How many mortgages can you have at once?Is there really a limit to how many mortgages a person can have at once?
Anyone would agree that investing in real estate is generally a good move.
Real estate properties rarely diminish in value.
In fact, they often appreciate in value (even after accounting for depreciation).
There will always be a demand for real estate.
You may even invest in real estate for personal purposes such as building your personal vacation home.
Indeed, whether you plan to resell or use your real estate property, you’d receive value for your money either way.
The only issue with investing in real estate is that it has a high barrier to entry.
Real estate investing is not cheap. A single real estate property may cost thousands, even millions of dollars.
So if you can’t cough up the required money, then investing in real estate may just be out of reach for you… well not really.
There’s still a way to gather the necessary funds to start your real estate investing journey.
And that way is with lending. Particularly, a mortgage.
With a mortgage, you would be able to gather the necessary funds to purchase a property.
Well, that’s assuming that your loan application gets approved.
And there’s a condition to this lending agreement – if you fail to repay the money you owe, the lender has the right to take your property.
Particularly, the property that acts as collateral to secure the loan.
In a mortgage agreement, it’s usually the property that you’ve purchased using the money lent to you.
Now, let’s say that you already got your first mortgage approved.
Good. But you’re now looking to purchase another property. And you’re looking at lending again as the source of funding.
The question now is, can you secure another mortgage? How many mortgages can an individual have at once? Read on to know the answer.
How many mortgages can you have at once?
Technically speaking, there is no strict limit as to how many mortgages a person can have.
But if we were to follow the Federal National Mortgage Association (FNMA), or Fannie Mae, the limit would be 10 conventional mortgages.
But just because the limit is 10, it doesn’t mean that anyone could secure 10 mortgages with no challenges.
The limit that was set by the FNMA before was 4 conventional mortgages. And most, if not all, banks still follow this limit.
So the question that you should be asking isn’t “how many mortgages can I have at once?” but rather “how many mortgages can I reliably secure?”.
Even getting your second mortgage might already pose a challenge.
You’ll likely have to comply with stricter requirements such as a higher down payment, higher credit score, higher cash-in reserve, etc.
And even if you do get approved for another mortgage, you might have to deal with higher interest rates.
So before you apply for another mortgage, think to yourself if you can afford the additional burden (not only just the additional principal payments but also the additional interests).
It can be tempting to expand your real estate investment portfolio but do so with caution.
Now I’m not saying that you can’t have more than one mortgage at a time.
You can and even Fannie Mae agrees.
And if you do have enough wealth or collateral, lenders are more likely to approve your mortgage application.
It can get complicated, but it’s entirely doable and possible.
But before you think of reaching that limit of 10, let’s start first with how you can qualify for your first four mortgages.
Qualifying for Your First Four Mortgages
Ultimately, the requirement for your mortgage application will depend on the lender.
Different lenders may have different requirements.
However, the following are general requirements that you may have to comply with no matter who the lender is:
- A good to excellent credit score (somewhere between 670 to 740)
- A loan-to-value (LTV) ratio of up to 80%
- Official proof of income (such as W-2 or other tax returns))
- Statement of all assets and liabilities
- Financial information or statements on your existing investment properties
- Information on your current mortgages (if there are any)
- Information on the availability of cash flow from your current rental properties
Your lender might ask for more requirements other than the ones listed above.
But in general, if you are able to meet these requirements, you should have no issues qualifying for your first mortgages.
Qualifying for Mortgages Beyond Your First Four
The requirements for mortgages beyond the fourth one are stricter.
Some banks or lenders may not even approve of your mortgage if you already have four existing ones.
But let’s say that you can get approved for another mortgage beyond your first four, here are the general requirements that you have to comply with:
- An excellent credit score (minimum of 720)
- 25% down payment for single units (e.g. single family homes)
- 30% down payment for multi-unit properties (e.g. duplexes, triplexes, quads)
- Official proof of income for the last two years; it should show rental income from your properties
- There should be no late mortgages payments on any property
- There should be no bankruptcies or foreclosures within the last seven years
- You should have sufficient cash reserves to cover at least six months of payments; it should be enough to cover all principal, interest, and taxes (a.k.a. PTI) on all of your mortgage properties for at least six months
- A completed 4506-T form for tax purposes
Again, your lender might have additional requirements.
Coordinate with your lender to know these additional requirements (if there are any).
Other Ways To Finance Mortgages
Other than conventional loans, there are other ways to finance multiple mortgages.
Some of them are the following:
- Hard Money Loans
- Blanket Loans
- Portfolio Loans
- Cash-Out Refinancing
Hard Money Loans (a.k.a. Private Money Mortgage)
Hard money loans do not come from traditional lenders such as banks.
Rather, they come from private individuals or companies.
They are often associated with less strict approval requirements but they tend to have higher interest rates than conventional loans.
In addition, hard money lenders will usually only want to finance a portion of the property value (usually 70% to 80%).
Thus, you may need to have sufficient cash on hand to have your hard money loan application approved.
On the bright side, it’s usually faster to close on hard money loans (within days or weeks) as compared to a conventional loan (which could take a month).
Since it’s still a mortgage, the lender will require collateral, which is usually the property that the loan will finance.
Should you fail in making principal and interest payments, the lender has the right to take away your property.
Hard money loans give real estate investors another option for financing mortgages.
If you cannot get approval for a conventional loan, you may want to look at hard money loans.
Not only that, but they are also a great option to quickly secure financing.
A blanket loan allows you to finance multiple properties under the same mortgage agreement, hence “blanket”.
Blanket loans are great for real estate investors, developers, and commercial property owners who plan to acquire multiple properties.
They allow for an effective and often less expensive buying process.
Those that use a blanket loan can secure the same interest rate for all of their rental properties.
Another benefit is that if one or more properties under the loan get sold or refinances, they can get released from the mortgage.
Other mortgaged properties will stay as is.
The downside to these loans is that they have stricter approval requirements.
They often come with higher closing costs than conventional loans.
Also, blanket loans cannot be used to purchase properties in multiple states.
Portfolio loans allow an investor to have more than 10 mortgages.
Lenders of portfolio loans keep their loans in-house rather than selling them on the secondary mortgage market.
They are similar to hard money lenders in that they care more about your cash flow rather than your credit score.
They are as quick as hard money loans in terms of approval. It’s another option if you want to quickly secure funding.
Portfolio loans tend to be more costly than an equivalent conventional loan.
They tend to have higher interest rates and/or prepayment penalty fees.
The reason for this is that the lender can’t sell the loan.
Thus, they take the entire risk of the loan.
As additional security, a portfolio may also require from you a higher down payment.
A cash-out refinance is a type of mortgage refinance that involves tapping into the equity you have built in your existing properties to finance a new property.
You get a lump sum in cash which you can use as a downpayment to secure financing from a conventional mortgage, hard money loan, or any other type of mortgage that you see fit.
Staying on Top of Your Multiple Mortgages
Now, let’s say that you got multiple approved mortgages. It doesn’t end there.
Remember that you still have to repay these mortgages.
I recommend that you come up with a good system to keep track of your mortgages.
Don’t rely on your lender to keep track of your repayment dates – these lenders oftentimes have a lot in their hands already.
Besides, if you default on your payment, it will not be the lender’s fault but yours.
You may want to detail your principal amount for each mortgaged property, as well as how much you’ve already paid.
Take note of your payment dates for each property.
More likely than not, if you have multiple mortgages, each will have different payment dates.
This is amplified if they are not from the same lender.
Make sure not to default on any of your mortgages.
A single instance may affect your entire system.
Stay on top of your multiple mortgages.
This way, you won’t be facing issues along the way.