Need more retirement income?  Tap into your rental property without selling it. Selling means paying taxes and losing your rental’s income and your future appreciation. If your rental’s value has appreciated since you bought it, you can get more money out of it two ways through refinancing. You will pay no taxes and maintain your property’s worth to you.


Lower interest rates since buying property
If interest rates have dropped since you originally bought or last mortgaged the property, you can refinance that loan in two ways. First, suppose you refinance only the present balance so that your monthly mortgage payments are reduced under a reduced rate. This reduces your rental monthly expense, giving you an increased net income for your retirement needs.

Second, you refinance but increase your mortgage balance so the new monthly payments are the same as the old payments. Of course, you can take the net increase of the new mortgage balance over the old one for cash, and your monthly expense remains the same. Since this money comes from borrowing, it triggers no taxes. It is yours to spend or reinvest elsewhere – as in bonds – for more monthly income.

Higher rental income for improvements
Even if interest rates are about the same as for you present mortgage, you can create more money from higher rents by improving or refurbishing your rental property.  You still need to refinance your rental to a higher mortgage balance. If interest rates are the same, this will increase your monthly payments. But if you use the excess loan money to improve the property, you can justify increasing the rents. 

Depending on your situation, the increased rents may more than offset the extra mortgage payments, giving you a net increase in income. Or, you may not have had to use all the excess mortgage balance for improvements. In that case, your increased mortgage payments may be balanced by the increased rent you charge. So you can pocket the cash from the leftover loan balance – after paying off the improvements and the old mortgage.

Of course, if the refinancing interest rates in this second scenario are lower than the original loan, you will have all that much more money to use. 

In each of these cases, you have increased your cash or income, yet maintained your rental property for its future appreciation and future rental income. Note that refinances will incur fees and commissions and refinancing for more than your current balance will increase your debt, which may not be appropriate

Contact our office so we can show you current mortgage rates and how you may take advantage of your property’s equity.