Lending after 10 Mortgages

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Lending after 10 Mortgages

Deanne Bourne
Investor · Concord, CA · Member since 2016 · 54 posts · 22 votes

I am now being told I have reached my limit in this residential "type" of mortgage product (20% down, 30 yr conventional) The lenders and my realtor both say I need to go to the next step, a portfolio loan.  It was described to me as using multiple properties as collateral and then using the money as needed.  Can someone go into detail about how this is accomplished?  Do I call a banker or a lender and say I want to put up 6 properties for a line of credit of $xx,000?   What banking or lender does that type of package?  I have talked with a bank that did a $500,000 refinance on one property which they called a portfolio loan.  It was a slightly higher rate of interest, 25 years amortization and a 6 year adjustment period.  I refinanced it asap. 

    I am programed to the 30 year conventional at this point and when I do mortgage calculations with 20 or 25 yr amortization periods I know the mortgage will take a bigger bite out of my profits.  Maybe I don't have my description right so correct me if I am wrong.

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Eric Johnson
Lender · Chicago, IL · Member since 2016 · 653 posts · 313 votes
5y

Hi, at this point you'll want to go commercial. You can get 30 year fixed or something like a 5/1 Hybrid arm (fixed for 5 years then adjusts based on an index after 5th year w/ a ceiling and lifetime cap). 5/1's usually have a lower interest rate by about 10-30bps (basis points). 

There is no limit to how many properties you can finance, since it is asset-based. Common asset-based pricing right now is around 4.85-5.75%. Hope this helps.

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  • Mike TerryPro Member
    Investor · Fort Myers, FL · Member since 2015 · 293 posts · 278 votes
    5y

    Hi Deanne,

    I am in the banking industry, although I am not a banker. I would recommend you contact small community banks ( total assets under 5Billion) or credit unions that do commercial lending.  I started backwards and went with a small bank commercial loan for my first 5 rental properties.  I do have a bank that uses a 30 year amortization schedule with a 5 year balloon.  Yes, rates are higher.  I think your fear is not really understanding the impact of rate and term on your loan.  Play with a mortgage calculator adjust rates terms and learn the real impact on your bottom line.  Remember that if you have a 20 or 25 am loan your renters are paying off the loan faster.  You are still earning a return it is just in a different form. There are other advantages, your commercial loans don't show up on your credit report.  Wrap your properties into a portfolio loan and start to build  on your conventional 10 loans again.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    @Deanne Bourne A “portfolio” loan is not a loan on a “portfolio of properties”that would be a Blanket loan (which mortgages more than one property).  A Portfolio loan is a loan that a bank/credit union keeps in house in Their Portfolio of loans, they don’t sell them off in the secondary market.

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  • Eric Johnson
    Lender · Chicago, IL · Member since 2016 · 653 posts · 313 votes
    5y

    Hi, at this point you'll want to go commercial. You can get 30 year fixed or something like a 5/1 Hybrid arm (fixed for 5 years then adjusts based on an index after 5th year w/ a ceiling and lifetime cap). 5/1's usually have a lower interest rate by about 10-30bps (basis points). 

    There is no limit to how many properties you can finance, since it is asset-based. Common asset-based pricing right now is around 4.85-5.75%. Hope this helps.

    2Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Deanne Bourne There are commercial programs designed for investors scaling like you which have no cap on the # of financed properties owned. 30 year fixed options are still available but rates would be higher than the Fannie/Freddie options you might be used to.  These will typically be in the 4-6% range depending on the scenario. Happy to chat more. 

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  • Deanne Bourne
    OP
    Investor · Concord, CA · Member since 2016 · 54 posts · 22 votes
    5y

    Thank you.  I have heard “blanket” loan and portfolio loan but these explanations really help.   I am in business at 72 yr old so I am looking for income and 20 or 25 yr amortization’s make it more difficult to have money at the end of the month.  So far I have done very well but it gets harder to find properties that will give good/great cash on cash return.  
    We are just completing a three townhouse purchase in STL at 80% LTV and under 3.4% for 30 yr. The monthly income is very good. With 10 mortgages I guess I will have to learn and accept a new approach and less return.

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  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    5y

    Look into local private lenders.

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