Loan refinancing is a strategy used by property investors to access funds – usually to grow or improve the value of their property portfolio. The right time to do it largely depends on your strategy, plans and equity. In this article, we highlight some of the key considerations for this strategy and how savvy investors often use the funds. Why refinance?

Refinancing can give you the opportunity to access the equity in your property. Another popular reason to refinance is to secure a more competitive interest rate or a loan that better suits your needs.

Key considerations

1) Market value and equity
Generally, the right time to refinance your investment property is when the equity has grown sufficiently to take the next step in your investment strategy, or to fund your renovation plans. To get an idea of the value of your property, we can sales data for our clients of similar properties in the area or we have an agent provide you with an appraisal. 

Keep in mind that a lender’s valuation will be on the conservative side of any estimates, and a formal valuation will be required by the lender before they will allow you to refinance. 

2) Consider the costs
Switching lenders and refinancing your investment loan can help you achieve your goals, but there are costs involved. These may include break fees (for fixed rate loans) or discharge fees, establishment fees for your new investment loan, and valuation fees..

3) Investigate how the market is performing
Part of the decision about whether to refinance will depend on how the property market is performing for your investments. National dwelling values have been falling in many capital cities in recent months. That may mean the location of your investment property will be a key consideration when deciding to refinance. 

It’s important to be aware that if do you refinance after your property’s value has decreased, you may be facing negative equity territory. In this situation, it may be better to wait until the market recovers before you refinance.

4) Other considerations
Interest rates are continuing to fall as well as the banks borrowing assessment rates. As a result, we’re seeing interest-only investment loans becoming easier to obtain. That means now may be a good time to reassess your investment strategies and refinance requirements.