Carrying multiple mortgages?

[Paul Giblin]

I’ve heard conflicting answers to this question. Using the Brrrr method, when it comes time to cash out refinance, do you have to be able to afford both mortgages even if your first one is renting with cash flow? Does that cash flow count as income for approval on the second mortgage?

[Michael Henry]

@Jimmy Lieu everything you stated about DTI is true but I think you may be missing my point. Let me try to say it in a different way. When you apply for financing they will tell you how much you qualify for (your max purchasing power) this is true for refinance too but with one other conditions limitations i.e. property value. Let's say you own a property and it is worth $500K but your DTI only allows you to pull out $250K you are capped unless you find a commercial loan product or your income increases the next year and which case you can refinance again at a higher amount. If the property value $150K you still have $100K in refinancing price or purchasing power.

The point is, your preapproval will tell you how much refinancing power you are going to have using traditional banks or CUs. If you do not that you are doing your Brrrr blind on one of the most important parts. 

Using an HML will not make sense because you will not have the ability to refinance out once your short term loan is up.