodels, investors are tapping far larger credit lines to fund additional acquisitions.
Investment‑property HELOCs dwarf owner‑occupied lines
From 2022 through 2025, Griffin Funding examined every reported HELOC origination in the federal datasets. In 2025 alone, lenders originated 27,183 HELOCs on investment properties, totaling $10.4 billion. The average line for these loans was $384,000, compared with $146,000 for owner‑occupied HELOCs – roughly 2.5 times larger.
The disparity is consistent year over year. Owner‑occupied line sizes fluctuated only about 15 % during the period, while investment‑property lines swung 59 % and never fell below 1.8 times the owner‑occupied average.
Why investors are borrowing more
Many homeowners hold first mortgages at historically low rates near 3 %. Refinancing to pull cash would mean abandoning that rate for a higher‑cost loan, so borrowers are instead opening second‑lien HELOCs that leave the original mortgage untouched. For investors, this strategy preserves a low‑rate first loan while providing the cash needed for new purchases.
Consider a rental bought in 2021 for $320,000 at a 6 % rate. By 2026 the equity may be sufficient to cover a down payment on another property. Rather than refinance, the owner can open an HELOC at 8‑9 % and draw $65,000, keeping the original mortgage unchanged.
State‑by‑state snapshot
Hawaii leads the nation, with 11.5 % of its 2025 HELOC originations going to investment properties – about five times the national average. Oklahoma (5.8 %), Mississippi (5.5 %), Louisiana (5.2 %) and Nevada (4.7 %) also rank above 4 %.
At the low end, Ohio reported only 0.8 % of HELOCs tied to rentals, with Wisconsin, Michigan, New Hampshire and Indiana near or below 1.1 %.
Non‑qualified mortgage market fuels growth
Because many investors cannot document income in the traditional way, a large share of these loans is issued outside conventional underwriting channels. Debt‑service‑coverage‑ratio (DSCR) loans and asset‑based documentation dominate the non‑qualified mortgage (non‑QM) segment. In early 2026, a $566.7 million non‑QM transaction drew 87.4 % of its pool from those categories.
Non‑QM issuance reached $33 billion through August 2025, according to Kroll Bond Rating Agency, and continues to expand with new securitizations backed by rental‑property mortgages.
Potential risks and regulatory attention
Moody’s Ratings warned that some lenders have relaxed DSCR underwriting standards, such as accepting full lease amounts without capping them against market rents. Historically, loosened standards can surface in performance data a few years later, suggesting the need for careful monitoring.
Overall, investment‑property HELOCs remain a small slice of the market – 2.27 % of all HELOC originations in 2025 – but the share is the highest since 2022 and the total count is up 47 % from its 2023 low.
Original reporting: El Paso News (HLL/CB) — read the source article.
