Mortgage interests rates continue at near-record lows right now, as the Federal Reserve has intervened through its major lending agencies Fannie Mae and Freddie Mac. And while that’s good news for first-time investors just getting started with buying rental income property, it’s also helpful for the veteran investor who wants to refinance existing rental properties. For holders of certain kinds of loans, refinancing programs are available to help not just homeowners trying to maintain their residences, but also income property investors to take advantage of low interest rates on both adjustable and fixed rate mortgages.
Even though mortgage lending standards have tightened considerably in the wake of the housing collapse of 2008-2011, eligible buyers can still qualify. Investors buying properties consisting of a single family home or a multiplex of up to four units per property can take advantage of the same lending criteria and support programs available to homeowners using the property as a primary residence. Beyond four units, commercial real estate standards apply.
Most loans for either purchasing or refinancing income property originate with the government’s two lenders, Fannie Mae, formally known as the Federal National Mortgage Association, and her brother Freddie Mac, AKA the Federal Home Loan Mortgage Corporation. These agencies hold the bulk of investor–eligible loans, which are then serviced by a variety of financial institutions. Agencies such as the VA and FHA provide loans to homeowners only, not investment property buyers.
Investors holding loans owned by Fannie Mae may qualify for refinancing under a program called DU Refi Plus. Although this program was originally designed for homeowners, it can also be used to refinance investment properties. Under the terms of DU Refi Plus investors can refinance properties of up to four unites for up to 125% of the property value without mortgage insurance requirements, if they had no mortgage insurance on the existing loan.
Investors seeking to refinance under this program aren’t stuck with their current mortgage lender either. They can choose to work with any lender that offers the program for the Fannie Mae loans they service, making it possible to shop for rates and terms.
Freddie Mac also offers the DU Refi Plus program, but he’s a little pickier. For investors whose current loan originated with Freddie Mac, this program is available only through the loan’s existing servicer – if they offer the program. If not, the investor will need to find other ways to refinance.
Although Fannie Mae and Freddie Mac are the major providers of conventional loans for investment properties, small lenders and local banks can also provide mortgage products for investment properties. For those types of loans, mortgage holders interested in refinancing need to work directly with the financial institutions for a loan modification, since none of the federal refinancing options will apply.
Changes in regulations governing financial institutions, along with stricter mortgage qualifying standards in the aftermath of the recent mortgage crisis, create new hurdles for experienced and new investors to get the financing help they need to buy or maintain their investment properties. But low interest rates, coupled with refinancing help for many qualifying loans, offer hope for investors working with Jason Hartman’s investment strategies. (Top image courtesy of Flickr)
The Jason Hartman Team