Refinancing an Investment Property

Guide to Refinancing an Investment Property

If you want to maximize your returns as a real estate investor, it’s important to evaluate your properties on a regular basis – their condition, the market they’re in and, of course, the mortgage loan you have on the home.

Oftentimes, these factors call for a change in strategy. Maybe higher demand for rental properties means it’s time to increase your rents, or maybe it’s time to upgrade the home to draw in more demand for the property.

These are all great ways to bring in more returns from your investment. But an even better one, depending on the market, might be refinancing your mortgage loan.

Why Refinance Your Investment Property Loan?

Refinancing the loan on your investment property can help to keep more money in your pocket. It may lower your mortgage rate, and subsequently the monthly costs of your investment properties.  

Refinancing can also help you cash out on the equity you hold in your property, which you can then use toward other investments or for expanding your portfolio.   

You may also choose to refinance to shorten the length of your mortgage loan – particularly if you’re looking to sell your properties or get out of your investments.  

When is the Right Time to Refinance?

There are a few times when refinancing may be in your best interest. The most lucrative opportunities are presented when mortgage rates drop below your current loan’s rate. Not only will this allow you to save money on your monthly payments (and over the life of the loan), but by keeping your rents the same – or possibly increasing them slightly – you can gain even more returns on a monthly basis and in the long term.

You also may want to consider a refinance if you have an adjustable rate mortgage and your lock-in period has expired, or if you want to get rid of Private Mortgage Insurance or shorten the term of the loan. Take some time to learn more about the benefits of refinancing to make sure it’s right for your investments.  

Choosing an Investor-Friendly Lender 

Contrary to what many homebuyers assume, you don’t have to use the same lender when you refinance your loan. In fact, it’s often in your best interest not to – especially as an investor.

Unless you’re particularly happy with the service or rates you get from your current mortgage company, shopping around for a new lender can be a great way to get the lowest costs and the absolute best customer service over the long haul.

When considering a lender to refinance with, look for:

  • Low rates and minimal closing/origination costs
  • Hands-on, responsive customer service
  • Experience in investment lending
  • A variety of loan products, terms and limits

What You’ll Need to Refinance 

Once you’ve chosen a lender, you’ll want to gather up all the proper documentation and paperwork before you start the application process. Just like with your initial mortgage application, you’ll need a number of documents verifying your income, monthly expenses, employment and financial accounts, and getting these organized early can help your refinance go faster and more efficiently.

Here’s what you should pull together if refinancing is on your radar:

  • Recent pay stubs, W-2s and tax returns to verify your income
  • A copy of your homeowner’s insurance and title insurance
  • Statements for your bank accounts, 401Ks, investments, stocks, bonds and other assets
  • Statements for any loans or outstanding debts you have (including your property’s existing mortgage)

Your loan officer will let you know if any additional documentation is needed. Make sure to respond quickly to prevent any unwanted delays in the refinancing process.

Have more questions or concerns about refinancing your investment property? Contact an Agora Lending loan officer at (855) 304-9231 or start your application now.