Home equity loans and HELOCs are homeowners’ easiest ways to finance home renovation projects. But, most people with primary residences and investment properties ask whether it is possible to have two or more HELOCs and home equity loans for the same property.
Although lenders recommended consolidating home equity loans as a way of eliminating high interest debt with home equity, the question unanswered is whether it is possible to have two home equity lines of credit, although with different lenders.
Read on to get answers to questions such as, “can you have more than one home equity loan?” and other frequently asked questions about a home equity loan.
What Is a Home Equity Loan?
The best way to determine if having more than one line of credit is the right option is to understand a home equity loan fully. A home equity loan is the same as a second mortgage or a HELCO loan. These are both types of financing that rely on the value of your house and its equity as security.
However, most lenders cannot allow you to use all the home equity to secure a loan. Instead, usable equity that most lenders let you access remains at approximately 80%. You can use this equity to secure a line of credit or a mortgage on an investment property.
How Loans Can I Have on One Property?
You can take more than one home equity loan from different lenders, depending on the available usable equity on your home. Home equity lenders can allow you to secure a loan using a portion of your usable equity. For example, you can use part of your equity to secure a loan for an ongoing renovation project and the rest for an investment loan.
Unfortunately, the portion of your home equity you use to secure a loan is no longer usable equity for another loan. As a result, you cannot re-use your equity to secure another loan.
Primarily, all lenders conduct a credit check to determine your usable equity before approving loans. Such a background gives them access to your outstanding loans and credit products to determine if you can repay them. Therefore, you can access an equity loan as often as you have usable home equity and satisfy the lender’s requirements.
However, taking multiple loans is not suitable for your credit. You will be getting high interest rate for the money you borrow, which is a drawback if you are eliminating high interest debt with home equity.
Home Equity Requirements
Lenders typically check your loan-to-value (LTV), to determine whether you have enough equity in your home to access loans. You become ineligible for multiple home equity loans if they find that LTV is less than 80 percent. However, access to loans depends on factors such as the lenders’ underwriting guidelines.
Lenders will evaluate each home equity loan application independently before approval. However, remember the more debts you secure, the harder it becomes for you to secure a subsequent loan or lower charges if you are looking for ways of eliminating high interest debt with home equity.
However, most people consolidate most of these loans to work for you by lowering the fixed rates, increasing disposable income, and simplifying monthly repayments
On the Bottom Line
Are you still concerned about topics such as “can you have more than one home equity loan?” Although most homeowners only use one home equity loan, in reality they can access more than one, depending on their home’s equity. However, you cannot use your equity more than once.
Instead, you can use part of the equity for different home equity loan products. However, remember to tap into your equity only when necessary. Resist taking loans that can run you into high-cost debt, especially when you have more than one home equity loan.