Real estate investment loans are repaid over a long period of time, but during that period, vacancies may increase and repayment may become difficult.
In such a case, if borrowing at a high interest rate is affecting your monthly repayments, you may be able to recover by lowering the interest rate, improving the yield, and improving your cash flow by refinancing.However, refinancing is not something that anyone can do, and it is necessary to be careful because even people who used to pass may not be able to refinance.This time we will explain about refinancing of real estate investment loan.
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About real estate investment loan refinancing
Changing the financial institution that has a real estate investment loan is called refinancing.The ultimate goal is to lower interest rates, increase yields, and improve cash flow.
Financial institutions with refinancing loans include city banks such as Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank, and Resona Bank, regional banks closely related to the local area, credit unions, credit unions, and Internet banks.
As a government-affiliated company, the Japan Finance Corporation also handles real estate investment loans, and is characterized by low interest rates because it is not a for-profit organization.However, the impression tends to be bad if various taxes, pensions, utility bills, etc. are not paid.
City banks are the most advantageous in terms of interest rates, but due to strict screening, it will be difficult unless it is a very good property, and it will be difficult if it falls once when you start real estate investment.As a result, it often becomes a local bank.
What criteria should be used when considering refinancing?
Generally, the judgment criteria when considering refinancing are that the refinancing reduces by 1% or more, the repayment balance is 500 million yen or more, and the repayment period is 10 years or more.
It is not possible to refinance with the intention of extending the repayment period, so if you contract for 35 years and borrow in the 20th year, you will need to repay in 15 years.
Calculate the benefits of refinancing by applying the following formula.
(Current Loan Balance x Interest Rate Spread x Remaining Repayment Period) ÷ 2 – 1% of Loan Balance (Miscellaneous Expenses) = Amount Refinanced
Even if you should consider refinancing, it is not always possible to refinance.Refinancing is the same as taking out a real estate investment loan again, so in addition to the screening of almost the same attribute conditions as when you started a real estate investment loan (place of work, years of service, annual income, credit, etc.) There are things like having a high occupancy rate of the property and preparing a joint guarantor.
Advantages of refinancing real estate investment loans
Lower interest rates and improved cash flow will lead to higher yields and higher profits.It is also possible to create new business opportunities such as improving the facilities of the property with the profit to raise the asset value and use it as a down payment for other property purchases.
Also, if you can refinance to a major bank than now, your creditworthiness will improve, which will be a great advantage when purchasing other properties.
Disadvantages of refinancing real estate investment loans
When you refinance, you have to pay back the original financial institution in full.Financial institutions make profits by earning interest, so if you refinance, you will not be able to get the interest you expected.Therefore, a lump-sum early repayment fee (a fixed amount or a guideline of about 1% of the loan balance) is set.
Other costs include registration tax and judicial scrivener fees for registration of mortgage cancellation and refinancing loan registration, and loan fees (fixed amount or about 2% of the borrowed amount) and guarantees for refinancing. Fees (depending on the financial institution) and a stamp fee (approximately 1 yen) will be charged.If you do not calculate in advance, you may not get much benefit from refinancing, so be careful.
In addition, if the conditions of each financial institution are different, such as when the loan was repaid before refinancing, the age was 80 years old, but the refinance recipient was 75 years old, the loan period may be shortened and the monthly repayment amount may increase. there is.In addition, please understand that there is a risk of interest rate fluctuations and the burden may increase along the way.
Flow when refinancing a real estate investment loan
The required documents differ for each financial institution, but the following materials are generally prepared.
personal information
Identification card, resume, repayment schedule, asset list, withholding slip, final tax return for several periods, final tax return *For corporations, register and financial statements
Property data
Registration book, official map, survey map, floor plan, rent roll, list of expenses, summary manual or important matter manual
Make an appointment with the person in charge of the financial institution and discuss the necessary materials in advance.It takes about a month from the interview to the completion of the examination.
Once the loan is approved, a loan agreement will be signed and the balance of the loan will be repaid to the refinancing source.After that, the mortgage set by the financial institution of the refinancing source is canceled and the mortgage is set to the financial institution of the refinancing destination.
By refinancing, you can expect to lower interest rates, improve yields, and improve cash flow, but if you do not act after careful calculation, it may result in an increase in risk.In some cases, you may need to refinance, but when you start investing in real estate, make a long-term plan and manage it with great care so that it will not go bankrupt unless something extraordinary happens. It's really the most important thing.
At Rich Road Co., Ltd., we will consistently support all aspects of investment real estate, from complete beginners to experienced people, from a wide range of real estate selection, loan consultations, post-purchase management, and renovations.
