Monday, March 9, 2020

How many mortgages can I have?

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 I Have?

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.

How many residential mortgages can I 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. 

How many buy to let mortgages can I 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 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 total 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.

How many blanket loans can I have?

Another common question that real estate investors have is “how to finance multiple properties?”, the answer is use a blanket loan. 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 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.

How many Mortgages can I 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 rates 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 apply 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 mortgage situation. They will be able to give you customized mortgage advice that will definitely help you in making an informed decision.

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