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How to Refinance an Investment Property in October 2020

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Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

If your investment property is mortgaged, then it might be time to consider a refinance. Refinancing can lower your interest rate, reduce your monthly costs, and boost your bottom line as an investor. However, rates can also be higher, so you’ll want to compare your options before moving forward.

Here’s what you need to know about refinancing investment property:

Advantages to refinancing an investment property

These are some of the most common reasons you may want to refinance your mortgage, and why they might benefit your situation.

Lower your interest rate

If market rates are lower than the initial rate you qualified for on your loan, then refinancing can help you lower your interest rate. That means a lower monthly payment, a bigger margin between your tenant’s rent and your mortgage, and more cash flow.

Lower your monthly payment

Refinancing to a longer-term mortgage can be another way to lower your monthly payment. If you only have 15 years left on your loan, for example, and then you refinance into a new 30-year loan, your balance is then spread out over many more years and months, thus lowering your payment. Keep in mind though that a longer term means you may pay more interest over the life of the loan.

Pay off your mortgage faster

You can also refinance into a shorter loan term, which would allow you to pay off your mortgage sooner and with less interest paid over time.

Head’s up: Shortening your loan term will mean a higher monthly payment.

Change the type of loan you have

In some cases, you might want to refinance to change your loan type. For example, if you have an adjustable-rate mortgage, you may want to refinance into a fixed-rate loan to keep your rate from fluctuating. Alternatively, you can also refinance to an ARM mortgage from a fixed-rate loan to save on monthly costs. ARM rates are generally lower at the beginning of the loan.

Cash in on your equity

If you’ve built up a good amount of equity in your home, then you might qualify for a cash-out refinance. This lets you take out a loan larger than your current balance, and then keep the difference in cash. You can use those funds in many ways — like for your business or otherwise.

Enable increase of rental income

If your refinance lets you lower your monthly payment or cash in on your equity, you can then use that freed-up cash to make the kind of investments that increase the income your property creates. You can update the property, repair items that need to be fixed, or add amenities that will justify a higher rent.

Pay for additional investment properties

You can also use the additional cash your refinance creates to fund additional investment properties. Use your cash-out refinance funds as a down payment on a new property or to cover closing costs on your next loan. You could even use them to pay for rehab costs on a fix-and-flip investment.

Cover other expenses

The money you free up through refinancing can also go toward other expenses — personal ones like vacations, college tuition, medical bills, or your retirement efforts. You could also use it to pay off credit cards or other debts.

Read More: Cash-Out Refinancing vs. Home Equity Loan

How to refinance an investment property: Step-by-step

Refinancing an investment property works much like applying for your initial mortgage loan. You’ll need to shop for a lender, fill out an application, go through underwriting, and close on the loan.

Here’s how to refinance your investment property, step by step:

  1. Shop for a lender
  2. Compile your financial documents
  3. Submit your application
  4. Lock your interest rate
  5. Work with your lender through underwriting
  6. Close on your loan

Step 1: Shop for a lender

Every lender has different mortgage refinance rates and fees, so it’s important to compare several options before deciding who to go with (Credible can help here).

Remember: You don’t need to use the same lender you did for the original loan.

Step 2: Compile your financial documents

You’ll need a good amount of documentation to refinance your investment property. Essentially, you’ll need anything that pertains to your income, assets, and personal wealth.

Here’s a sample list, though the exact requirements will depend on your lender:

  • Your last two personal tax returns
  • Your last two business tax returns
  • Two recent pay stubs
  • Any W-2s or 1099s
  • Proof of any additional income (disability, Social Security, pension, etc.)
  • Proof of your rental property income
  • The last two months of bank statements
  • The last two months of any asset accounts (IRAs, 401Ks, stocks, bonds, etc.)
  • Proof of your homeowner’s insurance

Step 3: Submit your application

You’ll need the above documents as you fill out your chosen lender’s application. They’ll use it to evaluate your risk as a borrower, determine if you qualify for the loan, and set your interest rate. They’ll also pull your credit report once you’ve submitted the application.

Step 4: Lock your interest rate

Once your application is processed, you’ll want to lock your interest rate to ensure it can’t rise before you close on the loan. Lenders’ lock periods vary, but they usually safeguard you for around 30 to 60 days. You may have to pay a fee if you want a longer lock period.

