Non-QM DSCR fixed-rate second loans and first-lien HELOCs give Colorado real estate investors an easy way to take out money from their rental property's equity. Approval is based on rental income as oppsoed to personal income. This makes the process simple and less document heavy. These loans let investors gain access to funds for renovations, new acquisitions, or business opportunities. With options for both fixed payments and flexible draws, each can provide a solution for investors to grow their portfolios as well increase cash flow.

Why Colorado Investors Choose DSCR Second Loans

Investors often need financing that adapts to the realities of rental property ownership. DSCR second loans are favored because they focus on the property's performance, not the borrower's personal income, which simplifies approval for seasoned and new investors alike.

Investors also choose DSCR second loans for the clarity they provide. The loan terms are straightforward and there are no surprises. This makes planning for long-term growth and managing multiple properties much simpler and less stressful.

Key Features

What Is a DSCR Second Loan?

A Debt Service Coverage Ratio (DSCR) second loan qualifies investors based on rental income instead of personal income. Rental income should cover both your first mortgage and second loan payments.

DSCR Formula

DSCR = Rental Income ÷ (First Mortgage + New Second Loan)

→ EXAMPLE: $5,200rental income/ $2,300first mortgage P.I.T.I +new second of$2,600/month) = 1.06 DSCR




You Know the Benefits of a Second Lien Position




Which Is Better For Me?

DSCR Fixed Rate Second

Best For

  • Long-term planning
  • Fixed Rate stability
  • One-time large expenses
  • Debt consolidation
  • No surprise budgeting
DSCR HELOC

Best For

  • Flexible access to funds
  • Funding multiple projects over time
  • Interest-only payment during draw period
  • Low balance or paid-off first mortgages
  • Property investments

Detailed Side-by-Side Comparison


Feature DSCR Fixed Rate Second DSCR First Lien HELOC
Interest Rate Fixed for 30 years Variable (prime + margin)
Loan Term 30 years 3-year draw + 27-year repayment
Loan Amounts $200,000 to $750,000 $200,000 to $3,000,000
Payment Structure Principal & Interest Interest-only during draw period
Prepayment Penalty Yes (1–5 years) No
Access to Funds Lump sum at closing Draw as needed
Rate Risk No rate risk Subject to change

Required Documentation

DSCR second loans require minimal documentation. Typical requirements include:


Property Documents

  • Current lease agreement(s)
  • Property insurance info
  • Property tax statements
  • HOA documents (if applicable)
  • First mortgage statement
  • Ineligible if renter is a family member

Borrower Documents

  • Valid government ID
  • 2–3 months of bank statements
  • Credit authorization
  • Entity documents (if applicable)

What You Don't Need

  • Tax returns
  • W-2s or pay stubs
  • Employment verification
  • Profit & loss statements
  • Business bank statements
  • Personal DTI calculations

Note: These requirements apply to both purchase and refinance transactions. A debt service refinance second loan with cash out is capped at 75 LTV and credit scores must be over 720. As the loan amount increases, higher credit scores, larger down payment/equity, and more cash reserves are required. Guidelines above are subject to change.

Colorado Investment Property Markets


Region Market Summary Key Cities / Neighborhoods
Denver Metro Strong rental demand and property appreciation. Downtown Denver, Cherry Creek, Capitol Hill, Highlands, LoDo
Boulder County University town with high rental demand. Boulder, Lafayette, Louisville, Longmont, Erie
Colorado Springs Military and tech hub with growing investment opportunities. Downtown Colorado Springs, Old North End, Broadmoor Area, Manitou Springs, Security-Widefield
Mountain Communities High-value vacation rental properties. Vail, Beaver Creek, Aspen, Snowmass, Breckenridge, Keystone, Steamboat Springs, Winter Park
Fort Collins & Northern Colorado College towns and suburban markets with growth potential. Fort Collins, Loveland, Greeley, Windsor, Evans, Johnstown

If You're Ready to Begin

 

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How is DSCR calculated for second lien loans?+
For second lien DSCR loans, the ratio includes both your first mortgage payment and the proposed second lien payment. The property's rental income must cover the combined debt service, typically requiring a DSCR of 1.0 or higher.
What's the difference between the fixed rate second and HELOC options?+
The fixed rate second offers a 30-year term with predictable payments but includes a prepayment penalty. The DSCR HELOC has a 3-year draw period with 27-year repayment, variable rates, but no prepayment penalty, giving you more flexibility to pay off early or access funds as needed.
How is rental income determined for Colorado properties?+
Rental income can be established through a current lease agreement or an appraiser's market rent analysis. For Colorado's dynamic rental markets, appraisers will analyze comparable rentals in the area to determine fair market rent.
Can I use a DSCR second loan on owner-occupied properties? +
No, DSCR second loans are specifically for investment properties only. The property must be rented to tenants and cannot be your primary residence or second home.
What happens to my existing first mortgage? +
Your existing first mortgage remains unchanged. The DSCR fixed-rate second loan is recorded behind your first mortgage in second lien position. You'll continue making payments on both loans separately.
BUT, if you want a DSCR HELOC, the new HELOC will payoff the existing first mortgage and become your new first lien. This works best if you have a high interest rate first lien, a small balance or own it free and clear.