OCTOBER 2026 | CLIENT UPDATE
Unlocking Your Home's Equity: HELOCs and DSCR Loans
A message from the Gloria Shepard Team at Compass
October 22, 2026
Your home may be your largest asset. Here's how to put that equity to work without selling.
If you've owned in San Diego for any length of time, you're likely sitting on substantial equity. For many of our clients, it's the largest single asset they own. Yet it often sits idle, locked inside the walls of a home they have no intention of leaving.
You don't have to sell to access that wealth. Two tools stand out right now: a Home Equity Line of Credit (HELOC) for your primary residence, and a DSCR loan for your rental or investment property. Each works very differently, and choosing the right one depends on the property, your goals, and how you prefer to qualify.
The HELOC: Flexible Access to Your Primary Residence
A HELOC works much like a credit card secured by your home. Your lender approves a credit line based on your equity, and you draw only what you need, when you need it. You pay interest only on the amount you actually use.
Most HELOCs have a draw period, often 10 years, followed by a repayment period. Rates are typically variable and tied to the prime rate, so they move when the Federal Reserve moves. After several Fed cuts, HELOC rates have come down meaningfully from their recent highs, with well-qualified borrowers seeing rates in the 6% to 7% range.
6%–7%
HELOC rates cited for well-qualified borrowers in the October 2026 article. Actual rates vary by lender and borrower.
How our clients use a HELOC:
- Renovating or modernizing the home they love
- Bridging the gap when buying their next home before selling the current one
- Funding a down payment on a second home or investment property
- Keeping a financial cushion on standby for opportunities or emergencies
What to know:
- Lenders generally want strong credit (680+, with the best pricing at 720+) and a debt-to-income ratio under about 43%.
- Most lenders will lend up to 80% to 90% of your home's value, combined with your first mortgage.
- A variable rate can rise. Some lenders let you lock a portion of your balance at a fixed rate.
- Watch for introductory teaser rates that reset after 6 to 12 months.
- Your existing low-rate first mortgage stays untouched, which is a major advantage over a cash-out refinance.
The DSCR Loan: Let Your Rental Do the Qualifying
If you own a rental or investment property, a DSCR (Debt Service Coverage Ratio) loan can be a powerful way to pull equity out through a cash-out refinance. The difference is how you qualify. Instead of tax returns, W-2s and personal income, the lender looks primarily at the property itself: does the rent cover the payment?
The math is simple. Divide the monthly rent by the monthly mortgage payment, including taxes, insurance and HOA dues. A ratio of 1.0 means the rent covers the payment exactly. Most lenders look for at least 1.0, and the best rates and terms typically start around 1.20 to 1.25.
1.20–1.25
DSCR range where the article indicates more favorable lending terms typically begin.
Why investors like DSCR loans:
- No tax returns or employment verification, ideal for business owners, retirees, and investors with complex returns
- You can often borrow through an LLC
- Cash-out proceeds can fund your next purchase, renovations, or other investments
- Short-term rentals are eligible with many lenders
What to know:
- DSCR loans are for investment properties only, not your primary home.
- Cash-out refinances are typically capped around 70% to 75% of the property's value.
- Rates run higher than conventional owner-occupied loans, roughly 7.5% to 9.5% in recent lender surveys, depending on the ratio, credit and loan size.
- Expect to show cash reserves, often 3 to 12 months of payments.
- In San Diego's luxury segment, rents don't always cover the payment on a high-value home. Some lenders offer programs that accept ratios below 1.0, or no ratio at all, with more equity or reserves.
At a Glance
| Feature | HELOC | DSCR Cash-Out Refinance |
|---|---|---|
| Best for | Your primary residence | Rental and investment property |
| How you qualify | Credit, income, debt-to-income | The property's rent vs. its payment |
| How you receive funds | A credit line you draw as needed | A lump sum at closing |
| Typical borrowing limit | Up to 80% to 90% of value, combined | About 70% to 75% of value |
| Rate structure | Usually variable, tied to prime | Usually fixed; interest-only options exist |
| Effect on your first mortgage | Stays in place | Stays in place or replaced by the new loan |
Questions Worth Asking Before You Borrow
Equity is a powerful resource, and it deserves a thoughtful plan. Before you tap it, we encourage clients to consider:
- What's the purpose? Borrowing to improve a home or acquire an income-producing asset is very different from funding everyday spending.
- How will I repay it? Know your exit, whether that's cash flow, a future sale, or a planned payoff.
- Can I handle a higher rate? If you choose a variable-rate HELOC, model what happens if rates rise.
- What are the tax implications? HELOC interest may be deductible only when the funds buy, build or substantially improve the home. Your CPA can advise on your situation.
- Does this fit my larger plan? Your estate plan, retirement timeline, and future moves all matter.
“Equity is a powerful resource, and it deserves a thoughtful plan.”
Let Us Connect You With the Right Lender
The right loan starts with the right lender, and not every lender specializes in HELOCs on high-value homes or DSCR financing for investors. Over the years, we've built relationships with trusted local and national lenders who understand the San Diego luxury market and deliver for our clients.
Whether you're planning a renovation, eyeing your next investment, or simply want to understand your options, we'd be glad to introduce you to a lender who fits your goals.
Reach out to the Gloria Shepard Team today for a trusted lender referral.
Gloria Silveyra-Shepard
(619) 417-5564 ·
gloria@gshepardhomes.com
Cory Shepard
(619) 889-8498 ·
cory@cshepardhomes.com
About Gloria Shepard
With more than two decades of experience in Santaluz, Gloria Shepard brings deep community knowledge, established relationships, and a highly personalized approach to buying and selling luxury real estate throughout Santaluz, Black Mountain Ranch, and North County San Diego.
This article is for general informational purposes only and is not financial, tax or legal advice. Rates, terms and qualification requirements vary by lender and change frequently. Please consult a licensed mortgage professional and your tax advisor before making borrowing decisions.
Sources:
Splash Financial: HELOC rates in 2026
WealthVieu: HELOC qualification requirements
FreeFinCalc: DSCR loan requirements 2026
HomeAbroad: DSCR requirements for investment property
Griffin Funding: DSCR loans
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