|
How
to Refinance Investment Properties
Refinancing Property to Save Money PART 2
Learning to
refinance investment properties is invaluable if you are looking for a
smart way to shave the interest rates off your property mortgage, car
loans and even credit card bills.
Find out what is the right way and when will be the right time for
refinancing investment property in this Part
2 of our Guide to Refinancing Investment Property.
Do you know
how refinancing can help you avoid capital gains tax or allow you to
cash out? If No, Click
here for Part 1 of this
Refinancing Rental Property Guide.
Refinance
Investment Properties for a Better Deal on Your
Mortgage Loans
As we have
revealed earlier in Part
1,
refinancing your property mean replacing your mortgage loan with a
brand new one with more favorable terms and conditions.
The most common and important reason for refinancing investment
property is to replace your existing mortgage with a new loan that
comes with lower interest rates. By lowering your interest rates by 2
to 3%, you can easily save up to a few hundred dollars on your mortgage
every month depending how are your total mortgage debts.
Your personal earnings and investment needs may change over time and
refinancing investment property allows you to change your loan duration.
By shortening your loan period, you end up paying less interest and get
to own your investment property sooner. On the other hand if you want a
breather and more affordable mortgage payments every month, you can
always stretch the loan duration. This will ensure a lower risk of you
defaulting on your investment property mortgage.
Some
property investors may also want to refinance investment property so
that they can jump ship and switch their
adjustable rate mortgage ARM to a mortgage loan with fixed interests.
The benefits of doing so includes being able to sleep well at night by
having a stable and easy to calculate mortgage payments. It's also an
effective way to get your hands on a cheap property loan by locking in
rock bottom interest rates.
However if you strongly believe that interest rates in the long run are
going to take a dive, you can do the exact opposite and convert your
fixed mortgage loan to one with adjustable interest rates.
Refinance
Investment Properties to Pay off Your Other Loans and Debts
Because
your mortgage loans are backed by your investment properties,
their interest rates tend to be much lower compared to your other debts
such as car loans or credit card bills.
With cash
out refinancing, you refinance investment property to free up its
equity and use the money to pay off your other
debts. Effectively you will be replacing your expensive consumer loans
with
mortgage loans that come with much lower interest rates. Over time you
will enjoy huge savings off your existing debts.
Let's take a look at this simple example below for a clearer picture
what I mean:
Let's say that you have
taken a car loan of $20,000 at an interest rate of 10% per year. In
addition you owe the
credit card company $5,000 at an interest rate of 24% per year. Finally
you owe your bank $10,000 in business loans at 15% interest rate.
So how much will you get to save by refinancing investment
property with a mortgage loan of 7% interest rate and using the cash
from the refinance to pay off your 3 other debts (car loan, credit card
bills and business loan)
Firstly calculate how much interest you will paying for your car,
credit card and business every year.
Total Interest per Year = (20,000 x 10%) + (5,000 x 24%) + (10,000 x
15%)
= $4,700
Total Mortgage Interest per Year = (20,000 + 5,000 + 10,000) x 7%
= $2,450
Savings
per
Year by Refinancing = 4,700 - 2,450
= $2,250
Do remember you will have to consider the refinancing fees and closing
costs to see if it makes sense for you to refinance investment
property. The more
consumer debts you owe and the higher their interest rates, the more
savings you will enjoy when you refinance investment properties.
Read
what our visitors have to share below OR Scroll down to
add your own comment
What are Your Most Important Reasons
to Refinance Investment Properties?
No matter how much experience you have, refinancing investment property will always be a big decision for you. What are benefits that you have reaped when you refinance investment property? Do you know any dangers to warn others about? Share your valuable experience with everyone here - We will love to hear your tips, comments and real life stories:
What Our Visitors Have to Share on Refinancing Investment Properties
Click on the links below to read the valuable tips that our other visitors have to share:
Do you want to learn MORE practical
must-know facts on
rental property loans?
Return
from
this Refinance Investment Properties page to our Financing Investment Properties guide
|
