Mortgage Refinance for Rental Properties

Mortgage Refinance for Rental Properties

How to Refinance the Mortgage on a Rental Property

2024 may be a good time to Refinance your rental property with a fixed rate loan. Our lenders offer refinance mortgages for rental properties, second homes, apartments and investment properties. Mortgage refinance loans can be powerful financial tools because they allow homeowners their equity for purchasing vacation homes and investment properties.

Are you ready for a rental refinance mortgage that saves you money every month?

For many investors, capitalizing on today’s historically low interest rates stands as the primary motive for refinancing investment property. However, it’s unlikely that interest rates will remain at these levels indefinitely. The Federal Reserve has hinted at multiple rate hikes in 2024, making it prudent to secure a better mortgage with a fixed interest rate before potential rate-hikes.
  • Refinance 2nd Homes

  • Mortgage Refinancing for a Rental Property

  • Refinance a Vacation Home

  • Investment Home Refinance Loans

  • Refinance Apartment Loans

Nonetheless, distinctions exist between refinancing your primary residence and refinancing a rental property. Lenders recognize that borrowers are highly motivated to safeguard their primary residence and will exert every effort to avoid defaulting.

When you start the process of shopping mortgage companies you need to verify that the lender provides refinancing options for investment properties and second homes. Certain lenders might perceive it as too risky, particularly in states where the housing market may be less robust.

Homeowners can refinance high rate loans and into a fixed rate mortgage loan that protects against rate hikes and inflation. There is no better way for a homeowner to refinance their rental properties than with a tax deductible mortgage refinance from lenders or bankers through BD Nationwide.

3 Tips for Refinancing a Rental Property or an Investment Home

The good news is that refinancing a rental property is not as difficult as you may think.

1. Accumulate Equity
Before refinancing your investment property, it’s essential to accumulate some equity. Lenders have varying requirements regarding the amount of equity needed in your property before refinancing. Generally, most lenders prefer a loan-to-value ratio (LTV) lower than 75%, implying you should have at least 25% equity in your property.

2. Gather Necessary Documents
Your lender will request several documents to initiate the refinancing process. These documents include:

Proof of income: Such as original pay stubs from the last 30 days or income verification if you’re self-employed.
Copies of W-2 or 1099 forms: To verify employment history. If self-employed, your full tax return may be required.
Proof of homeowners insurance: To demonstrate sufficient coverage on the property.
Copy of title insurance: To verify property ownership for refinancing, alongside providing legal property description and basic tax details.
Asset information copies: Including bank statements, investment accounts, and retirement savings.

3: Compare Refinance Rates and Apply
Don’t hesitate to compare rates from various lenders to secure the best deal for your investment property refinance. You might find a better offer with a new lender, although maintaining a positive relationship with your current lender could also be advantageous.

Once you’ve selected a lender, initiate the application process by contacting them. Complete the lender’s application, submit requested documents, and promptly respond to any inquiries.

Why Are Mortgage Rates Higher on Rental Properties and Investment Homes?

The risk is higher for mortgage lenders when it pertains to borrowers refinancing rental properties. In the event of financial adversity, such as difficulty in renting out the investment property, borrowers are more likely to prioritize payment of their primary home’s mortgage before that of their rental property. Consequently, there’s an elevated risk of default on the rental property and investment homes.

Are There Closing Costs on a Rental Property Refinance?

You’ll need to pay for a property appraisal, allowing the lender to determine the loan-to-value ratio, a crucial factor affecting your eligibility and rates. Besides covering the appraisal expense, you’ll also be accountable for closing costs, including origination fees, local filing fees, and additional charges. Expect the closing costs to be comparable to those incurred during the initial mortgage closing.

How Long Does It Take to Refinance a Rental Property?

The timeframe for refinancing 2nd homes and investment properties can vary dramatically.  If the process extends too long, there’s a risk that the rate lock could expire or the guidelines could change.  Generally, the process for refinancing rental properties should take 30 to 45 days. If you are self-employed or need several appraisals, it could take up to two months.

Get Approved for the Best Refinance Rates for your Rental Properties!

rental property refinanceIf you are a homeowner who owns more than one home with an adjustable rate mortgage, we strongly recommend refinancing into a fixed rate loan immediately. Refinancing second home and vacation properties can get tricky, so make sure that you work with a lender like Nationwide that trains their loan officers to refinance all types of properties.

In addition to seizing the opportunity presented by low mortgage interest rates, other advantages of refinancing a rental property include:

  • Transitioning from a variable/adjustable rate mortgage to a fixed interest rate
  • Reducing the total interest paid over the loan term
  • Switching from a 30-year to a 15-year fixed-rate loan to expedite equity accumulation
  • Cash-out refinance or HELOC to convert accumulated equity into cash for investment in additional rental property

Refinancing an investment property mirrors the process of refinancing a mortgage on your primary residence. It offers a potential avenue to secure a lower interest rate or improve your loan terms. Additionally, leveraging a cash-out refinance or home equity loan enables you to access funds from your accrued home equity.

In some cases, the refinancing procedure is typically more streamlined than applying for a standard mortgage, requiring less rigorous documentation compared to the initial purchase of your investment property.

Always make sure you do your due diligence. It’s very important to research the lender’s reputation. It’s essential to note that the most favorable terms may not necessarily equate to the best option. For instance, a lender offering a slightly higher interest rate might exhibit greater flexibility and be more amenable to future collaboration. Shop mortgage lenders until you find one with competitive refinance rates while also demonstrating effective communication and respect.