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How Many Home Equity Loans Can I Have?

April 09, 2024 7-minute read

Author: Kevin Graham

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Home equity loans can be an effective way to convert your existing home value into cash without having to refinance your primary mortgage or sell your home. However, if you have improvement projects for multiple properties and you’re looking to finance them with home equity, you may be wondering, “How many home equity loans I can have?”

How Many Home Equity Loans Can You Have?

While having more than one home equity loan is rare, you can theoretically have as many home equity loans as you have properties – so long as you meet eligibility requirements. Many lenders, including Rocket Mortgage®, won’t allow you to have more than one home equity loan on the same property. However, it’s important to note that lenders may have their own rules. We offer a Home Equity Loan for primary residences and second homes.1

To take out more than one home equity loan, you’ll have to qualify based on lender requirements, such as credit score, loan-to-value ratio (LTV) and income.

While there’s no limit to the number of existing mortgages you can have if you’re getting a home equity loan for a primary property, the maximum is 10 financed homes if you’re getting a loan for a second home. If you have more than six financed properties, the qualifying credit score must be 720 or higher. Properties that have been paid off don’t count toward limits.

How Many HELOCs Can You Have?

Like a home equity loan, a home equity line of credit (HELOC) is a second mortgage. While they can serve the same purpose, it’s important to understand the structural difference between a home equity loan and a HELOC. A home equity loan is a lump sum payment like a cash-out refinance.

By contrast, a HELOC functions more like a credit card. During the draw period, you only pay interest on the portion of your equity you take out. You can also put the money back in at any time during the draw period to be used later. The second phase of a HELOC is the repayment period, when the line freezes and you pay back principal and interest for the rest of the term.

Just as with home equity loans, it’s possible to have more than one home equity line of credit. Because there’s no legal limit on the number of HELOCs you can have, you can take out as many as you qualify for. Again, in most cases, you’re not going to have two on the same property. Rocket Mortgage doesn’t offer HELOCs at this time.

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Do You Need To Use The Same Lender For A Second Home Equity Loan?

There’s no regulation that says you have to work with the same lender to get a second home equity loan. However, on the off chance that a lender approves you for a second home equity loan, they might be more likely to approve you if they hold the first one than if you went with a totally different lender.

The reasoning here is that each lien on your property is riskier than the last. If you couldn’t make payments on your home, creditors are paid off in the order of their lien position. So the holder of your primary mortgage would be paid before the holder of your first home equity loan who would be paid before the third home equity loan holder, and so on.

If you’re getting multiple home equity loans, but they’re for different properties, you don’t have to worry so much about who holds the other loans. You should shop around for whoever is going to give you the best deal.

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How To Qualify For More Than One Home Equity Loan

If you’re trying to qualify for more than one home equity loan, here’s what you need to consider.

Equity In Your Home

You need to make sure that the value of your home is such that you have enough equity to accomplish your goals through a home equity loan. This is important because no matter how many existing loans you have on your home, your lender is going to require that you still have a certain amount of equity in the home after you take out your new loan.

As an example, Rocket Mortgage requires that you have a minimum of 10% equity in your home after your home equity loan closes.

Credit Score

Because it’s not based on a primary loan, the credit score required to get a home equity loan is higher than other mortgage options. If you leave 20% equity in your home, the minimum qualifying credit score is 680. That bumps up to 700 if you’re leaving 15% equity. Finally, if you’re leaving just 10% equity in the home, the credit score required is 740.

Other Requirements

Lenders may have other requirements in order to get a home equity loan. Rocket Mortgage doesn’t do piggyback home equity loans. This means you can’t have more than one home equity loan. You also can’t take out a home equity loan at the same time you take out a primary mortgage.

Beyond that, lenders will require that you have sufficient funds to make your payments and a low debt-to-income ratio (DTI). We require a DTI no higher than 50%.

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What’s The Most You Can Borrow With A Home Equity Loan?

There are two key factors in determining how much you can borrow with a home equity loan: the amount of equity you have as well as any maximum loan amounts a lender may have. At Rocket Mortgage, the maximum amount for any home equity loan is $350,000.

Beyond that, equity comes into play. You have to leave 10% equity in your home after getting your loan. So if your home was worth $300,000, you would need to have at least $30,000 equity left in the home after accounting for the new loan. In this case, the maximum you can borrow across all your mortgages would be $270,000.

When Does Having More Than One Home Equity Loan Make Sense?

One common situation in which having more than one home equity loan might be beneficial is if you have multiple homes that need home improvements but you don’t want to refinance the primary mortgage. You could utilize the equity in the properties to make your goals a reality.

You might also take out home equity loans across multiple properties in order to consolidate debt at a lower interest rate than you might receive on a credit card or personal loan. Consult a financial advisor for tips on your personal situation.

What Are The Risks Of Having More Than One Home Equity Loan?

The primary risk of having more than one home equity loan comes from what happens if you don’t make the payments. Because the house is collateral, there is a nonzero risk of losing your home if you get into financial trouble and end up defaulting.

Beyond that, the more equity you finance based on your home value, the bigger the risk you take that you won’t be able to pay off your loans if the property value falls.

Alternatives To Having More Than One Home Equity Loan

While having multiple home equity loans may be a good option in some cases, there are other avenues you could also take to accomplish what you wish to achieve.

Personal Loans

The primary attraction of a personal loan is that it’s unsecured. If you default, your credit is going to take a hit, but you’re not risking your home or personal property. However, you should know that this also means the interest rates are going to be higher than you can get with a secured loan because lenders are taking on additional risk.

Personal Lines Of Credit

A personal line of credit works like a HELOC, but it’s not backed by your home. Instead, you’re just evaluated based on your credit history. You still have a draw period and a repayment period. During the draw period, you’re only required to make the interest payments. Once the repayment period starts, you make payments on the principal and interest until the term ends.

Zero Percent APR Credit Cards

Depending on what your goals are with the home equity loan, you may be able to accomplish them with a 0% annual percentage rate (APR) credit card. This could work for both home improvement and (in the case of balance transfer) debt consolidation.

The important thing here is that you have to have a plan for paying off the debt over a relatively short timeframe. The 0% APR is an introductory rate. You’ll only have maybe a few months to a year to fully pay off the debt before a much higher interest rate kicks in.

The Bottom Line

It’s not common for people to have more than one home equity loan, but it is possible. You usually won’t have more than one on one property, but you might use multiple home equity loans across different properties to consolidate debt or complete home improvement projects. For a home equity loan to make sense, you’ll want to have enough equity to accomplish your goals along with stable income and a good credit score.

The amount you can expect to borrow is based on lender guidelines and the value of your home. It’s important to know that you put your home at risk if you fall behind on payments. Alternative financing options may include personal loans and lines of credit as well as low-interest introductory credit card rates.

Those interested can do more home equity loan research to find out if it’s right for them.

1 Home Equity Loan product requires full documentation of income and assets, credit score and max LTV/CLTV/HCLTV. Requirements were updated 2/5/2024 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $350,000.00 (minimum loan amount for properties located in Iowa is $61,000). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Schwab products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. Not available in Texas. This is not a commitment to lend.

Kevin

Kevin Graham

Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage, he freelanced for various newspapers in the Metro Detroit area.