How to Refinance Investment Properties with Bad Credit
Refinancing investment property is cumbersome and difficult to begin with. Getting the best rate with the fewest point is even more challenging when you have bad credit. Favorable interest rates are given to those who are not considered to be a "default risk," meaning the lender is worried you won't pay. If you have already taken the time to clear up your credit as much as possible, plan on being assertive about getting information and working with mortgage lenders to refinance your investment properties.
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Instructions
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Get educated about the existing mortgage environment. Pay attention to the current prime rates, mortgage trends and economic condition. Use sites such as MortgageNewsDaily.com to get current data. By knowing what the lowest rates are and whether rates will be increasing or decreasing, you will know whether you are being quoted a fair rate. Economic data can also tell you how desperate mortgage brokers may be to write a refinance, placing you in a positive negotiating position.
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Contact your existing lender to see what your possibilities are. Ask what rates are available to you based on your credit, how much the refinance will cost and what paying points will do to lower your interest rate. When you pay down the mortgage during a refinance, it can lower your points by a half a percent, saving you thousands over the course of the loan.
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Contact other lenders and ask them to beat the rates offered by your existing lender. Everyone will try to make you feel lucky for being given a credit offer since you have bad credit, but don't let them make you feel as if you need to take a crummy deal. Mortgage brokers make a lot of money doing a refinance and the bank makes a lot over the course of the loan. You are a customer and should be treated with respect. Show your knowledge and confidence and you will be.
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Demonstrate the ability to pay your loan on time. A lot of investment properties have income streams coming from rentals or use. While you may have bad credit, you may have positive cash flow with a history of paying the mortgage on time. This is important information to point out to the lenders.
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Negotiate with the top three lenders to get the best price. Show each lender what the other is offering and ask them to beat it. Interest rates and closing fees are negotiable. Understanding this will put you in the strongest position to get the best deal.
Consider upgrading the property to increase rent and cash flow. Showing your lender that you have a positive game plan to increase cash flow to pay the mortgage and other debts goes a long way.
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Fill out the paperwork with the lender offering the best deal.
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