
Refinancing
Traditional banks shy away from providing loans for investment properties. We work with a network of private lenders and banks that will help you secure the loan for the purchase or refinance of rental properties at competitive rates and fast funding.
What are some reasons to Refinance?
The first step in deciding whether you should refinance is to establish your goals. The most common reasons for refinancing a mortgage are to take cash out, get a lower payment or shorten your mortgage term.
Convert a Variable Rate to a Fixed Rate
One of the most important reasons to refinance your rental property is to convert from a variable interest rate (also referred to as an adjustable rate) to a fixed one. Why is this important? While an adjustable rate can result in lower home payments in the short-term, it can be a nightmare if interest rates were to rise in the long-term. Having a low, fixed rate, however, can protect investors from looming interest rates down the line.
Lower Interest Rate
Shortening your mortgage term is a great way to save money on interest. Often, shortening your term means you'll receive a better interest rate. A better interest rate and fewer years of payments mean big interest savings in the long run.
Take Cash Out
With a cash-out refinance, investors have the opportunity to withdraw above and beyond what they own on their current mortgage, helping to put cash in their pocket, which could be used for upgrades on their current rental property or leveraged for other investment properties. Since mortgage interest rates are typically lower than interest rates on other debts, a cash-out refinance can be a great way to consolidate or pay off debt
Things to evaluate
Once you have a clear goal in mind, you'll want to evaluate your financial situation.
Your Credit
Score
There are many online resources that make it easy for you to find out your credit score for free. Knowing your credit score will help you understand what mortgage refinance options you could be eligible for.
Your Debt-to-Income Ratio
Another factor to take into consideration is your DTI. DTI is all your monthly debt payments divided by your gross monthly income. DTI is one way lenders measure your ability to repay the money you're borrowing.
If you were paying $1,000 a month for your mortgage and another $500 for the rest of your debts (such as credit card debt, auto loans and student loans), your monthly debts would equal $1,500. If your gross monthly income was $4,500, then your DTI ratio would be 33%.
Most lenders require a DTI of 50% or lower, and the maximum DTI varies by the type of loan you get. A DTI that's too high could impact your ability to refinance or limit your refinance options.
Your Monthly
Mortgage Payment
Knowing how your monthly mortgage payment fits into your budget will help you evaluate your options. If you're taking cash out or shortening your term, for instance, it's a good idea to know how much wiggle room you have in your budget for a higher monthly payment.
Value of Home
Do a bit of research to estimate how much your house is worth. Your lender can't lend you more than the home is worth, so an appraisal value that comes back lower than expected can impact your ability to refinance – especially if you're looking to take cash out or remove mortgage insurance.
The best way to estimate your home value is to check the sale prices of similar homes near you. The more recent the sale, the better.
Knowing the value of your home can tell you how much equity you have.