Right Now is a Great Time to Refinance Investment Properties – The historically record-breaking low-interest rates over the last year and a half have sent homeowners to seek out loan products in larger numbers than previous years. One group that could significantly benefit from this is real estate investors hoping to refinance investment properties. Some investment property owners could trade in higher interest rate loans for those with lower rates or even access cash to help expand an investment portfolio.
Reasons to Refinance Investment Properties
The rates have adjusted a little bit, but they are still at all-time lows giving great benefits to real estate investors. Refinancing options for investment properties might not be at the rock-bottom rent they were just six months ago, but they are still very low and the advantage of refinancing an investment property to lock in a lower interest rate is still a great idea. One of the biggest benefits is with a lower monthly payment you keep a higher percentage of rent profit.
At the beginning of August, the average interest rate on a 30-year fixed rate was around 2.97% and the 15-year rate was around 2.28%. These are phenomenal low rates that many people have not seen in their lifetime. In general, the interest rates for investment properties and commercial loans are on average a half a percentage point to a full percentage point higher than traditional mortgage loan products on primary residences.
The current advantages of refinancing investment property
New York federal reserve has shown that in March mortgage originations, including new loans and refinance loans, hit 1.2 trillion in the fourth quarter of 20 20. This broke a record that has been in place since the refinancing boom of 2003 where interest rates dropped to 20% from the year 2000. Rates to refinance investment properties have stayed pretty steady for the first half of the year, but as we enter the latter half of the year some economists are forecasting that rates are going to become lower as the economy continues to rebound.
In addition to the prospect of lowering monthly payments, an investor may benefit from switching an investment property into a shorter-term repayment plan. A shorter-term repayment plan could mean a higher monthly payment for now, but less interest paid over the life of the loan and being able to free up money more quickly to make additional future investments, or turn all rental payments into almost 100% profit.
What should investors know before refinancing?
Refinancing is very promising for investment properties right now, but there are some things that are good to know and consider before doing so as a property investor. It is good to know the exact market value of the property and the current status of your credit to avoid any surprises when you apply for an investment property refinance.
If you are self-employed or non-salaried it is always a good idea to talk to a loan professional to make sure that you can qualify for a refinance loan on an investment property. Since the beginning of the pandemic there have been several qualifying guideline changes and a mortgage professional can help you to navigate all of these. Especially if you plan to use a stated income model as proof of income.
The best way to know all of your current loan options and the qualifications for them is to work with an experienced local mortgage broker as they know all of the products available in the area. It is their job to shop around for the best ones currently available.
For more information to refinance investment properties or mortgage loan options in Mission Viejo and California.
More Tips for Refinance Options:
- Can You Refinance a Mortgage on a COVID Forbearance Plan?
- Can Cash-Out Refinances Help Reduce Debt?
- The Basics of No-Closing-Cost Refinances
- Can I Use a Refinance to Buy a Second Home?
- Can I Refinance if I’m Self Employed?
- When Does it Make Sense to Refinance?
- 7 Simple Steps to an Easy Refinance
- How to Refinance a Mortgage on a Rental Property