When is it Advisable to Refinance your Mortgage?

Does it seem reasonable to refinance your mortgage? The response to the question of whether refinancing a mortgage is best for you might not just be as simple as yes or no. Picture your real estate venture for a second. Do you make speedy conclusions without cautious considerations and answer with a yes or no anytime you purchase investment properties? I sure expect you do not for the sake of your financial well-being.

As with any real estate deal, the thought of does it make sense to refinance is determined by a number of scenarios. And as with any real estate investment opportunity, some of these refinance scenarios are not very advisable. Some deals entail a “maybe but only if” answer and, obviously, some options are absolute no-brainers.

Let’s look into a couple of of these scenarios and I’ll give you my advice on how to deal with the question of whether or not refinancing your loan makes sense or the opposite. Let’s have a look at debt first. Should you follow traditional advice, refinance to a reduced rate and then repay debts? In my opinion, it's a deal breaker. Do not do it. You're better off making use of other people’s money to clear out financial debt (i.e. your month to month earnings from tenants in your rental properties.)

Now, is it advisable to refinance a mortgage loan to help take care of renovate or repair costs? Even though I am against for it on this certain scenario, I would not refer to this one a deal breaker. In today’s market, you should have no problem buying real estate investment properties well less than market value. This is exactly why your final offer price needs to include these repair costs.

The only way refinancing receives a minor nudge closer to a yes is it if will be your private residence, you plan on residing at the home for many more years, so you want to enhance your quality of life. It is, however, a very slight nudge towards yes. And of course, before going forward with the refinance, you still must take into account all the numbers and expenses it'll take.

Finally, does it make sense to refinance a loan if your intent is to reinvest in more cash flow properties? This is the one situation where I would say yes to remortgage the loan. However, this scenario only is smart in certain situations so yes, there's a catch. Also, you must do your homework much like any real estate investment deal.

Do your required research and ask yourself if the investment can pay you more than the cost of the refinance. Work the numbers and then work them again. Will this refinance make you money and not end up costing you money? If that answer is a yes, then my answer is also a yes.

You must steer clear of getting caught up in all the hype about low refinance rates. It does not make sense to refinance your loans nine out of ten times. You best be using that extra money to purchase more cash flowing investments the one time it does make sense to do so. 

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