How many home equity loans can I have?

^{The article is for educational purposes only. JPMorgan Chase Bank, N.A., currently offers home equity lines of credit (HELOCs) in select states and does not offer home equity loans in any state. Please talk with a Home Lending Advisor to see if HELOCs are available in your area. Any information described in this article may vary by lender.}

Quick insights

• Though each loan must be individually approved by the lender, there’s no limit to the number of home equity loans you can have at a time.
• Factors determining loan eligibility for multiple home equity loans may include credit score, debt-to-income ratio, home equity, income and combined loan-to-value ratio.
• While multiple home equity loans can empower you to tackle competing financial interests at a favorable rate, the risks of defaulting on your loans can be severe.

There are many reasons why owning your home can be financially advantageous. For some people, the top benefit is building equity through mortgage payments and improvements. At some point, you may choose to borrow against this equity to manage major financial expenses that come along.

In this article, we’ll discuss home equity loans, how many you can have at once, and what aspects may determine your eligibility and proposed terms. Lender’s may not allow multiple home equity loans or multiple liens on a property.

Understanding the basics: What are home equity loans?

If you’re wondering how many home equity loans you can have, you may already know how these loans work. As a refresher, home equity loans are secured loans that allow homeowners to borrow against the equity they’ve built up in their home. These loans (sometimes referred to as “second mortgages”) can be used for major expenses, such as home renovations, college tuition or debt consolidation. Home equity loans tend to have lower interest rates than other forms of debt, which may make them more attractive than other financial solutions.

Qualifying for a home equity loan

Like any other loan product, the borrower for a home equity loan needs to be approved based on certain criteria. Those may vary significantly between different lenders. In general, lenders may prioritize approving loan applicants who have:

• A good credit score (typically 620 or higher)
• A favorable debt-to-income ratio (generally 43% or lower)
• A minimum level of home equity (15-20% of the home’s value)
• A verifiable income history

These criteria can provide insight into a borrower’s overall creditworthiness and ability to repay the loan. Lenders use these factors to calculate the risk of lending to a specific applicant. The proposed loan rate and terms will represent their assessment.

Can you have more than one home equity loan?

There may be no limit on how many home equity loans you can have at a time. However, all loans must be approved by a lender. The factors that determine eligibility for multiple home equity loans are slightly different. The requirements regarding equity, debt-to-income ratio and income may be stricter for a second home equity loan. Lenders may also begin to factor in your combined loan-to-value (CLTV) ratio, or the combined value of all active equity loans compared to the property’s value.

Lien subordination

Home equity lenders are typically concerned with the order in which a borrower’s loans will be repaid in the event of foreclosure or bankruptcy. As is the case with a primary mortgage agreement, home equity lenders will seek to place a lien on the property. This gives them the right to take and sell it if the debt is not repaid. Liens are addressed in a pre-determined order, with the primary mortgage lien (“senior debt”) generally subordinating subsequent loans (“junior liens”).

Subordination agreements for multiple loans

When multiple loans are in play, a subordination agreement may be required to clarify the order in which liens will be executed. From a new lender’s perspective, a lien subordination can risk if and when the lender recovers the loan amount. The priority order gets formalized in the subordination agreement, and some may impose a subordination fee in the terms.

How many HELOCs can you have?

Sometimes conflated with home equity loans, a home equity line of credit (HELOC) offers another way to leverage your home’s equity for expenditures. HELOCs allow the homeowner to borrow and repay on a recurring basis, similar to the line of credit offered with a credit card. As with home equity loans, you may be able to open multiple HELOCs on a property, but it’s at the lender’s discretion.

Potential risks and benefits of having multiple home equity loans

Having multiple home equity loans can impact your credit and financial situation. For more insight, consider some of the potential risks and benefits:

Advantages of having multiple home equity loans

• Access to funds for home projects, education or other major expenses.
• Interest may be tax-deductible if used for home improvements.
• Interest rates are generally lower than unsecured loans.
• May be useful for debt consolidation due to low interest rates.
• Successful management may positively impact your credit score.

Risks of having multiple home equity loans

• Each new loan adds to overall debt obligations.
• Defaulting on your loan(s) can result in losing your home.
• Unless the interest rate for your loan is fixed, it may increase over time.
• Decreases the amount of equity available in your home.
• Multiple loans and mismanagement may reduce your credit score.

In conclusion

Harnessing your home’s value with one or more equity loans may help you manage your finances. While there may be no limit to the number of home equity loans you can receive, it’s up to individual lenders to approve or deny your request for a new loan based on their own criteria. If you’re considering a home equity loan, research potential lenders to understand the risks that come with this type of loan.