refinance an investment property

How Do Investors Refinance An Investment Property?

A loan for a rental property may significantly impact your long-term returns. Higher interest rates take a big bite out of your cash flow, leaving very little money to pay for debt reduction or ordinary operating expenses. This article will explain a few reasons why investors refinance an investment property and inform you about all the documents you need when applying. Since our professionals have been in the real estate sector for years, Real Estate Funding Solutions can help you understand everything about refinancing an investment property.  

Why Do Investors Refinance Investment Property? 

Even though several real estate investors tend to buy and hold rental real estate for the long haul, it does not mean that your loan must stay the same from start to end. Making a few changes to your financing could help you increase your monthly cash flow. It will also help you scale up and grow your investment property portfolio. Below are a few potential advantages you get to enjoy when you refinance an investment property: 

  • Lower Your Monthly Mortgage And Loan Interest 

If you have a $150,000 loan, lowering your interest by 0.25% can help you save around $240 every year. You can put that extra savings from refinancing into any existing loan balance.  

  • Shorten Your Mortgage Term 

Most loans for investment property tend to offer a term of 30 years. If you shorten the mortgage term from 30 years to 20 years, you can save a significant amount spent on interest expenses. For instance, if you have a $150,000 loan, you can save almost $40,000 by changing your mortgage term from 30 to 20 years, assuming an interest rate of 4.0% on your mortgage.  

  • Turn Equity Into Cash  

The quicker you pay the principal balance, the more equity you will have in the property, which can be pulled out using cash-out refinance and used to purchase another investment real estate.  

  • Increase Property Value And Rental Income 

The cash you get when you refinance an investment property can help you improve and renovate an existing property and help increase its monthly rental income.

  • Lower Debt-to-income Ratio 

The money you get from refinancing an investment property can also pay off any personal debt, such as a high-interest car loan or a student loan. Most investors use their credit history to apply for an investment property loan. By lowering your personal DTI (debt-to-income) ratio, you can receive a lower interest rate and much better terms when financing an investment property. 

Tips To Help You Prepare For Investment Property Refinance  

If you wish to increase the odds of getting approval to refinance an investment property, you must plan well. The Real Estate Funding Solutions team has helped several investors get approval to refinance an investment property. Thanks to years of experience dealing with lenders, we know how you can prepare for the best outcome. A few tips that can help you acquire a lower rate and better loan terms include: 

  • Maintain a good credit score (at least 620) by keeping current on existing credit lines and avoiding taking any new debt. 
  • Make any repairs needed to help you with your investment property appraisal and stay clear of any inspection required by the lender. 
  • Consider extending your existing tenant’s lease to show that your rental income is predictable.  
  • All multifamily real estate owners must lease up any empty units before applying for a rental property refinance.  
  • Get copies of the last two years of tax returns to show your rental income and expenses. 
  • Prepare all documents, including copies of the rent roll, tenant lease, income statement, and a capital expense report that shows any recent improvements you made to help increase your property’s value.  

As long as you keep these things in check, you can expect to have an easy experience acquiring refinancing. However, if you feel like you are facing many difficulties collecting all these documents, you must contact a professional to help you with the process. Our Real Estate Funding Solutions team can help you gather all the necessary documents. Our team can also give you tips on how you can improve your overall credit score so you have a better chance of getting approval.  

Need Professionals To Guide You Through The Process? Contact Real Estate Funding Solutions Right Away! 

We have a team of professional real estate experts who understand how refinancing works and have years of training and experience dealing with lenders. If you have trouble qualifying for refinancing an investment property, our experts are here to help! We will help you qualify for refinancing and stick by your side until closing to ensure you have no problems. If you are looking for professional guidance, call our team today at 855-913-8637, and our experts will reach out to you in no time.

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