Understanding Loan Terms

3 Top Benefits Of Using Real Estate Refinancing For Buying New Property

20 September 2021

Stanley Simmons

Did you know you can use your current real estate property to expand your investment portfolio? You can borrow against your current home and use the money to acquire new property. Real estate refinancing allows you to borrow another mortgage, pay off the current mortgage, and use the balance for other purposes. When you take the balance in cash, it is known as cash-out refinancing. You can use the cash to put down a deposit for other property. What are the advantages of using this arrangement to expand your real estate portfolio?

1. Friendly Interest Rate 

Do you find the prevailing interest rates unfriendly? When you do property refinancing, you are in a better position to negotiate for a favorable interest rate. It is significantly more favorable than taking out a new loan to finance your new purchase.

Lenders typically give more favorable interest rates when you opt for cash-out refinance than home equity loans. Most people use cash refinancing to do expensive home improvement plans like kitchen remodeling or an additional guest room. But you are not restricted in what you can do with your cash.

You can save thousands of dollars with the lower interest rates of property refinancing instead of applying for a new loan. It gives you a head start in clearing payment for your new purchase. 

2. Quick Processing 

Sometimes speed is of the essence when going after hot real estate property. You may not have time to tap into your 401(k) or other assets to get the cash. Saving up to begin your real estate portfolio can also take years. By this time, the market would have very different opportunities. 

Real estate refinancing enables you to grab opportunities as they appear. Your lender will typically process your refinancing application in a few days. The lender is already familiar with your paperwork and credit history. You also have ready collateral. You can land a very lucrative opportunity with speedy processing. 

3. Tax Advantages 

You enjoy a tax benefit when using real estate refinancing because interest on the first and second mortgages is tax-deductible. It means that you can deduct the interest rates you pay on the new loan from your annual tax returns. This tax advantage is not always available in other kinds of investment financing.

The tax advantage of your new investment gives you a higher return on investment from the onset of the loan. It is even more favorable if you already have rental income from your new real estate investment.

Are you looking to expand your real estate portfolio? Talk to your lender about your real estate refinancing options. 

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