Investment Loan Refinance
Being Successful with your Investment Loans
Investing in a property can become a very lucrative way to build residual income. We all have our Donald Trump dreams, but sometimes we need some assistance to get there. What does it mean to acquire investment refinance loans? You pretty much refinance a property that you plan to invest – whether it’s a vacation home or something you actually plan to rent out to tenants and make some profit down the line. It could ultimately be the great vehicle to extra income if you decide to put gas in the tank and let it ride with dependable tenants.
How to apply for an Investment Loan
Before you consider this process, think about your primary residence. Have you fulfilled the requirements of the state by staying in your first home for the allotted time? Have you kept up with your mortgage payments? Remember, lenders look at this first before even considering your application. Allowing you to refinance an investment property is a huge risk because your primary resident comes first especially when things hit the fan. Of course, it’s no surprise that a lender wants your income report, social security, employment history, and credit history. You are investing in a property you probably won’t actually live in, so that puts the fear of the unknown in their eyes. This type of loan is why it will be a lot harder to convince them to approve your refinance request.
What requirements will you have to meet?
Investment loans are not a walk in the park for a number of reasons. For one, your credit score must be greater than a conventional loan. We are talking over 700 – which takes a lot of time and effort. Make sure any missed payments or debts are taken care of before applying. Also, you may have to talk to your credit bureau to make sure there are no cracks in the walls of your credit line. Not only is good credit important but so is equity. While you may be use to a lender requiring you to build 20% in the home. A lender for your new investment home may request up to 40%. That is a huge down payment that is your responsibility! Make sure you have enough money on your end to cover that cost. Additionally, it’s also wise to have some money saved up to take care of the mortgage for at least six months in advance. While it’s great to find tenants to pay for the place, it’s also good to save yourself in case you can’t find anyone to live in the home or things get a bit tight. Give your lender the assurance that you can handle the situation.
Benefits of an Investment Loan
Investing in properties certainly has its fair share of benefits. One thing you can do with refinancing is boosting the property value. Upgrade your appliances and some items in your home like the bathroom, kitchen, etc. This will boost the market value of the home. Of course, this means you can raise the price of rent – leading to more profit down the line. As you begin to build more equity in your investment property, you have other options on deck to diversify such as using a cash-out refinance. You can always pay for school expenses, maybe even get another property, or continue to add value to the home. Maybe you want to take out some of your equity and use it towards a retirement fund or savings account.
Just because you are renting the place out to someone does not give you the right to be lazy. At the end of the day, your name is on the property, and you need to make sure you pay for proper cleaning services, fees, titles, higher interest rates, closing costs, etc. You need to ensure that you have the right income to keep things going in case your tenants leave. It’s always better to be safe than sorry.
Keep some of these ideas in mind to give yourself better perspective before getting investment refinance loans. This way you have more focus and more of an appreciation for achieving goals outside of your primary residence.