Surprise! 10 Mortgage Limit Includes a HELOC With Balance

[Joe Splitrock]

I have been aware of the 10 mortgage limit on conventional financing as we moved towards it. We have 9 currently and one HELOC on our personal residence (no mortgage on residence). I previously understood that the 10 limit was Fannie / Freddie backed mortgages and I thought he HELOC didn't count. I learned yesterday that the 10 mortgage limit is actually ten financed properties. The HELOC counts as a financed property IF there is a balance on the HELOC. I put an offer in on a property yesterday, assuming I could get a regular mortgage. It looks like I have three options:

1. Cash out refinance one of my rental properties and use cash out to pay off the HELOC. The only challenge here is timing of the refinance needs to happen ahead of the closing. It is also contingent on the property appraising at the desired cash out amount. This is the preferred route.

2. Do a cash out refinance on my personal residence. This would get a better interest rate, but we are not comfortable adding a mortgage back on our primary. From a risk standpoint, equity in our personal residence is safer than in rental properties.

3. Get commercial financing on the new rental property. I can do this, but the rate is only fixed for 5 years and the rate is higher. This is less advantageous because it affects cash flow and one of the reasons I am buying now is to lock into 2.99% for 30 years.

Has anyone run into something similar? I had no idea the 10 financed property limit included the HELOC (with balance), because it is held directly with the bank. This implies that any type of financed property counts towards the ten property limit. For example a commercial loan would even limit the number of conventional mortgages you could get.