Refinancing rental property is very beneficial. As a property investor, there are several steps you can take to know if you qualify to refinance.
Why should you refinance the rental property?
To get a lower interest rate – one major reason why people refinance their property is to get a lower interest rate on their loans. It decreases the monthly mortgage payments and leaves you with more money in your pocket from your income. you can save the money and use it to invest in other properties.
You get better terms – by refinancing your home, you will be able to get another mortgage with better terms. You are free to negotiate a mortgage with longer or shorter terms and less money depending on what you are looking for.
To take money out – one more benefit of refinancing is the ability to rake out equity on your home. This money can be used to purchase another investment property.
Determining the value of your property
You can do it online
If you own any type of investment property that is hot in the market like single family homes, multi-family homes and condos, you can visits several home online where people are selling similar properties. This can help you determine the ballpark value of the property and it will not cost you a thing.
The broker price option is great if you own investment property that is difficult to appraise and sell like larger multi-family homes and mixed properties, or you just need a professional opinion, you could contact a realtor who will help you request a broker price opinion. The BPO will give you information and analysis of the home for free.
The loan to value ratio
The bank will only loan you some money as a percentage of the underlying value of the property. The loan to value ratio, LTV, is a requirement in different banks and institutions. for rental properties, most lenders require a loan to value ratio that is between 50 and 80% and some of them will require a slightly higher ratio.
Once you get the ballpark value of the property. You could compare that to the current mortgage so you can determine the general loan to value ratio of the property. You need to be within the lender’s range in order to refinance the mortgage.
Choosing the right lender
This means reaching out to multiple brokers and lending institutions to request a quote. You have to ensure you get a quote from your lender because you have a higher chance of getting better terms than when you strike a deal with a completely new lender. You can also requests the quotes from online brokers, brick and motor lenders and private online lenders.
Applying for the loan
You need your tax records, identification card, property deeds, mortgage and bank statements rent receipts and the property deed to start the application process. Once you submit the application the lender will review and verify the documents and appraise the property. if they accept the application, you can close the loan in 2 to three months.