You bought a home and now you want to refinance it. Some lenders may make you wait up to six months before allowing it – they call it seasoning. Others may let you refinance as soon as you want. The question is which option will be best for you and why.
What should you do? It depends on your situation and the reason you want to refinance your home. You have plenty of options to refinance right away if it’s the right choice for your situation.
Why Are You Refinancing?
First, think about why you want to refinance your home and what implications the process may hold.
Did you only take out a small mortgage, putting a large amount of your own money down, and now need access to it sooner than expected? This is also common for real estate investors who invest a lot of money and then find another great property to invest in. They effectively use the refinancing funds to fund the purchase of a second home.
If you want your cash back quickly, refinancing right away should be a relatively simple and straightforward process. Conventional lenders, hard money lenders, and private banks usually don’t have a seasoning period and the chances are good you may not have to worry about it at all. As long as you use a different lender, you should be able to get around the 6-month seasoning rule.
The other option is that the terms might have changed. Did you take on a high-interest rate and now rates dropped? The earlier you refinance the better. This may sound counter-intuitive, but here’s why.
Once you make payments on your mortgage, you invest in it. When you refinance, you often reset the clock. Say for example you have a 20-year term and paid on it for 5 years. If you take out another 20-year term, you just lost those 5 years that you paid on the mortgage. Refinance right away and you don’t lose much time and save more money with the lower rate.
What Are Your Options When Refinancing?
The sky is the limit when refinancing your home. Since government-backed loans don’t allow investment properties, you have very few rules to follow.
Conventional lenders, hard money lenders, and private banks have lenient guidelines when it comes to refinancing, which will work in your favor. Still, you will want to think about your reason for refinancing when choosing your options.
Are you looking to buy another investment home fast and need quick access to funds? You need fast approvals and less-stringent guidelines. Hard money loans are your best bet here, being loans based on collateral that can be granted within a few days. Since these loans are based on the asset, in this case, the home, these lenders put less stake into the investor’s financial background. They are great for investors because they provide approvals and funds fast with closing often taking place within a week. You have a higher chance of securing that great deal, and many of these lenders provide a proof of funds that can add additional power to your offer.
With a hard money loan, you can borrow up to 75% of the property value and only need a 600 credit score to refinance. With funds in hand within 7 days, you can close on that incredible real estate deal you found, expanding your real estate portfolio without taking any money out of your pocket without having to refinance your primary residence.
Plan Your Strategy
If you’re thinking of expanding your real estate portfolio beyond the first investment property you bought, refinancing will be your ally.
If you’re planning to refinance your home, the process may look a little something like this: you invest in your first property, fix it up, and let the home appreciate. As soon as the home is worth more, refinance it. Now that you have equity in the home, you can take it out and use the funds to buy your next property.
It’s called the BRRRR method. Buy, rehab, rent, refinance, repeat. Hard money lenders make this simple and are an investor’s best ally. All you have to do is get out there and find the right properties that will yield the highest profits. Be in the right place at the right time and you’ll expand your real estate portfolio with very little money out of your own pocket.
All you have to do is pay that first mortgage (the hard money loan) from the proceeds of your rent. Keep expanding your portfolio and you’ll have no problem paying your mortgage and even paying it off.
Know Your Options
Before you invest in a mortgage and real estate properties, know your options and what they could mean for your investments and finances. Think about your financing strategies so you don’t find yourself stuck in a loan that won’t allow you to refinance, and make sure that you have exhausted all other financing options. If your goal is to create a large investment portfolio, you need flexible financing options that allow refinancing right away and you’ll have to ensure that this will be acceptable to your lender. You’ll free up capital and be able to invest in more properties, growing your portfolio, and taking the step towards becoming financially independent.
Refinancing doesn’t have to be a hard or expensive process. As long as you know your options, look at how you can qualify, and make the most of your real estate investments today, refinancing can lead to great success in building your business as an investor. There’s no better time than now to invest in real estate and the benefits far outweigh the disadvantages. If you’re ready to jump on the bandwagon, get started with the right financing that you can refinance as often and early as you need.
Alternatively, make sure you work with a hard money lender you can trust. New Silver has newly-lowered rates for real estate loans and easy online applications.