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How Many Mortgages Can You Have?

mortgage signing

Investing in real estate properties can be profitable, but how many mortgages can you have? You may think that your dream of becoming a real estate mogul is impossible to achieve precisely because of that question. However, it may surprise you to learn that you can hold more than a few mortgages at any time.

In this article, we will go in-depth on the topic of holding multiple mortgages. We will discuss how many mortgages you can have at any one time and how you can secure funding for them. Take the next step toward becoming a real estate mogul by continuing with the rest of this article.

How Many Mortgages Can You Hold?

Let’s get to the question at the heart of this article right away. How many mortgages can you have at any one time?

According to Fannie Mae, an individual can hold up to ten mortgages simultaneously. Fannie Mae set the limit for mortgages back in 2009. Before that time, you could only have four mortgages under your name. Fannie Mae set that new limit hoping that real estate investors would stimulate a recently crashed market.

The ten-mortgage limit allows enterprising individuals to get deep into the real estate market. You will not play the long game to expand your portfolio, which gives you more flexibility. If you have long been interested in trying your hand at real estate investments, the opportunity is available to you.

What Are the Benefits of Having Multiple Mortgages?

Individuals can hold up to ten mortgages simultaneously, but is that a good idea? What do you stand to gain from holding that many mortgages?

Let’s discuss the benefits of having multiple mortgages below.

You Can Have Multiple Rental Properties Active Simultaneously

The main advantage of having multiple mortgages is that you can also have multiple rental properties active simultaneously. If you have tenants lined up to live in your properties as soon as they become available, you will have an easier time managing your multiple mortgages.

Taking on multiple mortgages can place a greater financial burden on you, but your active rental properties can help offset your additional expenses. You can even earn better returns on your investments if your rental properties are in high demand.

You Can Secure Multiple Mortgages without Having Plenty of Cash on Hand

Since you are trying to take ownership of several properties using multiple mortgages, you might have assumed that you will need plenty of cash on hand. However, that is not the case.

Typically, individuals assuming ownership of multiple mortgages do not need to prepare plenty of cash beforehand. As long as you can cover your new properties’ down payments and closing costs, you likely will not need cash for any additional transactions.

You Can Use Your Existing Home Equity to Acquire Additional Properties

If you are willing to take on multiple mortgages, you also open up the possibility of acquiring additional properties through other means. Specifically, you may use home equity or a line of credit to secure your additional properties.

Purchasing additional real estate assets that way becomes an option after you build up significant equity in your current properties. Building that equity may take a bit of time, but it is nice to have that option.

What Are the Disadvantages of Having Multiple Mortgages?

There are also potential risks involved in taking on multiple mortgages. The biggest potential risk would stem from a loss of income.

Losing a source of income or even having it drop below a certain level could make it harder for you to meet your multiple mortgage payments. Something like that can be a huge blow to your finances even if you only have one mortgage, but its impact is more pronounced for those with multiple loans.

Work with the top buying agent in your area so you can hone in on the best rental properties. That way, you can continue making your payments even if something bad happens to your primary source of income.

It is also harder to keep track of multiple mortgages, especially if you secured your loans from different lenders. The good news is you can still organize your finances, so those payments remain easy to complete.

What Are the Qualifications for Having Multiple Mortgages?

You may be allowed to hold up to ten mortgages at any given time, but that does not mean you are automatically qualified to do so. As you can imagine, lenders require borrowers seeking multiple mortgages to clear some high bars.

The qualifications also differ based on how many mortgages you want to secure. Let’s talk about those requirements a bit more in this section of the article.

Requirements for Securing Up to Four Mortgages

  • Existing cash flow from current rental properties
  • Credit score in the range of 670 to 739
  • Loan-to-value (LTV) ratio in the range of 75 to 80%
  • Financial statement detailing assets and liabilities
  • Financial statement for current investment properties
  • Financial statements for existing loans
  • Proof of income courtesy of W-2s or tax returns
  • Rent roll

Those are only some of the requirements that lenders will likely ask for if you are going after multiple mortgages. Some borrowers may ask for more requirements, while others may not request as many documents. Clarify matters with each lender you speak to so you understand exactly what you need to prepare.

Requirements for Securing Up to Ten  Mortgages

  • Credit score no lower than 720
  • At least two years of tax returns detailing income from all rental properties
  • Available cash reserves to cover six months of principal, taxes, interest, and insurance (PITI) coverage for all real estate properties
  • No record of any late payment for any real estate property
  • Capability to provide a 25%  down payment for each real estate property

Unsurprisingly, the requirements for securing up to ten mortgages are significantly harder to meet. You must prove that you can make all of your payments on time without fail for any borrower to get on board with your plans.

