If you own investment property, you may be facing a major decision: Should you sell it or refinance? There are several factors to consider before making your final decision, but one of the major factors to keep in mind is current mortgage rates. With mortgage rates being at historical lows and projected to stay at an all-time low throughout 2021, refinancing has become an appealing option for many property owners.

Other factors to consider include:

Long-term property plans

When it comes to deciding between selling or refinancing investment property, it’s important to consider your long-term plans. If you plan on keeping the property for a while, it’s likely worth it to refinance your investment property. Hanging on to your investment property for a long time means that you’ll most likely reach the break-even point, which is the point in which your savings outweigh the cost to refinance.

Consider your credit

If your credit is in good shape, refinancing your property can be the better decision as opposed to selling it. You’ll want to ensure your score is good, that you have an optimal debt-to-income ratio, and that there are no delinquent marks on your credit report. If your credit isn’t quite where it needs to be, it doesn’t necessarily mean that selling your investment property is the best choice. You may just need to spend some time working on improving your credit before refinancing.

A need for cash

One of the reasons that people decide to sell their investment property is that they need the upfront cash that they’d receive from the sale, rather than the revenue they are generating through rentals.

However, there are refinancing options that allow you to keep your investment property, while also getting the cash you need to take care of major expenses, such as home renovations. A cash-out refinance gives property owners the opportunity to tap into their home equity and use that money for miscellaneous projects or expenses. In fact, many investors opt for cash-out refinance loans so that they can use that money to renovate their investment property or make repairs, which could increase the property value. Some borrowers even make a down payment toward their next investment property purchase with the cash they receive through their cash-out refinance.

Evaluate the income you’re bringing in

Whether you have a long-term tenant or you’re offering short-term rentals in a vacation home, calculating your actual net operating income can easily be the deciding factor when you’re considering refinancing versus selling. To calculate the net revenue you’re pocketing from an investment property, it’s important to factor in any costs associated with mortgage payments, repairs, and vacancies. Another thing to keep in mind is how much your investment property has appreciated and whether it’s located in an in-demand area that can continue to generate revenue over the years. The area you initially invested in may no longer be a popular vacation spot, or it may no longer be a good source of income for long-term tenancy. However, if you’ve been receiving a good return on your investment and you don’t see that changing anytime soon, keeping your investment property may be your best bet.

Refinance your investment property

If you’re looking to refinance an investment property, Filo Mortgage can help. Contact us today to learn more about the current investment property refinance rates and to get started on the application process.