To answer the question, ‘Can I have two mortgages?’ we will have to evaluate your specific circumstances. It is possible, but you have to know the terms and conditions of the mortgage to be sure. If you have a loan on your home that means that someone has a lien on it because it is the collateral for the loan. The mortgage you acquire when you purchase a home is called a first mortgage. The lender provides the money for the home, places a lien on the property for security, and you make monthly payments until the note is satisfied.
You can have two mortgages when you apply for and are approved for a home equity loan. The payments that you have made on the first home loan on your home build into equity over time. Equity is the term used to describe the amount of investment you have in the property. An equity loan is considered a mortgage, as well. The equity is calculated by subtracting the amount that you owe from the current market value of your home. The figure that results is known as equity and the loan-to-value (LTV) represents the amount that the lender will lend on the equity loan or the second mortgage. An example: Your home is worth $100,000. You have a LTV of 75% as determined by the lender. This means that you are qualified to borrow $75,000 total. Your first mortgage and your second mortgage could not be greater than $75,000.
Not only can you have two mortgages, you can also have a third mortgage is you have enough equity in your property. Are there benefits and risks in the number of loans on your home? It depends on why you have the mortgages. If you took out a second loane when you purchased the home to avoid paying Private Mortgage Insurance (PMI), then you have benefitted from a second home loan. This is known as an 80/20 loan. You will not have to have cash for the 20% down payment required on home loans if you borrow under two loans to meet the cash down amount. The amount that you save in premiums costs for PMI may make your smaller payment.
You can have two mortgages if you have the income to make the payments. You will need to prove to the lenders that you have sufficient income and little other debt before you will qualify for more than one loan. A lot of times people take out a second loan to pay for other loan consolidation. If this is the case you may find yourself at risk of foreclosure if you cannot continue the increase in payments. The crisis in the housing industry was caused by people not putting down the requisite 20% of the value of the home. The documents for the mortgages are filed with the court and are a matter of public record. When this process is done it is known as mortgage perfecting or securing interest. When you have paid off all the monies due on all the loans the lender will send documentation to the court to release the lien on the property.
There are three main classifications for mortgages. There are the first and second ones which are fixed loans which have a starting and an ending date. There is a home equity line of credit (HELOC) which is like revolving credit. You have a specified amount you can use and as you pay down the balance you can withdraw more up to the credit line amount. As you can see you can have one mortgage, you can have two mortgages, and you can have three or more depending on your ability to pay and the value of your home.