Refinancing has made its way into the headlines recently for the ridiculously low-interest rates that have emerged since the COVID-19 crisis began. Property owners everywhere are interested in refinancing—and they want answers.
Key points:
The benefits of refinancing an investment property are plentiful. The most obvious benefit is that your monthly mortgage payments will decrease if you lock in a lower rate, which will give you the maximum return on investment. By lowering your monthly payment, you’ll also be increasing your rental income, so you’ll be saving and making money simultaneously.
Other options include using the equity in the investment property to purchase additional properties or fund other investments. The reasons to refinance are many, but at the end of the day, the choice has to make sense for you and your needs and goals.
Due to the current economic conditions, now is one of the best times to refinance. Interest rates are historically low, and there’s no telling when they’ll drop this low again.
Generally, the best time to refinance is when interest rates are low and property values are high. If you’re looking into refinancing and haven’t gotten your ducks in a row yet, now would be an excellent time to get started.
Related: Questions to Ask a Mortgage Lender
Banks consider loans for investment properties riskier than those for primary residences, and this is reflected in the interest rate. It makes sense—people are more likely to prioritize their primary home in times of financial difficulty.
Because of this increased risk, banks raise the interest rate—0.5% more is fairly standard. If the rate is too high, it may not make sense to refinance. You’ll also need to consider brokerage fees, closing costs, and other hidden expenses.
Wondering what your rate might be? Use Mares Mortgage’s Rate Checker!
Lenders will typically ask for:
Refinancing loans are available from banks, private lenders, credit unions, and more. But just because they’re accessible doesn’t mean they’re all right for you. Be sure to vet your options carefully and get 2–3 quotes.
Please use a trustworthy and knowledgeable lender.
Once your application is approved, you’ll likely have the option to lock in your interest rate—meaning the lender commits to that rate for 15–60 days. If you don’t lock it, your rate may fluctuate ("floating") before closing.
Underwriters will review all documentation, verify income and assets, and usually order a home appraisal. If you’ve made upgrades or renovations, be sure to point them out—it can impact the value and improve your loan terms.
At least three days before closing, you’ll receive your closing documents. These outline all details of your new loan, closing costs, and fees.
Ask questions before signing. Once you're locked in, you can’t make changes.
Need a mortgage broker to help with refinancing? Mares Mortgage is a family business trusted by clients for over 20 years. They genuinely care about helping people find better financial footing.
Refinancing an investment property doesn’t have to be intimidating. While the process can be complex, a smart refinance can truly transform your financial future.
The key to success is research and preparation. If you're clear on your goals and choose a knowledgeable lender, you'll be in good shape.
Mares Mortgage is here to help you every step of the way. Contact them today!
Related: Reasons to Refinance Your Home
