Marty Asks… I’ve owned a rental property for about 5 years – I’m wondering if in this market – it is a good idea to refinance. Any advice?

The costs you will incur during a refinance of your rental property will more than likely be covered within the first two years at your new rate. Let’s say on the refinance of your rental property you are able to go from a 6% mortgage to a 4.5% rate. And with the new appraisal on your home you owe $200,000. Current loan guidelines state that you must have 20% – 25% equity in your home in order to refinance an investment property. This means that every month, you could be saving anywhere from $400 to $500. That’s a lot of money that could go towards other expenses such as groceries, college savings or simply towards other bills. 

Now in order for an investment such as this to make sense, you want to make sure that you plan on holding on to this property for typically an additional 5-10 years. In addition to this, you must also take into consideration your current financial situation. If this rental property is your only debt and you have a healthy habit of saving then yes it would make total sense to move forward with the refinance and continue to put that money towards principle to pay it off even sooner. That extra $400-500 will look really nice in your bank account each month if you need to boost your emergency fund or have other debts to pay.

Using a rental property for financial security long term is a great idea – get your renter to pay your mortgage AND help you save for the future!

Meet Cheryl!

About Cheryl

As a successful business owner and community leader, Cheryl Braunschweiger is known and respected for getting things done with a degree of skill and enthusiasm that bring out the best in those around her - colleagues, clients and friends. The name of her business, ALMC Mortgage, reflects Cheryl's philosophy and personality. She says it stands for All Loans Must Close –a reflection of her determination to do whatever it takes to serve her clients. Cheryl has been in the mortgage lending business for 20 years. Read More About Cheryl
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