Best Investment Property Refinance Lenders

Best Investment Property Refinance Lenders

Refinancing an investment property or rental home works differently than refinancing a primary residence. Lenders see these loans as higher risk because borrowers are more likely to default on a property they do not live in. As a result, you will typically face stricter requirements and higher interest rates. Understanding how this type of refinance works can help you find the right lender and make a smarter financial decision.

How Investment Property Refinancing Works

When you refinance an investment property, you replace your existing mortgage with a new loan – ideally one with a lower rate, different term, or better terms overall. You can also do a cash-out refinance to pull equity from the property and use those funds for repairs, additional investments, or other expenses.

Most investment property refinances use conventional loans. Government-backed loans such as FHA and VA are generally not available for non-owner-occupied properties. Jumbo loans may apply if your property value exceeds conforming loan limits, which are set at $766,550 for most areas in 2024 according to the Federal Housing Finance Agency (FHFA).

Lenders in this space that offer both conventional and jumbo options include Rocket Mortgage, Better, LendingTree, SoFi, Guaranteed Rate, loanDepot, PennyMac, Chase, Wells Fargo, and Navy Federal Credit Union. Each has different strengths depending on your situation.

Who Qualifies and Typical Requirements

Investment property refinance loans have tighter standards than standard home refinances. Here is what most lenders typically look for:

• Credit score: Most lenders require a minimum of 620, though some like Rocket Mortgage, LendingTree, and Navy Federal Credit Union accept scores as low as 580.
• Loan-to-value (LTV) ratio: Lenders generally want you to keep at least 20% to 25% equity in the property after refinancing. This means your new loan should not exceed 75% to 80% of the home’s appraised value.
• Debt-to-income (DTI) ratio: Most lenders prefer a DTI below 45%, though some allow up to 50% with strong compensating factors.
• Cash reserves: Lenders often require 6 to 12 months of mortgage payments held in savings or liquid assets.
• Rental income documentation: You may need to show lease agreements or Schedule E tax forms to prove the property generates income.

If you are financing multiple rental properties, requirements may tighten further. Fannie Mae guidelines allow financing up to 10 conventional loans per borrower, but individual lender overlays may set lower limits.

Pros and Cons of Investment Property Refinancing

• Pro: A lower interest rate can reduce your monthly expenses and improve cash flow from rental income.
• Pro: A cash-out refinance lets you access equity to fund repairs, buy another property, or cover other costs.
• Pro: Switching from an adjustable-rate to a fixed-rate loan can add predictability to your budget.
• Pro: Shortening your loan term can help you pay off the property faster and reduce total interest paid.

• Con: Rates on investment properties are typically 0.5% to 0.75% higher than rates on primary residences, according to industry benchmarks.
• Con: Stricter equity and credit requirements can make it harder to qualify.
• Con: Closing costs usually range from 2% to 5% of the loan amount, which can take years to recoup.
• Con: If property values have dropped, you may not have enough equity to refinance at all.

Tips for Getting the Best Deal

A few strategies can help you secure a more competitive rate and smoother approval process:

1. Shop multiple lenders. Rates and fees vary widely. Getting at least three to five quotes is one of the most effective ways to lower your costs. LendingTree is designed specifically for this type of comparison shopping.
2. Boost your credit score before applying. Even a small improvement in your score can move you into a better rate tier and save money over the life of the loan.
3. Maximize your equity position. The more equity you have, the better your rate options. If you are close to the 25% equity threshold, consider waiting or making a lump-sum payment first.
4. Check relationship discounts. Lenders like Chase and PennyMac may offer rate discounts or reduced fees to existing customers.
5. Consider your break-even point. Divide your total closing costs by your monthly savings to find out how long it takes to recoup your investment. If you plan to sell the property soon, refinancing may not be worth it.

Use Wirly’s Refinance Calculator

Before reaching out to any lender, run the numbers first. Wirly’s free tool at Wirly Refinance Calculator lets you estimate your new monthly payment, potential savings, and break-even timeline based on your current loan details. It is a straightforward way to see whether refinancing your investment property makes financial sense right now.

Disclaimer: This content is for educational purposes only and does not constitute financial, legal, or tax advice. Mortgage eligibility and rates depend on individual circumstances and lender criteria. Always consult a qualified financial professional before making refinancing decisions. Wirly is not a lender or mortgage broker.