The average monthly mortgage payment is about $1,030 in the U.S. Some mortgage owners think this sum is too little. They’d like to complete their mortgage payment faster; hence they wouldn’t mind higher rates.

The other side feels the average rate is eating into their budget. They wouldn’t mind negotiating for a lower amount spread over a longer period. What do these two groups have in common?

They are in a position to refinance a rental property. Unfortunately, few people know it’s possible to refinance an investment property.

If you’re among them, don’t worry. This guide will help you learn how to refinance your rental property.

Start by Building Equity

Equity refers to the portion of the mortgage you’ve cleared. It also includes the difference between your property’s new value and the price you bought it at. This applies in cases where your property has appreciated over time.

Most lenders would need you to have some equity as the first step toward qualifying for refinancing. This means you need to pay off debt on the property from earlier on. This isn’t a big problem for most people since they’ve consistently made their mortgage payments.

Consult Your Lender

You stand a better chance of growing your real estate business when you have a team you can trust behind you. Financiers are some of the most integral people in your team. Give them the first chance to refinance your rental property.

In some cases, your trust in your lenders may not exist anymore. Or perhaps your lender doesn’t have a home affordable refinance program. You are at liberty to research other refinancing sources from the market in this case.

The research should give you an idea of the refinancing cost in the market. Ask every lender you approach to provide a closing statement estimate. Compare them to find a baseline cost for your project.

Get the Paperwork Right

Once you’ve identified a lender, kick start the documentation process. Lenders can’t initiate the refinancing process if you don’t have some of these documents. The trick, therefore, lies in knowing beforehand which documents you’d need to provide.

You’ll need either copy of 1099 or W-2 forms. These forms confirm that you have been in gainful employment in a private or public entity. Your tax returns should suffice in case you are in self-employment.

You’ll also need to provide some proof of income. A bank statement or any other documentation validating your source of income would do in this case. If you’re in active employment, present original pay stubs to the lender as proof of income.

Lenders also need to confirm that you’ve taken measures to protect your property. For this, you’ll need to provide homeowners insurance. You will also present copies of the title insurance.

This document shows that you have the right to refinance the property in question. It also contains the tax information and legal description of your property.

Apply to Refinance a Rental Property

The good thing about refinancing is the ease of executing the process. It’s very simple, unlike the process of buying a property. All you need to do is contact the lender, fill in the application form and submit it with the relevant documents.

Lock Your Interest Rate

Your lender will respond to your request after you’ve applied. The lender will give you a chance to lock your interest rate once they approve your application. Locking the interest rate prevents it from changing before the loan closes.

Note that the lock period varies from 15 to 60 days. Factors such as the lender you’re dealing with, your location, and loan type play a role in determining this period. Try locking for shorter periods if you want a favorable rate from a lender.

If you opt against locking the rate, you could float it instead. Floating is a double-edged sword as it may secure a lower or higher rate depending on the prevailing circumstances. Floating, in essence, means not locking your interest rate during the loan process.


The lender needs to confirm that all the details you gave them are true. This is the underwriting process, and it begins immediately after you submit your application. It’s through this process that the lender gets to learn about the condition of your rental property.

During the process, the lender will conduct an appraisal of the property. The appraisal determines the market value of your property and the property taxes it attracts.

A refinance appraisal is good for you because it generates options for you. For example, it will tell you how much funding is available if you opt for a cash-out refinance. It will also tell you whether your level of equity is sufficient to make you eligible for a lower mortgage payment.

Ensure your house is in its best condition before an appraisal. Creating a list of all renovations you’ve added to the house since you acquired it is also helpful for the underwriting process.


The lender will send a closing disclosure a few days before closing your new loan. From this document, you’ll learn about the finer details of a new loan. You’ll also get quotations for closing costs or any other fee that the lender might need you to pay.

You must review the document thoroughly before signing it. Once you sign the document, the lender will give you a grace period of about three days. You can opt out of the deal during this period if anything changes your mind.

Invest in Real Estate Rental Properties in Memphis

Real estate properties are resilient sources of passive income that are worth considering. If you don’t have the cash to buy a rental property upfront, consider purchasing it using the mortgage. Then lease out the property and use the rental income to pay off your debts.

Memphis Investment Properties is here to help you manage, find tenants, and refinance a rental property. Get in touch with us for more information.