There are two main aspects that trigger the economic growth of an individual, savings and investments. When savings are used meaningfully and productively they are referred to as investments. Investments can be of two main types, namely securities investments and real estate investment. Of the two, the real estate or property investments acquire the apex position for every individual. They have higher costs and put additional burden on the investor while purchasing a property. The investor needs to clear all debts before getting its ownership. To decrease the burden of property investment mortgages, investors can now bank on refinancing of investment properties to a great extent.

Refinancing Basics

Refinancing refers to replacement of a present secured loan by another loan. The second loan is usually a loan that has low rate of interest and hence the debt burden decreases significantly for the individual. The second loan replaces the existing loan on the basis of the same assets. Refinance is used usually in terms of property purchase.

Advantages of Refinance

Individuals go for this option of refinance in order to seek some fundamental monetary advantages. Some of the significant advantages that refinancing provides are as follows:

1) The most important advantage of refinancing is that the individual can replace the high-interest loan with a low-interest loan.

2) It is also possible to replace short-term loans with long-term loans, which gives the investor some more time to repay the debt.

3) If the investors feel that their current loan is very risky and fail to sustain it then they may replace it into a low-risk loan through the method of refinancing.

4) Refinancing also helps in liquidation of the equity of the property that the individual must have acquired over the period of time.

5) Refinancing of loan also allows the investor to lower the EMIs or Equated Monthly Payments that reduces the pressure on the individual to a significant extent.

6) Individuals can convert their loan types into other loans through loan refinancing. If individuals have balloon mortgages then they can refinance it to fixed mortgage and ensure low risk on it.

7) Refinancing is ideal to discard credit card loans as they have very high interest rates. The credit card loans can be converted into the conventional fixed-rate loans that have lower rates of interest.

Refinancing Investment Property

Refinancing an investment property has increasingly becoming a standard trend in the real estate market. People often replace their investment property loans with another low-interest property investment loan. The property investment market is one of the most bustling markets in the overall investment sector. The market fluctuations may reduce the value of the investments. To avoid this and such other problems investment property refinancing is very essential and useful.

Uses of Refinancing Investment Property

Refinancing investment property loans has some key uses. Investors opt for investment property refinancing for the following purposes:

1) The market conditions change very rapidly. Hence a loan that was profitable till a day before may not remain or continue to remain profitable for the investor. The markets may experience a slump and the investment property loan rates may decline in the process. To take advantage of the low interest rate, investors can convert their loans into low-interest loans. This would make the investments profitable for the investors. The property must provide returns equal to the rate of interest to make the investment profitable.

2) Another important use of refinancing property investments is rising of cash flow. The equity built in the property over a certain period of time can be converted into cash by using the refinance method. There are investment advisors and experts who calculate the equity perfectly and provide the investor with the exact amount that he can borrow with the available equity.

3) Individuals can remodel their properties and equip it with modern amenities and increase the rent on the property. Refinancing can be used to make the upgradations so that the market value of the property increases. This refinancing can be done with the help of the equity in the property.

4) As the amount of loan decreases the equity of the investment property increases. Property prices always move in the upward direction. As the equity increases, investors can maximize the equity to their benefit with the help of refinancing techniques. They can convert the equity into liquidity and use refinancing measures to invest further.

Refinancing Requirements

When investors apply for refinancing there are certain required criteria or condition that they must fulfill. The investors would require the following things to apply for refinancing and get it approved:

1) Income Proof: This is the most important piece of information that the investor must provide to the financers. According to the general norms investors need to provide their income details for the past few months. They must mention their source of income precisely.

2) Insurance Copy: Investors need to provide a copy of the homeowners insurance. This provides a proof that the investor has the home covered sufficiently and appropriately.

3) Details of Assets: Investors must provide the details of all the assets that they own including details regarding statements for savings, investment records, mutual funds and stock holding details.

4) Other Details: Individuals must also give legal details of the property and also the relevant tax details.

Tips on Refinancing Property Investment

Refinancing is a tricky issue and requires the investor to be very careful while handling the aspect. Some of the tips to help him in this respect are as follows:

1) It is necessary that the investors are aware of the market trends and the exact process of refinancing before they get involved in the process.

2) Refinancing involves tax benefits that the investor can enjoy. Hence, investors must check the tax implications before opting for the refinancing aspect.

3) Investors must ensure that the refinancing measure would not affect the financial condition of the investor adversely and would not put his assets in jeopardy. After checking all these aspects, only then should he take the refinancing step.

Refinancing investment property allows the investor to take advantage of the low rate of interest as well as enhance his real estate investments. This is one of the avenues that have increased the feasibility of real estate investments.