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Refinancing rental property can be a smart move to reduce your interest rate and monthly payments so that you can enjoy more cash flow and rental profits month to month.

Another way that you can benefit from refinancing rental property is to do a cash out refinance to tap into your property’s equity. This is a way for you to get you hands on ready cash without having to sell the property and more importantly, without having to pay capital gains taxes.

Refinancing Your Rental Property to Enjoy Lower Mortgage Rates

With a conventional refinance, you simply choose a new lender who will pay off your old housing loan. You’ll owe the remaining amount to the new lender at a lower interest rate.

The key to benefiting from refinancing rental property is to do it at the proper time.  Let’s assume, for example, that you owe $50,000 on a rental property valued at $150,000 and your interest rate is 7%.  Since you purchased the property, interest rates have fallen to 4%.

You could do a straight rental property refinance and take out a new loan for $50,000 at 4% interest. Your mortgage will be significantly lower, but your tenants are still paying the same monthly rent. This translates to extra cash in your pocket each month plus less total interest paid over the life of the loan.

Refinancing to Cash Out Money from Your Rental Property’s Equity

Instead of borrowing the exact amount you owe from the new lender, you can actually borrow more. Returning to the same example above, let’s say you still owe $50,000 on your property that is worth $150,000. You can choose to borrow $100,000 instead and walk away with $50,000 in cash.

This is a great way to access the equity in your property if you don’t want to liquidate and sell off the asset.

If you are thinking that this will increase the amount of interest you pay over the life of the loan, you are correct. But do realise that this is offset in part by your renter’s payments and you could very well make other investments with the cash you pocket.  Best of all, you won’t have to pay a single in capital gains taxes.

Which Type of Refinancing is Right for You and Your Rental Home?

Refinancing rental property to lower your interest rates and monthly mortgage payments idea if you don’t need the extra cash or if your goal is to pay off the property quicker and owe it debt-free.

On the other hand, a cash out refinance is a smart move if you need the cash to pay off other high interest debts such as credit card bill or car loans. You can also reinvest cash in other investments or spend it for your own enjoyment such as a new deck for your house or a family vacation. 

Teo Zhenjie has been showing landlords how to manage their tenants and rental property effectively on Propertydo http://www.propertydo.com/ - To learn more important tips on refinancing rental property, visit his website today for step-by-step real estate guides, free resources and forms.

Teo Zhenjie has been showing landlords how to manage their tenants and rental properties effectively on Propertydo.com http://www.propertydo.com/ - Visit his website today for step-by-step real estate guides, free resources and forms.

Article Source:http://www.articlesbase.com/mortgage-articles/how-refinancing-rental-property-can-slash-your-mortgage-loans-861964.html

Though we are seeing some real signs of stabilization within the commercial mortgage business, the USDA’s B and I program seems to be in a complete state of confusion.  Business owners and investors are warned to be very careful with depending on the B and I loans as the recently announced that they have “run out of money”.

Though this maybe overly dramatic, it is basically the case.  No one knows when capital that has been allocated to the USDA will be released.  Could be 3 months, could be a 6 months…  Most borrowers cannot and should not put up with this level of uncertainty, mismanagement and lack of leadership by our fearless politicians.

B and I Loans 

Borrowers should instead give serious consideration to other sources of capital.  The most obvious is the SBA programs which seem to have regained their footing and are becoming once again the reliable source of capital that they were created to be. 

Some of the benefits to the SBA include 90% financing (vs. 80% with the USDA), fixed rates (B and I are almost always floating), and much lower fees.  Most importantly however, is that the SBA 7a and the “>SBA 504 loan are still funding…  The 504 program has stood up to the credit crisis well, and the 7a looks to have “rounded” the corner due to the Stimulus Package, and that President Obama has allocated $50 Billion to buy this debt off of the frozen secondary market at the end of March.   

Also, the SBA does not have the typical small town restrictions that many conventional sources do, i.e. minimum 50,000 town population.  Borrowers should get out there, roll up their sleeves and find real options for their loan requests and not wait indefinitely until our leadership provides answers.      

Jeff Rauth is President of Commercial Finance Advisors, Inc. They close commercial mortgages throughout the US from $400,000 plus. 248 885-8797. SBA 504 loan or commercial mortgage loan or apartment financing

Article Source:http://www.articlesbase.com/mortgage-articles/business-and-industry-loans-b-and-i-loans-out-of-money-836100.html