How to Refinance an Investment Property and not lose money
There sometimes comes a time in the life of investment loans that the investor considers the benefit that may be gained by refinancing.
Low interest rates are sometimes attractive, especially if you happened to have taken out the investment loan at a time of high interest.
The refinance of an investment property can be sought for many reasons and we have put together some of these situations here to assist you in your decision, but you alone must take into account your own particular situation.
Refinance Investment Property – To create ready cash.
The refinancing of your investment loan can create funds that in turn can be re-used to do the following:
- Pay for your children’s higher education.
- To purchase a caravan, motor home, boat or new car.
- Finance an overseas holiday.
- Increase the savings in your superannuation fund.
- Obtain money to pay off worrying debts.
- Invest in shares therefore widening your portfolio.
Refinance Investment Property – To purchase a further investment property.
As the equity in your investment property increases each year through regular repayments off the principal plus the naturally occurring capital growth that takes place as property values increase, you may wish to access this increased equity for further investment.
This is known as equity release finance. By utilizing this type of financing you can create sufficient finance to reinvest in purchasing an additional investment property. (This is particularly beneficial during times of rising property values).
Refinance Investment Property – Upgrading.
Refinancing investment loans can assist the investor to pay for improvements to the property which would enhance its market value and therefore enable the investor to raise the rent.
Such refinancing could create sufficient revenue to carry out the following upgrades:
- Re-paint the building throughout.
- Re-tile the bathroom while generally renewing the fixtures with a general upgrade.
- Extend rooms or build an extra room.
- Add air conditioning and upgrade heating.
- Replace floors, replace kitchens etc.
Refinance Investment Property – Create cash flow.
If you can increase the length of your mortgage and lower your loan repayments through the refinancing of your investment loan you will be able to increase your cash flow.
This can make life easier for the investor and his or her family in their day to day quality of life.
Consideration to be taken into account however should include the following:
- When refinancing an investment property it should be taken into consideration that banks often require a larger deposit be paid. Some even require up to 50%. This is to show that the primary interest of the investor is in the actual property.
- It is not uncommon for the rates to be higher than a normal bank housing loan.
- In the US, investors using the Federal Housing Administration (FHA) for the purposes of refinancing, have the benefit of the equity required being much lower than that required for a normal housing loan, other requirements are equally less stringent.
As can be seen, there sometimes comes a time in the life of investment loans that the investor considers the benefit that may be gained by refinancing.
How to Refinance an Investment Property.
Refinancing an investment property is rather simple and the process involved is not all that overbearing or time consuming if all the documentation is in order and the property appraisal is sufficient.
- It is a good practice to check various lending institutions out before settling on the first offer you receive, as it is a very competitive market, with rates varying dramatically.
- It is also advisable to try to obtain a refinancing loan without a pre-payment penalty.
If you wish to learn more about investment loans and the benefits that can be gained from refinancing an investment property please contact us.
Related posts:
- How to Refinance an Investment Property Loan
- Cash Out Mortgage Refinance
- Cash Out Refinance
- How to Build Up Equity in Your Investment Property
- Investment Property Financing
- Refinance Options
- How to Build Investment Property Wealth
- How to Refinance
- FHA Mortgage Refinance
- Refinance Real Estate Loan
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