Thursday, 03 January 2019 00:00

How Many Mortgages Can You Have? 3 Tips for Increasing Your Portfolio

How Many Mortgages Can You Have ? Tips for Increasing Your PortfolioNothing quite compares to how it felt when you closed on your first rental property.

It was a brand-new experience, maybe even one you weren’t sure you’d see all the way through.

But you did and, pretty soon, that investment began paying you back as rent checks came in every month.

If you’re like most investors, it didn’t take you long to start thinking about going through the process all over again and purchasing another rental property. After that, it probably felt inevitable that you’d soon purchase one more.

At this point, you may be seriously considering turning real estate into the source of your full-time income. You might even be just one or two properties away from replacing your current salary. Then, why not just keep adding more to your portfolio?

This is usually when investors begin asking, “How many mortgages can you have?”

The answer may surprise you.

 

How Many Mortgages Can You Have?

This has to be one of the most common questions asked by investors who are beginning to ramp up their real estate portfolios.

It might seem like the answer would clearly be that you can have as many mortgages as you can afford.

It’s a little more complicated than that, though.

Obviously, to take out a mortgage, you need a lender who will offer it to you. Unless you plan on paying in cash, some amount of financing is required, which means a lender will have to review your request and decide whether or not they want to give you a mortgage.

Most traditional lenders won’t offer you a mortgage after you already have four. Many will stop after only two. So, even if you have a pristine financial history of making every single payment on time, don’t be surprised if you’re turned away.

Traditional lenders’ business plans just aren’t built around investors who want to buy five or more rental houses – much less a dozen. They’re set up to serve people who just need a single mortgage for their primary residence and that’s it.

What About the 5-10 Properties Program?

This is another very common question among rental home investors. Back in 2009, FNMA changed a longstanding rule about multiple mortgages and introduced the 5-10 Properties Program. It was designed to support traditional lenders in offering additional mortgages to people who already had four of them.

Unfortunately, the program hasn’t really caught on as much as FNMA had probably hoped. As we just touched on, the problem is that most traditional lenders don’t seem to want anything to do with it. The underwriting process for multiple mortgages is just so much different than the one required to finance someone buying their primary residence.

So, while the program could help you take out as many mortgages as you want (up to 10 per person), it’s not a very realistic option for most investors.

How to Add More Mortgages to Your Investment Portfolio

Clearly, if you’re interested in taking out many mortgages, you’ll eventually have to work with lenders who understand your unique needs as a rental-home investor.

However, as soon as possible, you should move on to not just taking out your third or fourth mortgage but taking out three or four mortgages at a time.

This is easy to do thanks to blanket mortgages. In short, just one blanket mortgage can cover the cost of multiple homes. They’re designed for this very reason, so anyone who offers them will understand your unique needs as a property investor.

Aside from covering multiple properties, here are four other important ways blanket loans make it easy to add many mortgages to your portfolio at once, increasing its value substantially and quickly.

1. Less Administrative Requirements

Once your portfolio hits a certain number of mortgages, its administrative requirements can be overwhelming.

With a blanket loan, you can own several properties, but you only have the administrative work for a single mortgage. This means fewer queries to respond to, statements to file, points of contact to manage, and obligations to meet.

If time is money, this convenient benefit alone is enough reason to opt for a blanket loan if you want a portfolio with as many mortgages as possible. As you get closer to 10 mortgages or more, the savings will become obvious.

2. Less Overhead

Of course, blanket loans offer actual savings, as well.

Imagine just one closing cost instead of, say, 12. Those are savings you could use to eventually increase your portfolio even further.

Also, it’s worth noting that, in the future, you can even use blanket loans for refinancing. Again, this wouldn’t just lower your overall costs, it will give you savings that you can put toward adding more mortgages to your portfolio.

3. A Better Portfolio for Future Borrowing

Owning multiple properties will always help your profile as a potential borrower in the future. For one thing, the more homes you own, the easier it will be to leverage the benefits of asset-based lending. With each property you pay off and own free-and-clear, you have another asset you can leverage for a loan.

You can always stick with blanket loans, as well. In both cases, lenders will tend to look at the properties in question (either the ones you want to buy or the ones you already own), more than your personal finances to see if you qualify.

Nonetheless, it doesn’t hurt to improve your profile as a prospective borrower, especially if you intend to continue expanding your portfolio. Blanket loans will help with this because handling 1 loan for $1,000,000 looks a lot more impressive than handling 5 for $200,000 apiece.

Adding as Many Mortgages as You Want to Your Portfolio

As you now know, you can actually have as many mortgages as you want and the simplest way to do this is with a blanket loan.

At Rental Home Financing, we specialize in serving investors like you who want to build robust portfolios and can’t secure the loans they need from traditional investors.

That’s why we offer blanket loans and an extremely simple and straightforward application process.

Apply for your blanket loan today and we’ll be sure to let you know if you qualify ASAP, so you can get started on expanding your portfolio right away.

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