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22 Jan

How is it possible to get approved for multiple mortgages?


Posted by: Aneta Zimnicki

I remember a while back, I told someone I met that I own multiple real estate property.  They were shocked and said ‘You own more than your own house? You have more that one mortgage?’ They couldn’t understand how one can acquire so many assets and loans, without being super rich to begin with.  The truth is, owning multiple properties and mortgages really isn’t in the vocabulary of the general public, because  they have a generalized fear of debt and a lack of understanding how mortgages can work for you.  Time to bust this myth!

How you can get approved for multiple residential mortgages is essentially how you would get approved for your first mortgage. Lenders look at your income, credit, existing debt and calculate in the new mortgage debt.  If you can carry the debt within a certain ratio of your income, as per the lender’s policies, you can get approved for the mortgage.  Of course, there are nuances in the lender’s policies, and also the subject property has to conform within those policies.

So as long as your income increases somewhat proportionally to the subsequent mortgages you get for your investment properties, you can stretch out for many properties.  And remember, that doesn’t mean you have to continually get massive raises at your job to boost that income, it is the rental income that can assist as well.  But note, ideally properties should cashflow more than just beyond breaking even (basic expenses: mortgage payments, taxes, condo fees, heat), otherwise your ‘job income’ has to absorb the loss and that calculation has to be within the debt ratios.  The lenders also factor in other expenses (because there are, amateur investor mistake to think there are not! Maintenance, vacancy, insurance, property management are some examples.).  The lenders often do this by a generalized calculation (for example, a percentage of rent), rather than examining each of the actual expenses.  So the key is to cashflow positive after factoring all that in.  Then this boosts your income, or conversely, doesn’t burden your income (like negative cashflow would).  Assuming your application is for a cashflowing property, theoretically your debt ratios should remain the same.

Some key components to getting those mortgages approved are: have income that supports the prescribed debt ratios, have good credit, keep your non-mortgage debts (credit cards, line of credit, car payments etc) under control and reduce where possible,  get cashflowing property, have money for the downpayments, work with a mortgage broker that can structure your mortgages properly and is not transactionally-focussed but looks at the big picture and your future portfolio.

Eventually you may encounter some roadblocks with some lenders, but usually there  is then opportunity to work with other lenders. Again, that is why proper mortgage planning is important, along with your broker having intimate knowledge of the lenders’ policies.

It is very common for many investors to simply just run out of their own money before hitting a mortgage roadblock.  But that is a good problem to have, chances are you have created a nice portfolio with your own money, now you are entering second phase of your business, which is possibly working with other investor partners.

So it is very possible to get multiple mortgages.  There are many strategies associated with investment property mortgages, I discuss many of them in my blog and encourage investors to start the mortgage planning conversation early to position for better success.