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"Learn to Refinance Investment Property as Part of Your Long Term Strategy"

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You'll want to be familiar with how to refinance investment property because it is something that just about any long term investment property will benefit from sooner or later. The process is similar to getting the initial investors mortgage, with the main difference being that you'll already own the property.


You can typically refinance investment property by doing a standard refinance or a cash-out refinance. A standard refinance is where your old mortgage is paid off with the new mortgage. You then make your monthly payments to the new mortgage company. You're simply replacing one mortgage with another.

With the latter, you can "cash out" some built-up equity as long as you retain a 20% equity cushion (i.e., on a $100K property the total mortgage balance – consisting of the loan plus the cash you got back – should not exceed $80K).

For example, if the property is worth $100K and your mortgage is $70K, you should be able to pull out $10K in cash to pay off your down payment, rehab expenses, etc. The real estate appraising is critical here, because the higher the appraised value, the more equity you will have to potentially cash out.


Generally speaking, you'll want to refinance investment property under the following circumstances:

  • You purchased & rehabbed a fixer-upper using a private lender, and now you're ready to parlay your sweat equity into a 30-year fixed mortgage. Click for a review of the fixer upper strategy.
  • You would like to use the property's built-up equity to essentially secure a zero down financing source (say, after owning it for 5 years).
  • You have a shorter-term loan that is due to mature and be paid off (i.e., balloon payment).
  • You have an adjustable rate mortgage (shame on you!) that you're trying to get out from under.
  • Rates declined and you would like to lower the interest rate on your fixed loan (note: make sure you crunch the numbers to see if the reduced monthly payment justifies paying the closing costs).

There may be other situations where you'll want to refinance, but those are the "Big 5."


  • Do the math to ensure the time is right. You will have closing costs just like any other mortgage.
  • Price shop, starting with your current mortgage provider if you already have a bank loan.
  • Decide on an issuer and lock in the rate.
  • Coordinate, and prepare for, the appraisal.
  • Coordinate the title work (yes, required even on an investment property you already own).
  • Schedule the closing and review the HUD-1
  • Execute the closing

To sum up, your ability to refinance rental property is driven by the apprised value. Your goal absolutely, positively must be to maximize the appraised value, so make sure you have maximized the property's curb appeal. The bottom line is that if you get a "bad" appraisal, your ability to refinance investment property will be severely limited.

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4 Responses to Learn to Refinance Investment Property as Part of Your Long Term Strategy

  1. joel says:

    hey there, fantastic info, thank you! If anyone is interested in checking the current mortgage rates in real time, is a great one-stop resource. You can identify the lowest rates, and then call the low cost providers for more information.

  2. Santa says:

    Now is definitely the time to refinance investment property. Rates are still very low (as of Sept. 2011 that is…). I’ve done two and saved about $500 a month in total. Worth a quick call to your broker at a minimum…

  3. Jimbo Jones says:

    Hey this is excellent advice on how to refinance investment property. I was wondering though, does anyone have any specific advice for which lenders to inquire with regarding refinancing? I realize that bankrate gives you a list, but my buddy told me that those lenders often have hidden fees or super tight criteria that makes the list a little cloudy. Anyone have a reco for a good, low cost lender?

  4. joelle says:

    I just wanted to shout out to the webmaster; very nice work! I need to refinance investment property and searched and found this site. I’m glad I did! Keep it up!!

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