How to Refinance Your Rental Property

If you already own rental property, you may want to consider refinancing.

The real estate market fluctuates every day, and rates go up and down all year long. There may be better interest rates available to you now than when you initially purchased your rental property. 

Another reason to consider refinancing is when your rental property has been renovated or updated. Renovations and updates often significantly increase the value of a property so, at minimum, having an appraisal after the renovations are complete is a good idea.

Typically, refinancing a property will reduce the monthly mortgage payment.

Before you apply for refinancing, you should know the process and what will be required of you.

Refinancing can be done with almost any lender who offers initial purchasing. If you’re working with a rental property or vacation rental property, it’s best to find financing specific for this type of risk. Standard mortgage loans will have different requirements and stricter conditions. An investment property loan is the best option for a rental property that is not owner-occupied.

In order to move forward with refinancing, here is what you should do first:

Before you apply with any lender, make sure you know all available options. Depending on the number of properties you’re currently financing, your credit score, and the value of the rental property you’re thinking of refinancing, there may be a few different options available to you.

Knowing which financing you will choose helps you prepare for closing. This will make the application processing time faster and easier.

You may find that when you look to refinance that now is not the right time for you. Making the right financial moves depends on your current position and many other factors. If it’s not time, then you can learn about all of the financing possibilities and position your property for the best option for you.

An appraisal is a typical part of any real estate transaction. A rental property appraisal is different since it is an investment, which is expected to turn an income.

Getting an appraisal prior to starting the process will let you know how much money you could qualify for when applying for rental property financing.

Each loan will offer a different set of terms. Some loan options allow you to finance up to 100% of the property, and others will finance only up to 60%. Knowing the valuation of the home and how much of the property you anticipate financing will help you narrow down your loan options and lenders.

Finding the right lender can be hard. You want to find the best rates, fastest processing times, most trustworthy services, and a lender who understands the intricacies of rental property risks and profits.

Once you sign a contract, you’re bound to the terms. If you decide you do not like the terms of the contract, your only option would be to refinance the property again. In some cases, you may not even be eligible to refinance for a number of months or longer.

VRPL can help you understand your options when you’re looking for Airbnb financing. There are many different opportunities specific to investment properties and choosing the right one will help you maximize your return.

Vacation rental properties are a great investment, especially since the launch of platforms like Airbnb and VRBO. Working with VRPL to finance your next investment means you can get into a vacation rental property faster, and with less fees.

You may have done some renovations, or maybe you’ve paid off other loans, or your credit score has increased. These are all great reasons to consider a refinance. However, there could be other factors to consider before you fill out an application.

If the marketing is not working in your favor and the interest rates are high, you may not be able to find good terms to refinance.

Also, you may want to consider what you’re going to do with the property in the long term. If you plan on flipping it at any point, it would be better to wait on refinancing. Obtaining new financing for a property can be costly. Most often there will be application fees and possibly closing costs depending on the loan option.

Here are some things to consider before you decide to refinance your property:

• Why are you refinancing? Has there been a change to the property like a renovation? Has your credit score significantly increased?
• Is the market good for refinancing? Before you apply for refinancing, make sure you know the current interest rates. If the interest rates are rising, you’re better off waiting to refinance.
• What is your long-term plan? Knowing whether you plan on selling your rental property within the next 10 years or whether you plan on keeping it as a long-term investment should help guide your decision to refinance.

When you want to refinance a rental property, it’s important to consider the different factors and financial impacts of each. It can be a good idea to refinance rental property when it makes financial sense, but sometimes it’s better to wait.

If you’re considering refinancing of your rental property, you may want to consider an Airbnb loan. While there is no loan specific to Airbnb, being a part of the platform and working within that market will help increase your rental properties exposure.

You could find more listings and pull in higher rates using Airbnb or VRBO. Which is why focusing your financing on a vacation rental property loan may be a great option for you.

Want to learn more about Airbnb loans or vacation rental loans? Contact VRPL today at 1-888-999-4375 or request a quote right away!