Requirements for the Fannie Mae 5-10 Financed Properties Program

Some lenders may also agree to finance your new mortgages, even if you already have four under your belt through the Fannie Mae 5-10 Financed Properties Program. Fannie Mae will accept the risk associated with your loans if you qualify via the program. The qualifications for Fannie Mae’s program are in the bullet points below.

  • Credit score no lower than 720
  • At least two years of tax returns detailing income from all rental properties
  • Available cash reserves to cover six months of principal, taxes, interest, and insurance (PITI) coverage for all real estate properties
  • No record of any late payment for any real estate property over the last year
  • No record of bankruptcies or foreclosures spanning the last seven years
  • Capability to provide a 25%  down payment on a single-family property
  • Capability to provide a 30%  down payment on a multi-family property
  • Completed 4506-T form

How to Finance Your Mortgages

Meeting the requirements above will make conventional lenders more open to financing your additional properties. Of course, that is still not guaranteed to happen. Those conventional lenders may still be wary of financing your investments even if you are qualified.

It is also possible that you are not qualified to receive loans from those conventional lenders. You may need a bit more time to build up your credit score or cash reserves, but you do not want to wait because you want to capitalize on a great opportunity.

So, what can you do if conventional lenders are not willing to offer the financing you need?

You will be glad to know that alternative financing options are available if you want to purchase several properties using multiple mortgages. Let’s discuss those alternative financing options in this section of the article.

Mortgage Refinancing

As we noted earlier in this article, taking on multiple mortgages means using your existing home equity to secure financing for additional properties. That is possible if you decide to refinance your mortgage. You are specifically going for cash-out refinancing.

It is easier to finance your additional properties using this method if you have a good track record with your current lender. They already know about your ability to pay, so they may be more comfortable with you refinancing your mortgage to purchase another property.

Refinancing your existing mortgage also makes tracking payments for your current properties easier. So checking out if this financing option is available will be well worth your time.

Blanket Loans

You can also pay for your new properties by taking out a blanket loan. A blanket loan groups all of the mortgages for your properties into a single mortgage. Thanks to that, you only need to worry about making one payment.

Blanket loans also come with release clauses that grant additional flexibility. If you sell one of the properties covered by your blanket loan, that comes out of the mortgage. You can then use the money from that sale to purchase another property or enjoy your reduced mortgage payments moving forward.

Unfortunately, blanket loans also come with considerable risk.

Fail to make payments on your blanket loan, and you could lose all of the properties it covers. In addition, the down payment required for a blanket loan may also be higher than other mortgage arrangements.

Weigh the pros and cons of a blanket loan carefully while deciding if it is right for the plans you have in mind.

Hard Money Loans

Next up, let’s discuss hard money loans. Hard money loans are different from the options we have already detailed here. Arguably the biggest difference between them is the source of funding for hard money loans.

If you are looking for a hard money loan, you will not get it from a bank. Instead, Experian notes that these loans get offered by individuals, investment groups, and companies that specialize in financing.

The great thing about hard money loans is that they can put money in your hands quickly, and you can opt to pay off only the interest early on. Going after a hard money loan also makes sense if your credit score is not up to par for the more conventional options.

On the other hand, these loans also require borrowers to accept high-interest rates and make sizable down payments.

There is an element of risk present in securing a hard money loan, but the potential rewards are great as well.

Portfolio Loans

One more option we need to get into is the portfolio loan. A portfolio loan is a type of mortgage a lender offers that they also hold on to. Since the lender is hanging on to the loan as an investment holding, they can dictate its specific terms.

Portfolio loans typically come with high interest rates than what you will see for conventional mortgages. Your lender may also ask you to pay higher origination fees.

Why would you agree to a portfolio loan if it comes with a significantly higher interest rate and more expensive origination payments? Well, they may capture your interest because portfolio loans are usually more lenient when it comes to requirements. A portfolio loan may be your next best option if you cannot meet the requirements for a conventional loan.

Similar to hard money loans, you can also secure your financing faster if you opt to take out a portfolio loan. That feature will come in handy if you are trying to capitalize on a unique opportunity.

Make good use of your ability to hold multiple mortgages as you try to realize your dreams of becoming a real estate mogul. Work with us at RI Home Store, and we will help you land the Rhode Island properties that will offer the best returns!

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