Banks that Refinance Investment Property

Mortgage rates are historically low, and homeowners have no better time to refinance their properties. A Freddie Mac survey from 2020 revealed that the average interest rate on fixed-rate mortgages had dropped by 50% between 2010 and 2020. Although these rates have skyrocketed in 2022, the current sub-6 % rates still represent a vast improvement from what was available in the 90s and early 00s.

Refinancing your property allows you to get better terms than you did when you initially took out your mortgage. However, there are several factors you must consider before refinancing your property, especially if it is an investment property, to ensure that you are making a wise investment. One of these considerations is who to refinance with. You may refinance your property through a traditional bank or other lending institutions. Each lender has its specific benefits that may make them attractive. This piece looks at the different banks that offer refinancing for investment properties and how to pick the best bank to refinance your investment mortgage.

Refinancing Investment Properties

Refinancing is defined as the process of replacing an existing mortgage. The refinancing process is typically carried out to take advantage of lower interest rates on the market but can also be initiated for other reasons, such as to shorten the term of the loan to offset it faster and save money.

A common question among investment property owners is, “can I refinance my investment property?” The answer is YES. Investment properties can be refinanced similarly to residential properties. However, the requirements for refinancing investment properties are different, and you often need to present more documentation. The process is typically simple nonetheless, and having a good bank or company makes it more seamless.

Benefits of Refinancing

Refinancing your investment property offers many benefits. Some of the most obvious benefits and reasons for refinancing include;

• Allows you to negotiate a lower interest rate, helping you save money throughout your loan term
• Allows you to renegotiate the terms of the loan. You can seek a longer term to reduce monthly payments and increase cash flow every month. Alternatively, you can negotiate for shorter terms to help offset the loan faster and save more money in the long term, even though you incur higher monthly payments.
• Allows you to borrow against the equity that you have built on the property.
• You can utilize the money gotten from cashing out on the property to renovate the property, allowing you to increase your rental income.

Requirements for Refinancing an Investment Property

Refinancing an investment property is not much different from refinancing a primary mortgage. However, the requirements are usually lightly different for an investment property refinance. Here are some requirements that banks look out for before approving your property refinance. Some of these requirements include;

• Excellent credit score: Unlike with residential properties, banks often require you to have a high credit score if you’re planning to refinance an investment property, banks may request a credit score of up to 680 for a single property and up to 720 if you’re refinancing multiple properties.
• Low DTI: As it is with borrowing for an investment property, banks request that you have a stable debt-to-income ratio, typically less than 36%, before they can refinance your investment property. Bans want to know that you have a high capacity to pay off your mortgage, an attribute judged by the debt-to-income ratio.
• Loan-to-value requirement: The LTV tells you how much equity you have in a property. The higher the LTV, the lower your equity and the higher the risk to the bank. Thus, banks often set strict LTV requirements for investors who want to refinance investment properties. Banks may request an LTV of at most 75%, while some may have much stricter requirements.
• No more than 10 financed properties: per federal guidelines, you cannot have more than 10 properties financed at once. Similarly, when seeking to refinance, the banks will check how many properties you have a mortgage on and deny you refinance if they are more than 10. The more mortgage you own, the harder it is to settle them.

What to consider Before Refinancing

Even though refinancing is generally beneficial, it is not always the case. Refinancing is costly, and you must consider it carefully before proceeding. Some questions you must ask and answer before refinancing your investment property include;

• Is it the right time to refinance? You should assess the rates in the current market to ensure that refinancing at those rates will truly benefit you.
• Do I have the money to refinance? Refinancing is an expensive process. You have to make down payments, closing fees, and other minor charges which can run into thousands of dollars Thus, refinancing can impair your short-term cash flow. If you do not have adequate cash reserves to refinance, then it may hurt you in the short term.
• Am I refinancing with a different lender? Does my current lender have a prepayment penalty? if you refinance with a different lender, they will pay off your current lender while covering your mortgage. If your current lender has a prepayment penalty, this can significantly increase the cost of the refinancing process.
• Do I plan to own the property long-term? After refinancing an investment property, it may take a while to recoup the refinancing costs through rental income. However, if you don’t plan to own the property long-term, you may never be able to break even. Thus, you should carefully consider your length f time as a property landlord before refinancing.

