You may be asking yourself, “How can I refinance rental property? If you own rental property you may wonder how much cash you can take out from your rental property. Maybe you bought the home when interest rates were higher and want to refinance to get a lower interest rate so that you can lower the payment or maybe you want to take cash out of the property so that you can use the money for repairs or renovations.
So you have decided, “I want to refinance rental property.” What are the requirements for someone to refinance rental property? What is needed to obtain a loan at a lower rate or do a cash out refinance. These are questions many people ask. Refinancing your rental property is easy if you meet some very basic requirements.
A bank is going to want to look at several different pieces of information to approve your refinance. First and foremost is your ability to repay the loan. The bank wants to make sure that you are able to make the mortgage payment. Additionally, you will need to document the rental income by the way of a signed lease agreement. The bank will want to see bank statements, income information such as paycheck stubs and/or benefit statements, and three years of filed income tax returns.
For non-owner occupied rental property, the bank will loan up to 75% of the appraised value of for single unit properties, and 70% for two-four unit properties. The property must not be listed for sale on the market and must be owned more than six months.
A cash out refinance of rental property is risky to lenders, especially since the property is not occupied by the owner. You must have a good credit score and a reserve of assets or cash in the event that you are unable to make the payment.
Before you decide to refinance your rental property you need to be sure that it makes sense for you. Will you get a lower interest rate? Will it lower your monthly payments? Will it give you the necessary cash needed to make improvements to the home? Additionally, if you choose to cash out and take out some of the equity against the property, this may affect your ability to buy future investment property if it affects your debt-to-income ratio.
Before you decide to refinance your rental property, the first thing you should do is talk to a licensed Mortgage Loan Officer who can guide you through the process and get you qualified. A loan officer can help you decide what types of programs are available and what is needed to get you started.