Investment property owners are not immune to the effects of a sinking economy and turbulent housing market. While many have managed to dodge the bullet of foreclosure, many more are still suffering from large mortgage payments that are challenging their monthly budgets. While mortgage modifications may be a solution for some, not all lenders are willing to allow such changes for investment properties. In fact, investment properties may only find relief through refinancing.
Yea Or Nay?
Many lenders may push for refinancing of an investment property, but that doesn’t necessarily mean it is a good idea for the investment holder. There are several things to consider before refinancing an investment property.
First, what is the reason for refinancing? If it is simply to take advantage of a lower interest rate that may save you a few hundred dollars a month in mortgage payments this may be beneficial. After all, the point of an investment property is to make money and hold onto a valuable piece of property. However, remember that refinancing will cost thousands of dollars in appraisal and closing costs of the new loan. An investor that doesn’t have this money available to spend, refinancing may not be a good idea at this time.
Also, will refinancing into a new loan cause problems when it extends the life of the loan? Since refinancing the mortgage will extend the life of the loan term, refinancing is not a good idea for an investor that does not plan to keep the property for at least 10-15 years. Refinancing an investment property and selling it within 5-10 years probably will cost more and not result in much savings.