In essence, refinancing is a complex, expensive process. You have to do a careful financial analysis before going about it to ensure you get great value for the money spent.

How to choose a bank to refinance your Investment Property

When seeking to refinance an investment property with a bank, you have to research thoroughly to ensure that you get the best rates. The internet is a goldmine and your best friend when it comes to getting information on different lenders. Utilize the internet to research the rates and terms offered by different banks. The internet also provides many forums where you can interact with like-minded investors to get reviews of their experiences with different banks. However, be careful of predators on the internet who may seek to lure you with false advertising.

Another way to get reliable information is through word of mouth. When seeking to refinance, you can interact with landlords in your locale who have refinanced their property. Combining the information from different landlords can help you make an informed decision about the best banks to refinance with

There are two main factors to consider before choosing a bank to refinance with/ These are;

• Costs: You must understand the initial and recurring costs of refinancing with any bank. The rate, monthly payment, loan term, closing fees, down payments, and possible prepayment penalty all help you determine the loan’s cost. You should factor in all of these different costs before making a decision. Some banks may request higher down payments and closing fees but offer better rates to make the overall long-term cost more bearable. The reverse may be the case with another bank, so do well to research properly on the different costs.
• Services: Besides saving you money, you need a bank that makes the refinancing process seamless. Refinancing requires a lot of paperwork and can often get confusing. Banks with great service answer your questions promptly and accurately, with a smile on their face. Besides, the documentation and closing process is often hectic. A bank with good service delivery will prepare all documentation promptly, give you a fast decision and enable you to close the deal quickly, all while maintaining a transparent process.

Once you have researched and picked your best choice, you may proceed with the refinancing process.

Which banks Refinance Investment Properties?

Not every bank or lender will take the risk of refinancing investment properties. Here are some of the best banks that will help with refinancing your investment properties

Citibank

Citibank offers investors many advantages as a refinancing bank. First, Citibank offers different refinancing options, including rate-term refinancing and cash-out refinancing. Compared to other banks and non-bank lenders, Citibank has relatively lower interest rates and requests very small down payments (as low as 3%). With Citibank, you can get a refinance for an investment with a relatively low credit score (as low as 620), although higher credit scores are desired and help you get better rates.

Citibank offers terms of 10 to 30 years, with good payment plans to help save you costs. One major advantage of Citibank is its service and accessibility, with numerous online resources to help you determine your eligibility for refinancing and to help you through the process. Moreso, Citibank is currently running a promo that offers new investors $500 off on closing costs, while new and existing customers also get discounts on down payments and interest rates. You may begin a Citibank refinance application over the phone, online, or in person.

Pros

• Different refinancing options, including cash-out and rate-term refinancing
• Provides online resources to help you determine your eligibility and compare mortgage rates
• Low down payment, rates, and fees compared to other lenders
• Allows you to refinance an investment property with lower credit scores

Cons

• Requires help from a loan officer to complete an online mortgage application.
• Customized mortgage rates are not available without making contact.
• Charges a mortgage application fee

Citizens Bank

Like Citibank, citizens bank provides ample online resources to get you acquainted with their current refinance rates. Citizens bank’s online page also helps you connect to a loan officer to answer your inquiries and discuss customizable refinance plans. Citizens bank provides a simple way for investors to apply for refinancing by using the online portal where they can complete their profile and upload the necessary documents. However, if you want to apply physically, you can visit any Citizens bank branch to begin.

Like Citibank, Citizens bank offers cashout and rate-term refinancing, with fixed-rate and adjustable-rate refinance.

On the downside, Citizens bank offers comparatively higher rates, with a 30-year fixed rate mortgage having an interest rate of 6.125% and an APR of 6.277%. However, the advertised interest rates on the Citizens bank website only apply to investors with a 740 credit score who make at least 25% down payment. The refinancing process with Citizens bank can take anywhere from 2 weeks to 45 days. Citizens bank operates in all 50 states of the USA.

