Owning multiple properties can be an exciting way to expand your assets and take advantage of growth opportunities as a real estate investor. But each new property will likely require additional financing, which leads to the question: how many mortgages can you have? In 2009, the Federal National Mortgage Association, commonly known as Fannie Mae, increased the allowable number of conventionally financed properties from four to ten.  

But just because ten mortgages are technically permitted doesn’t mean they’re easy to obtain. Many lenders are hesitant to approve multiple mortgages due to the high level of risk, especially if the number rises above four. A landlord taking out multiple mortgages can expect a higher down payment, cash reserve, and credit score requirements as a way for lenders to mitigate that risk. 

When an investor takes out between one and four mortgages, lenders will typically require a good to excellent credit score, a loan-to-value ratio of 75-80%, and multiple records indicating income, cash flow, and the performance of existing rental properties such as W-2s, tax returns, financial statements, and proof of existing mortgages. 

If a landlord takes out five or more mortgages, financing will be even more challenging to obtain. Lenders will insist on strict qualifications, especially if they choose to let Fannie Mae take on the risk of the loan through the 5-10 Properties program. 

Since multiple traditional mortgages can be difficult to secure, some landlords instead look to other mortgage options to obtain financing: 

• Hard money loans are funded by private investors or companies rather than banks. Their approval process tends to be faster and less stringent, but these loans often have higher interest rates and require a substantial down payment. 
• Blanket mortgages allow an investor to finance multiple properties within the same investment. These mortgages are known for having exacting requirements but provide the convenience of keeping all your payments in one place. 
• Portfolio loans remain in a lender’s portfolio rather than being sold on the secondary mortgage market. They offer the advantages of faster closing and financing of more than one property under the same loan, but their high-interest rates and prepayment penalties can make them an expensive option. 
• A cash-out refinance taps into the equity you’ve built up in other properties over time. It replaces the original mortgage with a new, larger mortgage and gives the investor the difference in cash. Such refinancing can free up money for a new down payment but will result in more interest paid overall. 

Checking with various lenders can be another way to acquire a mortgage, as some have more rigorous requirements than others. Local banks might be more willing to take the time to understand your business and goals, and mortgage brokers may be more flexible if they can access alternative loan financing programs. 

No matter how you choose to finance additional properties, keep in mind the risks of taking on so much debt. One or more of your properties will likely serve as collateral, so losing a critical source of income could put you in danger of foreclosure. Missed payments can also damage your credit, which may make it more difficult to obtain financing in the future. Carefully consider whether you’re in a good position to take on additional responsibilities and risks before making new investments. 

To help avoid missed payments, be proactive about keeping your mortgage records organized. Know how much you owe on each mortgage and when each payment is due. Decide whether it’s in your best interest to keep all your payments together for ease of organization or to stagger payments to maintain steadier cash flow.  

The appropriate number and type of mortgages to take out will depend on your individual situation and long-term investment goals. Taking into account how each mortgage may affect your risk factors, transaction timing, cash flow, and investment performance can help determine which option will best further your investment career. 

About Rentals America     

Rentals America provides full-service property management for residential rental properties. Our team is wholly dedicated to property management, and we’re here to help landlords navigate the rental market.