Step 5: Work with your lender through underwriting

As your lender works to underwrite your loan, they might request other pieces of information or documents along the way. It’s important you respond to these quickly and produce any documentation needed ASAP. The longer you take to respond, the more it could delay your loan closing.

Step 6: Close on your loan

Finally, your lender will assign you a closing date. This is when you’ll sign your documents, pay any closing costs, and finalize the loan. In many cases, refinances can be done at your property, with just a notary at the kitchen table.

Keep in mind: You have three days to change your mind on the refinance (called the right of rescission). If you don’t use this right, your loan will fund after that three-day period, and your refinance will be complete.

What lenders are looking for when refinancing

Lenders tend to be more strict when it comes to financing investment properties and second mortgages. That’s because the risk of default is higher. Typically, a property owner is more likely to stick it out with their personal home than an investment property in hard times.

Because of this, lenders require you to have a good credit score, a low and stable debt-to-income ratio, a bigger down payment (or more equity in the home), and more in cash reserves to qualify for an investment property refinance.

How to qualify for an investment property refinance

You and your property will need to meet certain requirements to qualify for a refinance. These requirements will vary by lender and loan program, but the below chart offers a good high-level look at what sort of standards you can expect to be held to:

Credit score640 to 720
Debt-to-income ratio45% (including your new, expected mortgage payment)
Loan-to-value ratio70% to 85%
Equity reserved15% to 30%
Cash reserves6 to 12 months
Property
  • Up to 4 units
  • May need multiple appraisals
  • Must be safe and meet minimum property standards before funding (if you’re using an FHA loan)

How to compare investment and rental property mortgage rates

Rates and fees tend to be higher on investment property loans than traditional mortgages, so it’s especially important that you shop around and compare your options. You’ll want to consider at least a handful of mortgage lenders, making sure to compare interest rates, APRs, closing costs, and other fees when you do.

When comparing your options, you’ll want to look at these line items:

  • Interest rates: A lower interest rate will typically mean a lower monthly payment, but make sure you’re comparing apples to apples. You can’t compare one lender’s 30-year fixed refinance rates to another’s 15-year fixed refinance rates. Make sure you’re looking at the same numbers.
  • APR: APR is the annual cost to borrow the money, including the interest rate and any fees. It’s a good barometer for comparing lenders — especially ones who are really close on interest rates.
  • Rate locks: Refinances have been taking a little longer to process these days due to the high demand, so if one lender gives you a longer rate lock (and their rates and fees are comparable), they might be the better option.
  • Closing costs: The fees you’ll be charged at closing will be wildly different from one lender to the next. Take a look at the total cash you’ll need to bring to closing on each, and see which is lowest. You should also check if any of the lenders have rolled the closing costs into the loan on their estimates. While this lowers your upfront costs, it also means a higher loan balance, a bigger monthly payment, and more interest paid in the long run.

Credible can help make comparing your options easier. With just one form, you can receive detailed loan estimates for several lenders at once. You can also get pre-approved from each lender, allowing you to move forward quickly once you’ve made your decision.

Frequently asked questions about refinancing investment and rental properties

Refinancing your investment property loan can be a complicated process, and you might have some questions along the way. Here are a few of the most common:

Why are interest rates higher on investment and rental properties?

The main reason is that investment properties are riskier for lenders.

Not only are you more likely to default on the loan than someone who lives there, but your income also relies on the property. So, if the market turns sour, the home loses value and your income takes a hit — both of which are risky for the lender.

What is a good investment property mortgage rate?

This depends on the market, your location, and your current rate.

Generally, if you can reduce your rate and you know you’ll own the home long enough to reach the break-even point — or the point at which your refinance saves you more than it cost to execute — then it’s a smart move to refinance.

Should I refinance?

To determine this, you need to know your goals for refinancing. If it’s to save money and you will reach the break-even point, then it may be worth it. If you’re refinancing to get funds to pay off medical bills or the down payment on another property, then the answer depends on how much equity you have.

How often can I refinance?

Typically, there’s no limit to how often you can refinance your mortgage, though some lenders and loans may require some “seasoning” of the loan before you’re eligible. This is essentially just proof you can make your payments for a few months. For example, FHA loans require six months of payments before you can refinance your mortgage.

Can I refinance with bad credit?

There aren’t many home refinancing options for investors with bad credit. Some lenders will allow you to refinance an investment property loan with a score as low as 640. If it’s below this threshold, you may want to spend some time improving your score before applying. Not only will it help you qualify, but it could improve the interest rates you’re given when you do.

