Why might now be a good time to reconsider refinancing your investment property? Refinancing an investment property can be a strategic move to lower your interest rate, access home equity, or adjust loan terms for better financial flexibility. The key to maximizing your investment is making sure your getting the most out of your current loan.
Why Refinance an Investment Property?
Lower Interest Rates
Refinancing allows property investors to secure a lower mortgage rate, reducing monthly payments and increasing overall profitability.
Access Home Equity
Through cash-out refinancing, investors can tap into their property’s equity to fund new investments, renovations, or debt consolidation. Not a bad idea to look at potential renovations that could take your investment property to the next level!
Change Loan Terms
Switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan can provide stability, while extending or shortening loan terms can align with investment goals. There are so many ways to maximize your loan terms.
Key Considerations Before Refinancing
Loan-to-Value (LTV) Ratio
Lenders typically require an LTV of 75% or lower for investment property refinancing. Higher equity can lead to better loan terms.
Credit Score Requirements
Investment property loans generally have stricter credit score requirements, often 680 or higher for the best rates.
Debt-to-Income (DTI) Ratio
Lenders assess the borrower’s DTI ratio to ensure they can manage additional loan payments.
Closing Costs and Fees
Refinancing involves costs such as appraisal fees, loan origination fees, and closing costs. It’s important to weigh these expenses against potential savings.
Steps to Refinance an Investment Property
Assess Your Financial Goals
Determine whether refinancing aligns with your investment strategy—whether for rate reduction, equity access, or improved loan terms. Are you looking at another property, maybe two? Taking a look at your current loan terms can provide insight on how to get the most bang for your buck when moving to the next project.
Check Your Credit Score and Financials
Review your credit score, debt-to-income ratio, and existing loan terms to understand eligibility and potential offers. Look out for anything that doesn’t seem right on your credit report to ensure accurate reporting.
Compare Lenders and Loan Options
Different lenders offer varying rates and loan products. Shopping around ensures you get the best deal. Didn’t get your first loan with AZM Lending? A okay, we are here to help walk you through the best possible outcome for your loan terms.
Get a Property Appraisal
Lenders require an appraisal to determine the current market value of your property and calculate the new loan terms.
Close on the Loan
Once approved, finalize the loan terms and complete the closing process to secure the refinanced mortgage. Want more information? Give us a call today, we’re here to help.
