Cash-out refinance for investment property – Track the 4 smart steps

Cash-out refinance for investment property – Track the 4 smart steps

Apr 24, 2013

Mortgage refinance is undoubtedly a popular option for many. Cash-out refinance is one among all the available options for mortgage refinance. In cash-out refinance, you get to extract the equity available in your property. So obviously the new mortgage loan will be greater than the previous loan. This refinance option generally helps people out when an urgent need for money arrives.
Cash-out refinance is often considered to be the alternative to home equity loan. If you’ve considerable amount of equity in your property, then you may easily look for cash-out refinance.

why should you go for mortgage refinancing

Not only general homeowners but the people with investment properties may also fetch profit through cash-out refinance. If you’ve an investment property, then you may get help of cash-out refinance to increase your investment. The money you’ll get out of your investment property can be utilized well for the down payment for another lucrative property. So, this is definitely an option real estate investors must look forward to.

Here are 4 steps through which you may take out the equity from your investment property and fulfill your financial needs efficiently:

  1. Check your qualification first: Traditional guidelines for mortgage lending allow transactions for up to 75% of the appraised value of the investment property. Investors with four or less investment properties may look for cash-out refinance. However, people with more than four investment properties may get help of willing community banks, private lenders or various credit unions for cash-out refinance. It’s advisable to check the guidelines before you take any vital step.
  • Get a copy of your credit report from beforehand: Your credit score plays an important role during refinance. If your credit score is feeble enough and you’ve missed mortgage payments in recent past, then lenders may not be that willing to assist you for cash-out refinance. As per the traditional mortgage guidelines, the borrower must have a credit score of 700. Anything below that may create problems for the borrower. If you’re credit score is really poor, then it’ll be better for you to concentrate on the improvement of your score first. Otherwise you may not qualify for the refinance.
  • Compare the loan terms online: Check out what your current lender is offering and what the other lenders have to offer. Evaluate the terms online and select the most profitable one for yourself. If you’ve maintained your previous mortgage payments on time, then your lender may feel eager to assist you further and offer you reasonable terms.
  • Complete the mandatory formalities efficiently: After you’re done with your choice of lender and the refinance terms, it’s time to close the deal by completing legal formalities. Don’t forget to inform your loan officer about the details. Present the thoroughly completed loan application and the copies of rental details, tax returns, pay stubs and other investment property details. These formalities will testify the authorization of cash-out refinance.
  • Cash-out refinance is a smart option but you must use it carefully. This refinance option may reduce the equity in your property. So try cash-out refinance only when you’ve adequate equity or your need is genuine. Inconsiderate use of equity is definitely not advisable and especially not for the investment properties. So whenever you consider cash-out refinancing just make sure that the circumstances are suitable for you to do that.

    Ed Neuhaus

    About Ed Neuhaus

    El Capitan is a nickname given to me years ago. This was just before or just after I was married. No, unfortunately it was not given to me by my wife. She has far better and worse things to call me. I sailed a lot a young man and I know a thing or two about sailboats. Maybe that is why I got the nickname. Maybe my nicknamers were thinking I was strong as a rock like El Capitan in Yosemite National Park. I hope it was because they thought of me as their leader. I am el Capitan of our ship, Broker for our company, father of two, husband, sailor, drummer, soon to be pilot, and all around bad ass. Ok maybe that last part about the bad ass is too much. But hey, why not. BTW, did I tell you I want to be a pilot? no wait, really, I want to be a pilot. You know the guys who fly planes. (this would all be a lot better in a video soliloquy than in typed form, but use the tools you got right?)