What Are Common Reasons to Refinance Investment Property?

The decision to refinance investment property is one that should be made only after considering all relevant information. Depending on the current state of the economy and the terms and conditions that apply to the current financing used to acquire the investment in the first place, looking into refinancing options may be a very wise move. Typically, if it is possible to lock in better terms and provisions by refinancing the current debt on the property, the strategy is worth the time and effort to investigate.

One of the more common reasons to refinance investment property is to lock in a better interest rate and terms. In this scenario, the owner of the property may currently carry a mortgage that has a fixed rate that is significantly higher than the fixed rates currently available. By choosing to refinance the current balance due on that mortgage, it is possible to save a considerable amount of money over the life of the loan. Assuming that the cost of refinancing does not offset those savings to any great degree, this could mean the ability to settle the refinanced mortgage in a shorter period of time, allowing the property owner to have full control of the asset sooner rather than later.

Along with obtaining a more favorable rate of interest on the mortgage, choosing to refinance investment property may also help to make the monthly installment payments easier to manage. One potential approach to the refinancing is to still structure the refinanced mortgage for the same duration as the time remaining on the original mortgage, just at a lower rate of interest. When this is the case, the monthly payments are highly likely to be lower, effectively freeing up some income that can be invested in making capital improvements to the property and thus increasing the revenue generation potential of those properties.

Generally, the decision to refinance investment property involves the desire to enhance the financial position of the owner in some manner. At times, the goal is to pay off the debt on the property faster, while at other times the idea is to restructure the debt to make it easier to manage. In any event, any owner looking to refinance investment property loans should take the time to look closely at any refinance offers, project the outcome allowing for all fees and charges as well as the lower rate of interest, and determine if the refinancing presents a significant savings over time. If so, then the deal is well worth consideration.