The Mortgage Brothers Show
Can I Get a 3rd Mortgage?
We get asked this question all the time, but it’s not always in these exact words. Sometimes it’s: How many mortgages can I get on my home? or How many can you just stack? Oftentimes, it’s people simply wondering if they can get another line of credit. They’re thinking of it that way rather than as in terms of positions.
Mortgages have positions?
Now, what’s important to understand is that every mortgage has a position. They have a first and second, and anything beyond that would continue in the same order. Technically, these are all lien positions and that’s what those numbers are standing for.
You can think of every lender basically as a standalone entity or a standalone loan. When you have a first loan on your home and you have a mortgage, that’s a standalone lender. So, if you ever need additional money, you’d be going to a totally different lender. And even if it’s the same lender, it’s going to have to be a brand-new loan.
How many times can I do this?
That’s the question you came here for. In most cases, the answer is two, max. It’s unlikely you’ll find any bank willing to give you a third position loan or a third mortgage on your home. Even though one bank can have two different positions, if there are two, often the second one will be from a different bank than the first.
When people get a conventional loan or an FHA or VA, more often than not those are all first position liens and if you want to access more money, you’ll need to get a home equity line of credit or a fixed-rate second mortgage.
So, once you have a first and second position lien on your home, that’s really it.
But what if I want access to more equity?
If you already had a first and second mortgage on your home and you want more equity out of your house, we would end up redoing either your first or your second mortgage. You wouldn’t go out and get a third. It all depends on whether or not you have enough equity in your home. Some banks want you to have up to 20% equity in your home when going for a second mortgage. But if you do, if you have the equity, we can create a new mortgage.
How does what position your loan is in matter?
This part is actually pretty simple. So, when a foreclosure occurs the courts will order that your home is sold and the lien holders are paid off in the order of the lien position. The lender who’s in the first position gets their money first from the sale of your home then whatever’s left over gets paid off to the second.
During the big financial crisis in 2008, we saw a lot of second mortgages completely annihilated. In many cases, there wasn’t even enough money from the foreclosure sales to pay off the first lien.
The short answer is that there are no real residential third mortgages available out there, at least at any decent rate. And if there was one available, it’d be so expensive you’d never want to do it.
So, your options are basically redoing your first or redoing your second. And the only thing you have to keep an eye on is just making sure that you’re within the loan-to value caps. And as long as you’re under those loan-to value caps, you can redo your first and second as many times as you want throughout the life of your home. You just have to have the equity.
Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.
Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.