Everyone these days is talking about refinancing. We are, too: any number of our recent blog posts have related to any refinance investment property plans, and we talk about refinancing with our clients every day. And our opinion is still the same: refinancing your mortgage is still one of the best things you can do for your financial health in 2015!
But what you may wonder about is how that applies to property that you may own, but don’t occupy—in other words, refinancing the mortgage on your investment property. And getting the best mortgage rates for investment properties is more important than ever.
You’re right to wonder about it. Refinancing an investment property is different from a home mortgage refinance. In fact, you may have tried to refinance your Florida or Georgia investment property … and you may have been turned down. If that happened, it’s probably either because your loan-to-value ratio is too high, or your current interest rate is so low that lenders feel it’s not worth refinancing.
Let’s talk about those two objections:
LTV (loan-to-value) ratio is too high:
This is one of the places where home mortgages and investment property mortgages differ. While various lenders may be willing to be flexible about your LTV ratio on a home mortgage, that’s generally not the case with an investment property mortgage. In fact, what you need to know before you apply to refinance your mortgage (much less be concerned about investor mortgage rates) is that you’ll need more equity in your investment property than you would in a primary residence. In general, you’re looking minimally at a 80% LTV.
Current interest rate is too low:
The rule that most lenders follow (and the experience that they’ve had) is that investment property loans are riskier than home loans. That makes sense: if someone finds themselves in financial difficulty, they’re more likely to let an investment property go into foreclosure than they are with the residence. Having a low interest rate shows that you’ve already done everything you can to save money, and as current mortgage rates for investment properties are higher than home mortgage rates, this may raise a red flag.
As is true for every mortgage loan and mortgage applicant, you need to see what specific issues you may have for your specific situation. If you’re looking to refinance an income property in Florida or Georgia, then give us a call and we’ll help you determine what is the best route for you … to get the best mortgage rate possible.