Things may be going great between you and your bank. Maybe you’ve attained several mortgages from them already, and you’ve been buying up real estate left and right, building your portfolio.
You might not see it coming, but once you own a set number of mortgages in your own name, the traditional bank will likely cut you off, refusing to lend you another cent. Although the limit can vary, I believe it’s now around 10 mortgages. Of course, this number depends on many factors.
So, why would the bank do this, especially when you’ve shown them repeatedly that you’re good for the money? Maybe you even have a perfect credit score or enough cash in reserves to buy the property outright if you really wanted to. That’s great—it’s not what the bank is concerned about.
Just as we investors like to diversify between multiple investment types, sometimes the traditional bank likes to spread out their risk among many different borrowers, not lending over a certain amount to any one person, for example.
This, however, does not actually mean that your situation is too risky or that you have done anything wrong. It’s the bank’s policy. Or, in other words: It’s not you, it’s them.
Related: 4 Reasons Property Owners Might Choose to Sell via Seller Financing
To avoid being blindsided, a good practice is to every now and again take a banker to lunch (i.e. pick his or her brain). Ask them what they’re lending on these days or what kind of deals they’re looking for.
If you’re already to the point where you’ve hit a roadblock with your neighborhood bank, no matter how many lunches you buy, don’t lose hope.
Over the years, I’ve borrowed at least 50 mortgages, including refinances and HELOCs (home equity lines of credit), and of course, not all of them were acquired from traditional lenders. There are other options out there.
5 Ways to Get Deals After the Traditional Bank Cuts You Off
1. Find an investor-friendly bank or mortgage broker.
When I hit that first roadblock, I decided to join a local real estate club to network with other real estate investors. Through rubbing elbows with more experienced investors, I was able to add more tools…