When Should You Refinance Your Mortgage?

Does it seem reasonable to refinance your mortgage? The response to the question of regardless if refinancing a mortgage is right for you might not just be as simple as yes or no. Just think about your property investing business for an instant. When you come across an agreement, do you make a simple yes or no choice about purchasing an investment property without having careful consideration? For the sake of your financial well-being, I hope you do not.

As with any real estate investment deal, the question of would it make sense to refinance depends upon a variety of circumstances. And like with any real estate investment opportunity, some of these loan refinancing scenarios are deal breakers. Quite a few deals involve a “maybe but only if” answer and, obviously, some options are absolute no-brainers.

Let’s have a look at a few of these situations and I will give you my advice on how to deal with the question of whether refinancing your loan is smart or the opposite. Let’s take a look at debt first. In the event you follow traditional advice, refinance to a reduced rate after which repay debts? For me, this is a deal breaker. Do not do it. You are better off making use of other people’s money to clear out debt (i.e. your monthly revenue from tenants in your rental properties.)

Up next, to help cover rehabilitation or remodel costs, is it best to refinance a loan? I’m not going to label this as a deal breaker, but I lean pretty heavily towards no on this scenario. In today’s market, you shouldn't have any problem buying real estate investment properties well less than market value. That's why your final offer price needs to include these repair costs.

The only way refinancing gets a slight nudge closer to a yes is it if is your private residence, you plan on residing at the home for many more years, and you want to improve your standard of living. Nevertheless, it is just still a very slight nudge towards yes. Last but not least, before going forward with the refinance, you must still consider all the numbers and expenses it will take.

Finally, would it seem sensible to refinance a loan if the purpose is to reinvest in more cash flow properties? I would definitely agree to refinance the loan for this one scenario. Then again - yes there is a catch - this instance only makes sense in certain situations. And much like a real estate investment deal, you need to do your research.

An investment should pay you greater than the cost of the refinance. Run the numbers and then run them again. Will this refinance increase your profits and not cost you money? My answer is a yes if the answer is yes.

Because of the hype about low refinance rates, you have to be careful not to get in the wagon. Nine times out of ten it simply doesn’t make sense to refinance your loans. You must be using that additional cash to acquire more cash flowing financial assets the one time it does be sensible to do so.

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