Refinance Your Rental Property

All about refinancing investment property

There are a number of reasons to refinance an investment property but the best reason is always going to be the one that puts you in a better position to hold or sell when the time is right. Accordingly any of the following benefits makes a good reason to refinance your rental property.

Refinancing a rental property may allow you (an investor) to change an adjustable rate mortgage into a fixed rate. With fixed rates at close to all-time lows, refinancing your rental property to a low fixed payment makes a lot of sense if you are not selling it anytime soon.

Refinancing a rental property at the right time could conveniently reduce the loan amount you are obligated to repay in interest throughout the loan's entire term.

A refinance of your rental home which has increased in property value may mean the loan-to-value ratio is lower and warrants a lower interest rate and/or the removal of private mortgage insurance from the monthly payments.

Let's say you bought the property with 10 percent down, lived in the property for 3 years, then moved elsewhere and rented it out the last two years. You may get a lower interest rate as well as pmi removal.

With the increased value in the rental property, investors may want to do a cash-out refinance to update the kitchen, add or remodel a room, improve the flooring or something else on the property.

Don't forget you can refinance your duplex, triplex or fourplex as a primary residence if you live in one of the units for a potentially lower interest rate, or as a rental when you live off-site.

What is the current interest rate to refinance a rental property?

Current Interest rates are approximately .50 to .75% higher than rates for a primary residence. If you originally had an FHA loan, you may still qualify for a FHA streamline refinance at low rates even though it's now being used as a rental or switch it into a conventional loan to get rid of FHA's MIP.

A cash out refinance on a investment property (rental) is available on most loan products from conventional, FHA, VA, jumbo, and loans without tax returns. The major factors will be the property's loan to value, your income, employment, and your credit score.

Always do your best to raise your personal credit score before starting a refinance. One of the best ways to do that is make all payments on time, keep your balances low at less than 10-percent of their respective credit limits, don't open new credit accounts, and don't close old accounts with good payment histories.

1. View the disclosure disclaimer regarding loan approval, loan product availability and qualifying for a loan. Not All borrowers will qualify.