The number of mortgages you can have depends on a few factors, ranging from your individual circumstances to general lending rules and industry standards. Let’s look at how mortgages work and how many you might be able to secure.
Before we get started, it might be worth recapping some mortgage basics. A mortgage is a loan taken out to buy or refinance a home. The length of a mortgage varies depending on the terms of your loan and how soon you pay it off. During this time, the loan itself is “secured” against the value of your home until it’s fully paid off. This means that if you can’t keep up your mortgage payments, your lender may eventually need to repossess your home and sell it to get their money back.
Mortgages usually start with an application. Lenders look at your financial history, income, credit score and the value of the property you want. Depending on the risk you represent on paper, lenders decide the terms of your loan. Once complete, you start making monthly payments that go towards the loan itself as well as its interest. This builds equity in your home, which is the part of the property that you truly “own” — typically expressed as a percentage.
With the basics in mind, let’s look at how many home loans you can have.
Can you have multiple mortgages?
While the total number of mortgages a single individual can have isn’t technically limited by any law or regulation, lenders do tend to impose certain restrictions. As you seek financing, some lenders may impose more stringent requirements. This typically means higher standards for your credit score, debt-to-income (DTI) ratio and other financial factors, including the required cash reserves you’ll need on hand after closing.
The closest thing to a “hard cap” on the number of mortgages you can have comes by way of the Federal National Mortgage Association (FNMA), nicknamed Fannie Mae. Fannie Mae caps the number of mortgages it will back for a single individual at 10. This makes lenders less likely to offer a mortgage beyond this point, effectively setting the maximum number of mortgages at 10 per individual.
Qualifying for multiple mortgages
All that considered, the answer to the question “How many mortgages can I have?” depends on your own financial circumstances. To estimate how many home loans you can have, you’ll want to revisit the key considerations of most lenders. Note that each lender will have their own set of criteria and that speaking with a qualified mortgage advisor may be helpful when considering additional mortgages.
Income and DTI
When financing more than one mortgage, lenders will likely take an especially hard look at your income and DTI ratio. Your DTI ratio is your monthly debt payments as a percentage of your total monthly income. Higher DTI ratios indicate that you’re likely paying out large portions of your paycheck to loan repayments before factoring in your own living expenses. When applying for multiple mortgages, lenders need to ensure that you have the ability to pay your financial obligations. Thus, generally, the higher your income and lower your DTI ratio, the better your chances of qualifying for multiple mortgages.
Your credit score is a major factor in any loan application, but it plays an even bigger role when it comes to qualifying for multiple mortgages. Lenders view a high credit score as a sign of financial responsibility and reliability. It may also help you secure better interest rates. It is also important to note that mortgage lenders use a different scoring model than others. When you’re looking to take on multiple mortgages at a time, lenders will likely seek out top-tier credit scores to begin consideration.
Purpose of additional mortgages
Another factor that potentially influences how many mortgages you can qualify for is the intended purpose of the additional mortgages. For example, if you plan to use the properties for investment, the potential rental income could be a possible factor in your application. How individual lenders weigh this criterion varies.
Managing multiple mortgages
Before even considering multiple mortgages, it might be worthwhile to pause and examine some of the challenges that come with them.
Risks and challenges
- Damage to your credit score: Holding multiple mortgages means juggling various repayment schedules, interest rates and terms. These can be complex and, without careful management, could lead to missed payments and potential harm to your credit score.
- Other costs: Owning multiple properties, especially investment properties, could bring unexpected costs through maintenance, vacancies and property management fees. These expenses, coupled with various mortgage payments, could potentially escalate and put a strain on your financial health.
- Prioritizing organization: Keeping a clear and organized record of your separate mortgage details can go a long way towards keeping your repayments on schedule. This also means fully understanding the terms of each mortgage, their respective due dates and associated interest rates. Doing so could potentially help keep track of all your obligations and reduce the chances of missed payments.
- Emergency funds: Setting aside some money to cover unforeseen expenses may provide a safety net in times of financial instability. The more properties you own, the more likely it is that unexpected costs could arise.
So, how many mortgages can you have? The answer usually varies depending on your credit score, DTI and general financial health. That said, many lenders will likely be reluctant to lend beyond 10 mortgages at any given time to most individuals, as Fannie Mae typically caps their support for mortgages at 10 per person. Understanding where you stand, financially, is a key first step in dipping your toes into any real estate market and how many mortgages you can have.