Whether you want to purchase and keep multiple properties, or manage some fix and flip properties, one of the questions that you might be wondering is “how many mortgages you can have at one time?”. Luckily, by law, you are allowed to have as many mortgages as you need. So it is only up to your lender as to what they will offer you.
Before you start digging into your real estate investment plans, it is important that you explore multiple mortgage options and its consequences.
How Many Mortgages Can You Have at One Time?
In theory at least, there is no limit on how many mortgages you can have. Be it for residential purpose, buy to lets, holiday homes, or for any other purpose. It ultimately only depends on the lender how much he will lend and under what policies.
1. How many residential mortgages can you have?
If you want to take out a second residential mortgage, then typically you will have to prove to the lender that one of the properties in question is your primary residence. Apart from this, you will also have to provide a justifiable explanation to your lender on why you need a mortgage for your second residential property.
Residential mortgages are typically cheaper than the buy to let mortgages. Therefore, to avoid illegal subletting, lenders need a solid reason for why you need a second residential mortgage. Second homes can be used to accommodate relatives, to reduce commute time during working days, or as a holiday retreat. These are some good examples and are legitimate reasons that can be accepted by the lenders.
2. How many Mortgages can you have as a Real Estate Investor
Almost a decade ago, Real Estate investors could only get approved for four mortgage loans at once. But in 2009 FNMA (Federal National Mortgage Association) issued a change to this limitation. To deal with the crashing housing market at that time, FNMA proposed that Real Investors could have as many as 10 mortgage loans at once.
Since then, the real estate investors can have 10 investment mortgages concurrently depending they qualify the eligibility criteria. However, this is only the best case scenario as not all mortgage lenders offer you access to this extended 10 investment mortgage program.
3. How many mortgages buy to let Mortgages can you have?
There are many people who want to let out multiple properties and in order to do so they will require multiple mortgages. Typically, lenders have no issue in approving multiple buy-to-let mortgages as long as the property is sufficient which means that the rental income from the property is enough to make monthly mortgage payments with some additional amount on top of it. But it varies from lender to lender as well, some will offer you only 2-3 mortgages, others will offer you more depending if you have a good credit history and the associated risk is not too high.
Every lender has their own rule book which they follow when granting multiple mortgages, so it is important that you evaluate these rules before you put in an application. Typically, as long as your rental income can cover the mortgage cost, the lender is satisfied. But exactly how much rental income is required for the mortgage to be allowed depends on the lender as well. Some lenders will want your rental income to be a total of 150% of the mortgage repayment each month while the others will require only 125%.
The more mortgages a person has in place, the harder each new application becomes as lenders/banks consider it as a riskier loan. After your first five buy-to-let mortgages, it becomes even more difficult to get approved for a new loan. But remember, if you are turned down by one mortgage lender does not mean that you will be turned down by the other mortgage lenders as well.
4. How many Mortgages can you have on one property?
Typically, you can have only one residential mortgage registered against your property at a time. The exception to this are the loans that are considered as a “second charge”. The lenders that allow this type of service generally require a higher interest rate and fees in exchange for taking a higher risk than your primary mortgage lender.
But remember these mortgages are very complex and risky so it is highly recommended that you seek help from a financial advisor or a professional real estate agent.
How to Finance multiple Properties?
Another common question that real estate investors have is “how to finance multiple properties?” While the investors are allowed to have upto 10 investment mrotgages, they certainly can’t do this through typical conventional loans. Instead, these are three different options that investor can utilize to finance their multiple properties.
1. Blanket Loans
A blanket loan typically finances more than one property. By using a blanket loan, a landlord or real estate investor needs one loan to finance multiple properties rather than getting multiple mortgages for each investment property.
Now the question is “how many blanket loans can you have?”. The answer is the same here as well. In theory, you are allowed to have as many blanket loans as you need. In addition, blanket loans provide an obvious benefit as it offers greater efficiency and saves a lot of time. They also turn out to be cheaper than the individual loans as it saves application and closing costs required for each property.
When it comes to how many properties can be covered under one blanket loan, it depends on what your lender allows. They have requirements that are similar to hard money and private money loans.
For a blanket loan, the lenders usually tend to focus on the borrower’s cash reserves.
2. FNMA 5-10 Properties Program
To allow investors to get benefit from10 investment mortgages, FNMA set a program. This program is called 5-19 Properties Program, the requirement for this program varies from conventional mortgage loans in various ways including the required credit score, down payment, and a few other things. These are the criterias that a borrower must meet in order to get qualified for this program
- A minimum credit score of 720
- Should already own 5-10 properties with financing
- 25% down payment on each property and 30% for 2-4 units
- No late monthly mortgage payments during the past one year
- A 30% equity is required in case of a mortgage refinance, regardless of the property type
- Two years of tax returns showing rental income from all properties
- No bankruptcy or foreclosure in the past 7 years
- 6 months of cash reserves to cover Principal, Interest, Taxes, and insurance on all properties
- Sign a 4506-T form
These requirements are rather strict which is why not many investors can get approved for it and have to opt. For other financing options.
3. Hard Money and Private Money Lenders
A more popular and feasible financing option among investors is Hard Money and Private Money Lenders. The one reason behind it is that these loans are open to negotiation and do not require any hard and fast set of requirements. The Private Money Lenders often allows investors as many mortgages as they require depending if they fulfill the lender’s criteria.
These private mortgages are typically for a shorter term compared to the conventional loans. As a result, the interest rates on these mortgages are much higher. The lenders usually don’t look at the credit score instead the deciding factor for them is the value of the investment property that the investor is interested in and the mortgage rates that the investor is willing to pay.
Due to their flexibility and ease of negotiation, the private money lenders and hard money are among the top financing options for financing multiple properties.
How to get Approved for Multiple Mortgages?
The major barrier behind getting approved for multiple mortgages is your ability to repay them. With buy-to-let mortgages, the major criteria for evaluating your affordability is the potential rental income. However, with residential mortgages, the lenders will need to evaluate a fairly detailed picture of your finances including your credit score and credit history.
Remember that applying for mortgages can be really intimidating for untrained buyers. If you choose to apply to the same lender for multiple mortgages, it may make the process easier for you and will cut down the costs on paperwork. Choosing the same lender for multiple mortgages will centralize your efforts as well. But the drawback is that you may have to abandon better mortgage rates in order to find a bank that is flexible enough to offer you all of the loans.
We recommend that you talk to one of our mortgage experts to share your concerns and financial situation. They will be able to give you customized mortgage advice that will definitely help you in figuring out how you can get approved for multiple mortgages.
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