It’s time for some more mortgage Q&A: “Can you have two mortgages at the same time?”
This question came up recently and despite all the content on my site, it’s something I’ve never explicitly addressed.
So let’s talk about it! In short, yes, you can two mortgages at the same time, or even three depending on the circumstances.
It’s actually pretty common to have a second mortgage, though the reasons why can vary.
And no, it’s not a negative thing to have two mortgages, it can actually be a super savvy move.
Can You Have Two Mortgages?
In my second mortgages article, I briefly touched upon the possibility of having two mortgages and how in the past (or even present) it can carry a negative connotation.
The long and the short of it is someone who has (or needs) two mortgages might suggest they are in financial stress.
But that’s simply not true for myriad reasons, which I’ll lay out here.
Before I do that, I want to make clear that you can hold multiple mortgages on the same property at the same time.
For example, you can take out a first mortgage when you buy a home, and later take out a second mortgage behind it.
Or you can buy a home with two mortgages at the same time, known as a piggyback loan (for obvious reasons).
You can also own multiple properties with multiple loans attached, or even two properties with two mortgages on each, for a total of four loans.
The possibilities are endless really, but the takeaway is that it’s completely normal.
Why Would Someone Have Two Mortgages?
Now let’s talk about the why. There are various reasons.
A common one is to tap your equity once you’ve accrued some, perhaps a few years after you purchased your home.
Let’s say you bought a home for $400,000 with a 20% down payment to avoid private mortgage insurance and secure a lower interest rate.
Now it’s worth $500,000 and you’ve paid it down some as well. If you need/want cash, one option is to tap your available home equity, which is the difference between your appraised value and outstanding loan amount.
Pretend that outstanding loan balance is $350,000 now. That means you’ve got $150,000 in equity at your disposal.
However, lenders typically won’t let you tap ALL your equity, so a cushion is often required.
This could mean that you can borrow 85% or 90% of the current value, so in our example up to $100,000.
If you were to do this, you could take out a home equity line of credit (HELOC) or a home equity loan.
That would be a common scenario where someone winds up with two mortgages at the same time.
An alternative to this where they stick to one loan is a cash-out refinance, where you exchange your existing first mortgage for a brand new shiny one.
But considering where mortgage rates are at the moment, it’s probably a better deal to get the second mortgage.
This way you can hang onto your low-rate first mortgage and save on interest in the process, even if you need cash.
Home Buyers Will Also Break Up a Loan Into Two to Avoid Mortgage Insurance and Snag a Lower Rate
The other common scenario where you wind up with two mortgages is the piggyback loan I spoke about earlier.
These are not as prevalent today because you can now buy a home with as little as 3% down with Fannie Mae or Freddie Mac. Or even zero down across many loan programs.
But home buyers will sometimes purchase a property using two loans.
For example, a first mortgage at 80% loan-to-value (LTV) and a second mortgage for say 10%.
This means they only need a 10% down payment AND can avoid mortgage insurance (PMI) as well because they’ve got a first mortgage set at 80% LTV.
So it’s a strategy to both get a lower interest rate on the first mortgage due to lower mortgage pricing adjustments, and also avoid monthly PMI costs.
To that end, it’s not a sign of financial distress, but a strategic move to save money, whether it’s breaking up a home purchase loan into two, or keeping your first mortgage and its low interest rate intact when tapping equity.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.
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