In an attempt to save some money and increase cash flow, several real estate investors choose cash-out refinance for investment properties. The loan you have on a rental property can have a severe impact on your potential long-term return. Higher interest rates could take out a significant chunk of your cash flow, leaving very little money to manage regular operating costs or debt reduction.
In today’s article, the Real Estate Funding Solutions team will tell you everything you must know about cash-out refinance for investment properties and how to get one to help improve your investment portfolio. Remember, the primary goal of cash-out refinance is to help put yourself in a better financial position and boost your monthly cash flow. Let’s check out how cash-out refinancing can help you save money on your investment property.
Lower Your Current Interest Rate
Interest rates have steadily increased since the pandemic’s historical lows, but they are still incredibly low. If you had purchased a property with a higher interest rate, cash-out refinance is a great way to bring down your monthly payments and free up that money for other essential things.
Tapping into Equity
Another reason many people choose cash-out refinancing is to tap into all the equity they’ve built on the investment property. It means swapping your current loan for a new one higher than your existing one. The difference in amount will be paid to you in cash. You can use this money to purchase new properties, make repairs to your investment property, or use it as you see fit.
Switching Your Loan Type
Cash-out refinance also allows you to switch to a more favorable loan type. Depending on your current financial situation, you may want to consider shortening or extending your loan term. Moreover, you may now qualify for a better loan than you initially did when you purchased the property. Refinancing from adjustable to fixed loan rates can help you take advantage of the current interest rates.
Steps To Refinance An Investment Property!
The process of cash-out refinance for investment properties is quite similar to refinancing a residential property. However, since real estate investment property loans are considered more risky, you must prepare as much as possible. Now that you understand why cash-out refinancing could be in your best interest let us check out how to apply.
Before starting the process, you must gather several lenders to qualify for a loan. Collecting all your paperwork together will help make the entire process much smoother. Some documents that most lenders ask for include the following:
- Proof of property insurance
- Proof of income (deposits or other income papers made using the property)
- Tax returns or W2s
- Proof of title insurance
- Financial statements (business and personal accounts)
The Application
Once you have all your documents ready, it’s time to submit an application to your lender. You can find thousands of real estate lenders, so you must research before finalizing anyone. It would be best to partner with a Real Estate Funding Solutions professional. Our team has been in the industry for years and can quickly help you connect with the right real estate lender in no time. Applying for the loan itself is a painless process. You must ensure you respond quickly and submit all essential documents to stay on track and prevent any delays in your closing.
The Underwriting Process
During the underwriting process, the lender will check out your finances and may also order an appraisal to assess your real estate’s value better. If you have recently made any improvements or renovations to the property, ensure they are told to the appraiser. A title company will also search to ensure no title issues. If any title issues, such as claims or liens, come up, you must take care of them before closing.
Once your underwriting process is done and dusted, it’s time to close your loan. All real estate lenders must provide the borrower with an official closing disclosure at least three days before closing. It will cover all your refinance figures and expenses, including your closing cost, total monthly payment, interest rate, escrowed taxes, and insurance.
Contact Real Estate Funding Solutions To Find Out More About The Process!
When done under the right circumstances, cash-out refinancing for investment real estate is an ideal way to free up some money and invest it back into your business. With our Real Estate Funding Solutions experts by your side, the process will be as painless as possible. Moreover, our team can help you find the best lender for your loan. Remember, working with the right lender could make all the difference, so if you plan on applying for cash-out refinance and are looking for professionals who can guide you through the process, feel free to contact us as soon as possible!