Compare your refinance options now

Are you ready to see what rates and loan terms you qualify for on your investment property refinance? Credible can help. You can compare multiple lenders and see prequalified rates in as little as three minutes.

Credible makes getting a mortgage easy

  • Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.
  • We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed.
  • A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.

Find Rates Now

About the author

Aly J. Yale

Aly J. Yale

Aly J. Yale is a mortgage and real estate authority and a contributor to Credible. Her work has appeared in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, and more.

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Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom

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Loans Bad Credit Online – PNC Personal loan 2021 Review

Top perks

Low minimum loan amount

Customers can borrow $1,000 to $20,000. That minimum loan amount of $1,000 is unusual in the personal loan industry. A low minimum threshold means you can get the cash you need to cover small emergencies without being tied down to a larger loan.

Wide range of repayment terms

You have between 6 and 60 months to repay the loan. There are pros and cons to longer repayment terms, so this flexibility allows you to customize your term to your situation.. With PNC, you have the option of designing a repayment plan that fits your monthly budget.

Joint applicants welcome

Whether you need a joint applicant’s high credit score to qualify for a lower loan interest rate or someone has decided to co-assume responsibility for a personal loan, PNC allows for joint applicants.

What could be improved

Terms depend on location

The first thing you will be asked is where you live. On its loan homepage, PNC states that “PNC product and feature availability varies by location.” While this may be good news for borrowers in some areas of the country, it could be bad for others. You’ll need to see what it means for you.

Lowest interest rate reserved

If you’re looking to borrow enough to make repairs to your roof or buy a new furnace, you might not borrow enough to qualify for PNC’s lowest advertised interest rate. That’s because that low interest rate is reserved for those borrowing more money. For example, PNC will automatically assign a $5,000 loan a higher interest rate than a $15,000 loan.

Loans Bad Credit Online – PNC Personal loan 2021 Review

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Loans Bad Credit Online – Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom | Fintech Zoom

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Loans Bad Credit Online – Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom

Loans Bad Credit Online – PNC Personal loan 2021 Review

Top perks

Low minimum loan amount

Customers can borrow $1,000 to $20,000. That minimum loan amount of $1,000 is unusual in the personal loan industry. A low minimum threshold means you can get the cash you need to cover small emergencies without being tied down to a larger loan.

Wide range of repayment terms

You have between 6 and 60 months to repay the loan. There are pros and cons to longer repayment terms, so this flexibility allows you to customize your term to your situation.. With PNC, you have the option of designing a repayment plan that fits your monthly budget.

Joint applicants welcome

Whether you need a joint applicant’s high credit score to qualify for a lower loan interest rate or someone has decided to co-assume responsibility for a personal loan, PNC allows for joint applicants.

What could be improved

Terms depend on location

The first thing you will be asked is where you live. On its loan homepage, PNC states that “PNC product and feature availability varies by location.” While this may be good news for borrowers in some areas of the country, it could be bad for others. You’ll need to see what it means for you.

Lowest interest rate reserved

If you’re looking to borrow enough to make repairs to your roof or buy a new furnace, you might not borrow enough to qualify for PNC’s lowest advertised interest rate. That’s because that low interest rate is reserved for those borrowing more money. For example, PNC will automatically assign a $5,000 loan a higher interest rate than a $15,000 loan.

Loans Bad Credit Online – PNC Personal loan 2021 Review

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Loans Bad Credit Online – Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom

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Loans Bad Credit Online – Badger Advisors Gets Bad Review For Credit Card Refinancing | Fintech Zoom

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Loans Bad Credit Online – Badger Advisors Gets Bad Review For Credit Card Refinancing

Editorial Credit: Djomas

Badger Advisors wants you to believe they are offering credit card refinancing and have begun flooding the market with debt consolidation and credit card relief offers. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2021 Reviews, the personal finance review site, has been following Badger Advisors, Rockville Advisors, Old Dominion Associates, Sooner Partners, Snowbird Partners, Gulf Street Advisors, Memphis Associates, Safe Path Advisors, Plymouth Associates, Tate Funding, Braidwood Capital, Tiffany Funding, Nickel Advisors, Coral Funding, Neon Funding, Polk Partners, Ladder Advisors (also known as Carina Advisors, Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).

