Should I Refinance My Investment Properties


Refinance Investment Properties

There are many reasons why you would want to refinance investment properties.  The reasons to cash out and refinance rental properties can only benefit you.  Generally speaking, refinancing investment properties can give you the opportunity to lower your monthly mortgage payment.  Additionally,  a refinance of your investment property can increase your monthly rental income. By the same token, if you have equity in your rental property, you can cash out and purchase other investment properties.   If you refinance investment properties that you own, you can take advantage of lower interest rates.

Rules regarding refinance of Non-Owner Occupied Properties

The best advantage to refinancing investment property is if there is equity.   Equity is the net amount after any loans or encumbrances against the property are paid off.  Currently, lenders will typically loan up to 75% of the value of the property.  Some lenders may go up to 80% but expect a higher interest rate.  Fannie Mae’s max loan to value is 75%.

Current Rules Regarding Cash Out Refinance

1) For 1-unit single family residences, the maximum loan to value is 75%.

2) For 2-4 unit properties, the maximum loan to value is 70%.

3) Must be owned for more than six months.

4) The property cannot be listed on the market for sale.

5) Maximum loan to value if the home was listed on the market during the last six months is 70%.

Credit Requirements to Refinance Non-Owner Occupied Investment Property

To refinance investment property, overall, you must have a good credit score.  Most lenders want to see at least a 720 credit score.  This is because a cash out refinance is riskier for a lender.  Not only will you need a good credit score, but there are cash reserve requirements.  A lender wants to see that you can make the payments.  Generally, the rule of thumb is 6 months in reserves for all investment properties.

Documentation Requirements to Refinance Investment Properties

To refinance investment property, you will need to provide documentation to show the lender that you are able to repay the loan.  Additionally, the lender will want to see two years of your personal income tax returns.  This will include the Schedule E, showing the income and deductions for each of your investment properties.  Additionally, two years of W2s, two months of paycheck stubs, two months of bank statements, and lease agreements for the investment properties.

Should you Refinance Investment Properties?

To summarize, if you have equity in your investment property and you are able to lower your monthly payment and put more cash in your pocket, then you should consider refinancing your investment properties.  You can use the extra cash to renovate or improve the properties or you can purchase additional investment property.  Before you consider a refinance of investment property you want to be sure that you will get a favorable interest rate and that you can make the monthly payments.

About the Author: Arlene Disessa is a senior writer for California Loans with Gustan Cho Associates in the Greater Sacramento, California area, including Placer County, and the cities of Rocklin, Roseville, Granite Bay, El Dorado Hills, and Auburn.  Call Us today at 530.813.0661 or email at  Arlene Disessa is available 7 days a week to answer your questions.  Do you have bad credit? Call Us today on ways you can improve your credit score and qualify for a mortgage loan. For more useful information visit

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