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Refinancing can be tricky. Below are popular questions and answers about the process:
What is a refinancing loan?
For a traditional, owner-occupied mortgage, it's a way to get lower interest rates for a homeowner who still has a balance on their mortgage. For investors, it's a way to secure more time or more capital needed to complete your property project, or a way to lower interest rates from what is currently being paid.
How is a refinancing loan different than a fix and flip loan?
Refinancing loans are intended to be used to pay off an existing loan typically with a different lender that offers better terms or service. They are not used to acquire an investment project and rehab it. Fix and flip loans fund both acquisition and repair of a property.
What if I have bad credit?
Refinancing loans can still be available. Private hard money lenders look at everything from previous investment history to equity and other risk factors. Credit is only one of the factors that paint the picture of loan-worthiness.
How quickly can I refinance a loan for an investment property?
Sometimes in as little as 2 business days. This primarily depends on the situation with the current lender, the amount you need, what is currently paid off, and what the potential risk is.
What are the positives and negatives of refinancing loans?
The positives of a refinancing loan are that they can save you money via lower interest rates, they may offer superior services like construction draws, or they can give you access to the extra funds or longer loan terms.
The negatives of a refinancing loan are that they are based on the as-is value of a property so if the property is fully demolished, the as-is value is significantly lower. The first lender may have originated the loan using the total project costs or the after repair value. Until the drywall stage of construction is reached, a new lender may not be able to offer enough for it to make sense to refinance.
Can a refinance loan be used to consolidate other debt?
In some cases, a refinancing loan can consolidate multiple debts on a property. If you put several lenders together for a project, a single refinancing loan could pay off each, allowing completion of the project with a single monthly payment.