Refinancing an investment property can be a smart financial decision if you’re looking to increase returns, reduce costs, and accelerate your wealth accumulation. Find out the ins and outs of refinancing an investment property with this guide.

Everything you need to know about Refinancing an Investment Property

Understand the basics of Refinancing.

Refinancing an investment property involves replacing your existing loan with a new one, usually with different terms. When refinancing an investment property, it’s important to consider interest rates, fees, and other costs associated with the loan. To maximize the benefits of refinancing your investment property, make sure you look for the best terms and conditions you can find.

Determine your current Property Valuation.

Before you start the refinancing process, it’s important to determine the current market value of your investment property. This can help you ensure that you receive a loan amount that accurately reflects the worth of your property and gives you the ability to access all available financing options. To do this, get a professional appraisal or home inspection to confirm the exact value.

Compare interest rates and costs between Lenders.

When refinancing an investment property, it’s important to compare multiple lenders and their different offers. Don’t just choose the first lender you find. Carefully look at interest rates, fees, and other borrowing costs when making your decision. Make sure to pick the loan that best fits your current financial goals and needs.

Understanding the different types of Refinancing options available. 

There are several types of refinancing options for investment properties, including cash-out refinancing, rate & term refinancing, and debt consolidation. Each type of loan has its own benefits and terms that should be closely considered when picking the best option. Cash-out refinancing allows you to take cash out from the equity built up in your property and can include a lower interest rate. Rate & term refinancing may offer a shorter or longer mortgage length or an improved interest rate but does not require any cash out from the equity in your property. Debt consolidation may involve consolidating all your investment properties into one loan which may provide certain savings in interest and fees.

Consider the tax implications of Refinancing an Investment Property.

When refinancing an investment property, it is important to consider the tax implications. The Internal Revenue Service (IRS) typically considers any monies taken out during a refinance as taxable income. This means that if you take out cash from your equity when refinancing, it could be seen as taxable income and should be reported accordingly. Additionally, it is important to check with a qualified tax professional about any potential deductions you may qualify for when taking on a refinanced loan.

How to change your investment property’s future

Do you own an investment property? If so, then you have a big decision to make. Do you want to keep your current mortgage or refinance for a lower interest rate? Fincue will help you decide.