Refinancing a Mortgage or Rental Property
Q: I have a rental property which I bought 5 years back for $170,000 and have a mortgage at 6.75 percent.
Due the current economy the same house is now valued at $120,000. I have around $45,000 equity in the house. I am not in financial difficulty, but would like to take advantage of low interest rates. Is it possible to refinance my rental home? If so any tips would be appreciated.
A: You should be able to refinance a single-family rental property as long as you have at least 25 percent equity in the house, and have a credit score of at least 700.
Fannie Mae and Freddie Mac are both refinancing rental properties, and while Fannie Mae will allow you to own up to 10 properties, most lenders will only let you own four properties, including the one you live in.
But don’t expect to get an interest rate in the 4 percent range. You might get something at 5 to 5.5 percent range – which is still a lot less than you’re paying. And, while Fannie Mae and Freddie Mac are buying residential rental property mortgages, not every lender is doing them. So you’ll have to start shopping around to find a lender who can help you.