Pros

• Excellent service with prompt and accurate answers to inquiries
• Easy online application process

Cons

• Relatively higher rates
• No discount on closing fees and interest rates for new customers

Capital Bank

Capital bank allows you to refinance your property, whether you are consolidating debt or cashing out. Capital bank offers several options, from fixed-rate mortgages to adjustable-rate mortgages (ARM), home equity line of credit (HELOC), and even smart refinance

Capital bank refinancing works through an efficient online process known as the QuickClose digital process that enables you to verify your income and assets through your bank, connect to a loan officer t answer your query, make a refinance application, and track the entire process. Capital bank allows you to refinance your home even if you don’t have enough cash to make a down payment, although they require you to have a good credit score (typically up to 680) and a stable debt-to-income ratio. Capital prides itself in having a transparent refinance application process and has received numerous positive reviews for its efforts. 

Pros

• Easy online application process
• Good service delivery with dedicated mortgage originators to help assess your unique situation and determine the best loan option for you
• Multiple refinancing options to suit our unique case
• Relatively low down payment requirements.

Cons

• No advertised rates on different refinancing options. Only when you begin the application process that you see the different rates.

US Bank

US bank offers various options for investment property loans and investment property refinancing. Like the other banks, the process can be completed entirely online, and the rates are pucblished for the different refinancing options. Although US bank has relatively higher rates, with up to 5.7% APR on a conventional 15-year fixed rate mortgage, it makes up by offering existing customers up to 0.25% discount on closing costs during refinancing.

Through its online platform, you can get in touch with a loan officer o attend to your queries and help you determine the refinancing option that is best for you. If you’re not comfortable making a refinance application online, you can schedule a call with a loan officer who will help you make an application over the phone.

Pros

• Seamless online application process
• You can use the online tool to prequalify for the refinance and compare rates with other banks
• Excellent service, with call centers always available to answer your queries.

Cons

• Relatively high-interest rates
• Published mortgage rates assume an above-average credit score
• Harder to qualify for refinancing with this bank.

The Refinance Process

Once you have successfully selected the best bank to refinance your property, you can begin the finance process. Luckily, the banks listed here utilize an online process that makes the refinance applications seamless. The refinance process is as follows;

1. Gather supporting documents: For an investment property refinance, these documents will include
   1. Proof of income
   2. Copies of W2 or 1099 forms
   3. Proof of homeowner’s insurance
   4. Copy of title insurance
   5. Copies of asset details
   6. Account of rent collected from tenants
2. Apply for refinancing with your preferred bank
3. Lock in your refinanced rate
4. The bank underwrites your refinance
5. Closing

The entire process, from start to finish, may take between 2 weeks to 60 days (or more), depending on your lender. Ensure that you have enough time to answer queries and make multiple copies of your documents if you need to submit them. Also, ensure that you have enough cash at hand to cover the closing costs and other associated fees.

Bottom line

When you decide that it is time to refinance your investment property, it is pertinent that you carry out proper research to find the best bank that suits your unique circumstance. Different banks have different requirements and terms. With an excellent credit score, low DTI, high LTV, and proper knowledge of what you desire, you can meet the investment property refinancing requirement for virtually any bank. However, ensure that you research properly the rates and terms offered by each bank to avoid paying more than necessary. This piece provides you with some of the best banks to seek investment property refinance with; however, you should consult similar investors in your locale to find which banks or lenders offer the best rates around.

Looking for the best lender for an investment property refinance? Look no further than Aurum & Sharpe. Aurum & Sharpe provides a fine blend of cost and efficient service to ensure that you get the best experience e possible. We put all our customers first and guarantee you highly competitive rates to help you save money. Don’t qualify for an investment property mortgage? Aurum & Sharpe also offers excellent non-QM loan options for investment properties to help you achieve your dream of being a landlord.

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