Should You Refinance Your Rental Property?

Are you considering a refinance for your rental property? If so, you may wonder if it is a…

Are you considering a refinance for your rental property? If so, you may wonder if it is a good idea. Before making a major decision like refinancing, it is advisable to consult a professional property management company in Atlanta or industry professional for advice. At 3 Options Realty, we understand the intricacies of refinance investments, providing guidance to help you determine the right time, and navigate the process successfully. Let’s delve into the critical factors you should consider before deciding.

Can You Refinance a Rental Property?

Most people assume refinancing is only for residential properties, but rentals are also viable. However, refinancing investment properties faces stricter requirements, hence the need to work with certified property managers. Professionals can help you get lower interest rates through refinancing by making improvements to your property, or investing in other properties.

Why You Should Refinance Your Rental Property

As stated, refinancing is not only meant for residential properties. As a rental property owner, some reasons to refinance your investment include:

Lower the Interest Rate

The real estate landscape is constantly changing, and mortgage rates are no exception. If the rates decrease since you secured your loan, or your credit score improved, refinancing your rental property could help you get a lower interest rate. In addition, lowering your interest rate reduces your monthly payments and saves you money over the lifespan of the loan.

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Change Loan Terms

Another reason to refinance your rental property is the flexibility it offers in changing the length of your loan. You can extend the term of your loan to decrease monthly payments, or shorten the term to pay off your loan sooner and save on interest. Depending on your preferences, consult a dependable property management company or a financial expert for advice.

Access Home Equity

Investing in rental property is challenging and often expensive. Fortunately, refinancing allows you to access the equity you’ve built through cash out refinance. You can use these funds for various purposes, including property maintenance, expanding your real estate portfolio, or consolidated debt.

Expand Your Portfolio

As stated, the proceeds from your cash out refinance can be used as a down payment on another rental property. This is a great way to generate extra income from multiple properties, increasing your overall return on investment in the long run.

Cons of Refinancing Your Rental Property

While there are many benefits of refinancing investment properties, it also comes with several disadvantages. Let’s delve into some cons to help you make informed decisions.

Stricter Requirements

Lenders often set stricter requirements for rental property refinances because of the high risks involved. Some requirements may include lower debt-to-income ratios, higher credit scores, and additional documentation.

Risk of Negative Equity

As mentioned, the real estate landscape is constantly changing. This means you might owe more on your mortgage that the property’s worth. This is known as negative equity, and makes selling the property or refinancing in the future difficult.

When deciding whether to refinance your rental property, consider your current interest rate, long-term investment goals, and the property’s value. Contact us at 3 Options Realty and schedule a consultation with our property managers in Roswell to make the right choice for your future.