How to refinance a rental property

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Refinancing rental property is synonymous with a host of benefits. It can also unlock an array of wealth-building activities including improving loan terms, lowering interest rates and monthly payments and even increasing cash flow. However, very few investors are aware of this strategy.

It’s important to note that refinancing rental property comes with several caveats. When you refinance rental property there’s an inherent degree of risk. Hence it’s critical that you are very clear about your reasons for refinancing, to be able to balance the risks and rewards. Done right refinancing of rental property is a great move

When Should You Refinance Rental Property?

The most opportune time to refinance your rental property is when the value of that particular property is high and interest rates are low. The most common reasons for refinancing rental property are to:

  • Pay off your loan faster
  • Lower your mortgage rate
  • Buy new investment properties
  • Upgrade current investment property

What are The Main Steps to Refinance Rental Property?

After you’ve determined the value of your rental property, applying for a loan to refinance should be your next step.

  1. Contact Your Mortgage Broker or Lender

If you’re satisfied with your current lender you can ask them to refinance your existing loan. Working with a mortgage lender or broker that you trust, makes growing your real estate business much easier and faster.

However, it’s also important that you research other sources since lenders have different products for real-estate investors. Be sure to get a statement from each lender to see how the cost of refinancing varies from one lender to the next.

  1. Provide Mandatory Documents and Any Additional Requests

There is a lot of paperwork required when you want to refinance rental property. You should be able to provide all the necessary information and be prompt to respond to any additional requests so that the underwriting process and disbursement of your loan isn’t delayed.

  1. Property Inspection and Appraisal

Your lender will order an appraisal of your rental property to verify its value. If you have tenants be sure to alert them in advance and if there’s any deferred maintenance have it done before the appraisal so that you get the best appraised value. Some lenders may require professional inspection of your property.

  1. Sign Your Loan Documents

After reviewing your final closing statements and signing your loan documents your lender will fund and close on the loan. They will ensure that any existing loan and closing costs are paid for and send any excess funds from the refinance to you.

What are The Refinance Application Documents Required By Your Lender?

Refinancing of your rental property will go faster when you have these documents;

  • W-2 for employment history and income verification
  • Proof of your personal income including bank statements.
  • Most recent tax returns
  • Verification to run your credit score
  • Statements for all investments and retirement accounts

There are a host of benefits that are available to you when you refinance rental property.


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