How Many Home Equity Loans Can I Have? A Complete Guide

Home equity loans allow homeowners to tap into their home equity to access funds. But can you take out more than one home equity loan? The answer is yes, you can have multiple home equity loans – with some limitations.

In this comprehensive guide, we’ll cover everything you need to know about getting multiple home equity loans, including:

What is a Home Equity Loan?

A home equity loan is a type of second mortgage that allows you to borrow against the equity in your home. The equity is the difference between what your home is worth and what you owe on your mortgage.

With a home equity loan, you receive the money in a lump sum and repay it over a fixed term, usually 5-30 years The interest rate is also fixed for the loan term.

Home equity loans are commonly used for

• Home improvements
• Debt consolidation
• Major purchases
• College tuition
• Medical bills

How Many Home Equity Loans Are Allowed?

There’s no legal limit to the number of home equity loans you can have. However, most lenders will limit how many home equity loans they’ll give one borrower.

For example, many lenders like Rocket Mortgage will only allow one home equity loan per property. So you couldn’t get two home equity loans on the same home.

But if you have multiple properties with equity, you may be able to qualify for separate home equity loans on each.

What Factors Determine Eligibility for Multiple Loans?

While there’s no hard limit, getting approved for more than one home equity loan can be challenging. Lenders will scrutinize your application closely to ensure you can manage the additional debt.

Here are the key factors lenders consider:

Credit score – For a single home equity loan, you’ll likely need a minimum credit score around 620-680. But with multiple loans, a score of 720+ gives you the best approval odds.

Debt-to-income ratio – Lenders want to see your total monthly debts divided by income below 50%. Multiple loans make this ratio climb quickly.

Loan-to-value ratio – Most lenders require you to maintain at least 10-20% equity in the home after the new loan. The more equity you have, the better.

Home equity – You’ll need enough equity in each property to support the loan amounts you’re requesting while meeting the lender’s LTV requirements.

Income/employment – Stable income is crucial when you take on additional debt. Expect extra scrutiny from lenders. Self-employed borrowers may have a harder time qualifying.

Existing loans – Lenders will review your payment history on current mortgages and other debts. Late payments or defaults can jeopardize approval odds.

As you can see, getting multiple home equity loans is far from easy. You’ll need prime credit, low debt, and ample equity to have a shot.

How Much Can You Borrow With Multiple Home Equity Loans?

The maximum you can borrow depends on:

• The lender’s policies – Most cap loan amounts at $150k-$350k
• Your total equity
• Loan-to-value requirements

For example, say you have two homes, each worth $300,000. On the first home, you owe $180,000 and on the second you owe $150,000.

That gives you $120,000 in equity on Home 1 and $150,000 in equity on Home 2.

The lender requires you to maintain 20% equity. So the most you could borrow is:

• Home 1: $120k equity x 80% = $96,000
• Home 2: $150k equity x 80% = $120,000

So in total with two loans, you could borrow $216,000.

Always account for LTV when calculating the max loan amount to avoid surprises.

When Does Getting Multiple Home Equity Loans Make Sense?

There are a few situations where multiple home equity loans can be useful:

• You need cash for renovations on two different properties.
• You want to consolidate debt with low-interest loans across multiple homes.
• You have urgent expenses exceeding the equity available in one home.
• You don’t want to refinance existing mortgages and home equity provides lower rates.

However, because eligibility is strict, alternative financing like personal loans or HELOCs may make more sense in many cases.

What Are the Alternatives to Multiple Home Equity Loans?

If getting approved for multiple home equity loans seems out of reach, here are some other options to tap home equity:

• HELOC – Home equity line of credit works like a credit card, with flexible draw periods. Easier to qualify for than multiple loans.

• Cash-out refinance – Pulls cash from one property by refinancing the mortgage. Requires less equity than a home equity loan.

• Primary mortgage – When purchasing a new home, roll equity from your other properties into a larger primary mortgage.

• Personal loan – Unsecured loan with fixed rates. Won’t put your home at risk but may have higher rates.

• 0% APR credit cards – Useful for shorter-term goals. Intro 0% rates last 12-21 months.

Each option has pros and cons to weigh based on your situation and financial goals.

What Are the Risks of Multiple Home Equity Loans?

The more equity you convert to debt, the greater risk you take on. Key risks include:

• Losing your home – If you default on any of the loans, foreclosure is possible.

• Fall in home values – Declining property values can leave you underwater on the loans.

• Payment burdens – More loans equal higher monthly payments. Budget carefully.

• Rising interest costs – If rates increase after you get a fixed-rate home equity loan, future loans will be more expensive.

• Credit damage – Defaulting hurts your credit, which can limit future financing options.

Always weigh these risks against your need for the loan proceeds and ability to comfortably make the payments.

Tips for Managing the Application Process

If you’ve determined multiple home equity loans fit your needs, here are some tips to navigate the application process:

• Check your credit – Review your credit reports and address any errors before applying. Aim for a score above 720.

• Calculate your equity – Use online tools to estimate your home values and determine your available equity.

• Compare lender guidelines – Each lender will have their own requirements. Shop around for the most favorable terms.

• Review the rates – Compare interest rates across lenders and loan options. Variable-rate HELOCs may have lower initial costs.

• Lower your DTI – Pay down debts and avoid new credit applications to keep your DTI low.

• Clean up income documentation – Have tax returns, bank statements, and other info lenders will want to verify income.

• Ask about exceptions – If you don’t meet every guideline, find out if the lender has any wiggle room or appeals processes.

The Bottom Line

While not very common, you can get multiple home equity loans – as long as you meet strict lender requirements. Key qualifications include a strong credit score, low DTI, and enough home equity to support the loans.

Thoroughly assess your financial situation and goals before pursuing multiple loans. In many cases, alternatives like HELOCs, cash-out refinances, or unsecured personal loans may be easier to obtain if your primary aim is tapping home equity. But if you need funds for multiple properties, and you have prime credit and substantial equity, multiple home equity loans could make sense.