Editorial Credit: Ollyy

Credit Card Refinancing

Credit card refinancing is a possibly feasible solution for your piling credit card debt. Under credit card refinancing, all of your credit card balances go into one account where a single interest rate is charged. If you have a good enough credit score, then you may be able to qualify for credit card refinancing at low-interest rates. Just like other refinance options, credit card refinancing also entails a loan offer to pay off your debts and improve your financial health. You will then have to focus on the credit card refinancing loan only and no other credit card balance.

Another major advantage of credit card refinancing is that the interest rate will not vary over the lifecycle of the loan. This will simplify your life a lot and make debt servicing much easier since you will know how long it will take for you to pay back your loan. With variable interest rates that you often find in credit cards, you can end up incurring higher interest expenses. But with a fixed interest rate that credit card refinancing purveys, you will not have to face this unwelcome possibility.

With the right kind of credit card refinancing loan, you can possibly save hundreds and even thousands of dollars on interest expenses this way. Of course, you will have to be punctual with your monthly repayments. If the terms and conditions of your credit card refinancing loan are favorable then you may very well embark on the road to financial freedom and get there before you know it.

Is There Any Difference Between Credit Card Refinancing and Debt Consolidation?

From the aforementioned discourse, you may have realized that credit card refinancing is very similar to debt consolidation and that indeed is the case. Both are about settling all debts with one favorable loan so that you can focus on this loan only and enjoy its lenient terms and conditions to rebuild your credit score and gradually work your way towards debt freedom.

Provided the terms and conditions of your credit card refinancing loans are suitable, this financial option represents a viable route for managing and paying off your outstanding liabilities in a better way.

Why Credit Card Refinancing loan May be Better

A credit card refinancing loan may be a better choice than a balance transfer card. The idea of a balance transfer card is to take advantage of the zero APR introductory period that usually lasts from 12 to 18 months. However, there are a few caveats due to which a balance transfer card may not exactly be a good idea.

The zero APR period may look tempting but it still may not be long enough to pay off your entire credit card debt. And that is unfortunate because once the zero APR limit expires then you will have to pay very high interest and you may even incur penalties. Then there is the question of balance transfer fees that can offset the advantages of the zero APR time frame.

Another problem is that the credit limit of the balance transfer credit card may not be big enough to accommodate all of your credit card balances. This is a real possibility since your credit card debt is high to begin with and it may not fit within the credit limit of the balance transfer card.

Then there is the danger of spending with the balance transfer credit card. The inability to control spending and use of credit cards is the very reason why people fall into credit card debt traps in the first place. This possibility is very much open and present with balance transfer cards. Instead of helping you, they may worsen your debt situation since they too are credit cards that are all too easy to misuse. What’s worse, they have exorbitant interest rates.

Such a scenario cannot transpire with a credit card refinancing loan since it is not a credit line – this loan immediately goes towards paying off your credit card balances due to which there is no peril of misuse. Instead of getting another credit card in the shape of a balance transfer card it is much safer to freeze all of your cards and repay your debts.

If you do your research on credit card refinancing then you might find that some people also include balance transfer credit cards under this heading. But due to the drawbacks mentioned above, you should try to steer clear of balance credit cards and instead take out a personal loan for the sole purpose of repaying your credit card debts.

The prime advantage of credit card refinancing is that they can provide you with a low interest rate if you have a good enough credit score.

How to Make Credit Card Refinancing a Success

While credit card refinancing provides good terms and conditions, it is not a magic elixir that will cure all of your financial woes.

To make your credit card refinancing a success, you will have to follow some good money habits and exercise discipline at the same time.

You should try to find extra sources of income. You can think about working overtime at your job if that is possible. If not, you can opt for freelancing gigs and projects. Even if you earn a few hundred dollars through this route each month, it will prove to be of great assistance in helping you become debt-free more quickly.

You should also think up ways of saving on expenses. A major reason why consumers incur enormous debts is that they do not track their spending. This is a habit that you must remedy forthwith if you wish to get out of your financial predicament quickly. No matter how little your expense, make sure you record it somewhere secure. You can utilize apps to record your transactions. Thus, you will know the areas on which your spending is inordinate. You will also be able to compare your spending with your planned budget.

You should get in touch with your financial advisor to find out whether credit card refinancing is right for you.

Loans Bad Credit Online – Badger Advisors Gets Bad Review For Credit Card Refinancing

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