A guide to refinancing real estate and investment property

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There are countless compelling benefits to refinancing property assets to maximise returns on investments. Seasoned real estate and property investors are well aware that refinancing is the key to unlocking opportunities, yet few new investors are aware of this strategy or its existence and how they could be benefiting from it.

At the very minimum, refinancing can unlock an abundance of wealth building opportunities, for example; it can lower monthly payments, gain a lower interest rate, improve loan terms and acquire additional cash flow. It is also an excellent strategy for building your property empire as it can release the funds needed for additional purchases.

Regardless of the many excellent benefits refinancing property assets can offer, there should be careful consideration and a full assessment of the risks. Investors should be clear and understand the purpose of refinancing in relation to their own needs, weighing the risks versus the rewards in great detail.

For the right reasons and executed correctly, refinancing can be a superb tactic in your strategy and exit plan. If you are considering refinancing a rental property, now is a great time because interest rates are at historical lows and look set to remain at this level for the foreseeable future. Investors who purchased before 2009, when the global recession hit, are highly likely to find lower interest rates today than at the time of their initial purchase.

Refinancing can save you money

Economically refinancing can be a smart move and one of the biggest reasons investors follow this course of action. For example, if your credit score has improved or interest rates have fallen since you took out the original finance, you could make huge savings by refinancing. Reducing an interest rate from 4.5% to 4% on a €300,000 investment property would save you over €30,000 across the lifetime of a 30-year loan.

Lower interest rates result in a lower monthly payment, less money paid to the lender in the long run. The opportunity for investment property owners with refinancing is to retain more monthly income, pay off your loan faster and realise the profits on your property much earlier.

Refinancing for investment

Another key reason that successful investors refinance is to buy additional properties for their portfolio. With interest rates so low, it is very easy for the rental yield of most properties to cover the cost of borrowing. As an investor this means you could add an additional property to your empire without putting any strain on your current cash flow.

If you are able to purchase a property in a location with a strong rental market providing stable yields it makes perfect sense to refinance now in order to purchase a new property.

What should you look for when you refinance your investment property?

Look for competitive rates and consider lenders based on their minimum qualification requirements. You should avoid paying an application fee without knowing if you will qualify for the refinance loan.

Consider the following questions:

  • Does the lender offer refinance on investment properties overseas or country of origin only?
  • Is there a length of period you must have owned the investment property before refinancing?
  • What is the minimum credit score requirement?
  • What are the lenders interest rates?
  • What terms are offered by the lender?
  • How long does it take to process and receive the loan?
  • What are the lenders fees?

Is real estate and property refinancing right for me?

If you are an investor who desires better terms on their financing, would like to take equity out of the property as cash, or wants to buy a new property for their portfolio, then refinancing is something you should explore.

Investment property refinancing is right for:

  • Investors who want to lower their interest rate
  • Long term investors who want to change the loan terms
  • Investors who want to take equity out of the property as cash to invest in renovation or to buy another investment property

Refinancing real estate and property assets can be a great option for investors, knowing your long-term goals and exit strategy are essential before considering and seeking professional advice when necessary. If you plan on selling the property in the near future, then refinancing into a 20-year fixed loan may not be the best option. More than ever before there are more finance packages and offers available to investors and with interest rates low, now would be a great time to explore your options.

Do you need advice on investing in overseas real estate and property? Contact us for a free 20 minute consultation with one of our experts, no hard sell just simply 20 minutes of our time to answer any questions you have and provide you with the information you need to start your property investing journey. There are a number of ways to get in touch, see details here.

Inspiration Asia

Inspiration Asia

Inspiration Asia is part of the Inspiration Group, an established real estate investor with offices in Berlin, Hong Kong and Israel that has successfully developed property in Germany's capital over the past 11 years.

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