Is refinancing the right move for you? Previously, we discussed the benefits of refinancing your rental property and the documentation you need to provide to your lender. Let’s dig into the process a bit more so you know what to expect.
A Look at the Refinancing Process
What do you do?
- Call your current lender. This is just a start. They are already familiar with your financial/investment situation and can give you an “estimate,” if you will, in terms of interest rates and loan terms.
- Shop it. Do some comparison shopping; a reputable mortgage broker can help you find the most advantageous deal. As you compare, ask lenders for estimated closing statements that itemize costs and your output. These vary significantly by market and by individual lender, so don’t assume one will be the same as the next. It’s an important step to take.
- Select a lender. Take some time to sift through the offers and choose a lender that offers the best deal for your situation. Interest rates are obviously of great concern, but they’re not the only factor in your decision. You also want a lender who acts as a partner in the process.
- Be prepared for more paperwork! It never ends, does it? During the underwriting process (after the lender receives your loan application/paperwork), they may need yet more information to verify that you are eligible for the loan and to finalize their offer. As mentioned in our previous post, this may include providing various financial statements, debt records, and proof of adequate savings.
- Have an independent property inspection. Most mortgage lenders need an appraisal to ensure the value of the property is sufficient to offset their risk. If you have current tenants, let them know what’s going on (so they’re not freaked out by someone lurking around!). Your lender may approve the loan pending the appraisal as it can take some days.
- Sign on the dotted line. It’s not really dotted, but you get the idea. Once you are officially approved, sign everything and send to the lender. If everything is in order, you will receive your funds.
- Pay off the old mortgage. Actually, your new lender does this by sending a payment to your previous lender to clear the mortgage. So you can sit back on step 7.
Arguably the most critical aspect of the refinancing process is choosing a lender you can work with on a compatible, professional basis. You want to save a bit on interest, sure, but finding a partner who can walk you through each step is crucial.
If you are interested in turnkey investment properties, we can connect with with the right lenders. Contact us today.