When Does it Make Sense to Refinance Your Loan?

Gregorio Grasselli & Kshiraj Mahtani

Introduction: Why Refinancing Isn’t Just About Rates

When most real estate investors hear the word refinance, they immediately think of getting a lower interest rate. But refinancing a rental property isn’t just about shaving off a few basis points—it’s about improving your overall cash flow, unlocking trapped equity, and optimizing your portfolio for long-term growth.

If your rental has appreciated, or if you’re holding a loan with a high rate or subpar terms, refinancing could be one of the most financially impactful moves you can make this year. In this article, we’ll walk through the key reasons to consider refinancing, how the numbers work, and how Certain Lending makes the process faster and more investor-friendly than traditional lenders.

When Does Refinancing Make Sense?

There are several situations where refinancing a rental property is worth serious consideration. One of the most common is when your existing interest rate is significantly higher than what’s currently available. Even a 75–100 basis point reduction can translate to hundreds in monthly savings—and tens of thousands over the life of the loan.

Another strong use case is if your property has appreciated and you’d like to tap into that equity through a cash-out refinance. That money can be used to fund renovations, buy your next investment property, or simply strengthen your reserves.

Some investors pursue refinancing to extend the amortization term (e.g., from 20 to 30 years) in order to reduce monthly payments and improve cash flow. Others want to consolidate or restructure multiple loans into a single portfolio refinance to simplify their finances.

The bottom line? If your goals involve improving cash flow, reinvesting capital, or reducing risk—refinancing should be on your radar.

Types of Rental Property Refinances

Not all refinances are created equal. The right structure depends on your goals.

Rate-and-Term Refinance is the most straightforward. You’re simply replacing your current loan with a new one—ideally at a better interest rate, with improved terms, or both. This approach can lower your monthly payments and reduce the total interest you’ll pay over time.

Cash-Out Refinance allows you to increase your loan balance and pull equity out of the property. For example, if your rental is worth $500,000 and you owe $300,000, you might refinance into a $375,000 loan—freeing up $75,000 in cash while still maintaining a 75% loan-to-value ratio.

Portfolio Refinance is ideal for landlords with multiple rental properties. Instead of managing several different loans, you can consolidate them into a single structure—streamlining payments, possibly lowering your overall rate, and simplifying your bookkeeping.

Each refinance type has its own benefits, but all of them are designed to either improve your cash flow, unlock capital, or simplify your investment operations.

How the Numbers Work: Sample Scenarios

Let’s say you bought a rental property for $375,000, put in $50,000 of rehab work, and the property is now worth $570,000. You initially financed it with a $300,000 loan at 7.50% interest.

Before Refi:

Loan Balance: $300,000
Interest Rate: 7.50%
Monthly Payment (P&I): $2,097.64
Monthly Rental Income: $3,200
Monthly Taxes/Insurance: $250
Monthly Cash Flow: $852.36
DSCR: 1.36
Equity in the deal: $125,000 (Plus holding costs)

After Refi:

New Loan Balance: $427,500
Interest Rate: 6.75%
Monthly Payment (P&I): $2,772.76
Monthly Rental Income: $3,200
Monthly Taxes/Insurance: $250
Monthly Cash Flow: $177.24
DSCR: 1.06
Cash Out $127,500 (Excluding closing costs)

In this scenario, we pulled out $127,500 in cash while still holding onto a cash-flowing asset—and even dropped the interest rate by 75 basis points. That’s the magic of a strategic refinance: you're not just getting a better rate, you're unlocking capital you’ve already earned. Instead of leaving equity trapped in the walls of your property, refinancing lets you reinvest it—without selling, without starting over. It’s how investors grow faster, compound returns, and make every dollar work harder.

The Certain Lending Difference

Traditional banks often view rental property refinances as high-friction transactions. They require extensive documentation, move slowly, and frequently underwrite based on personal income—even for seasoned investors with proven rental cash flow.

Certain Lending takes a different approach.

We underwrite based on property performance, not personal tax returns or W-2s. If the rental cash flows and meets our DSCR (Debt Service Coverage Ratio) requirements, we can close fast—often in as little as 10–14 days. Whether you’re refinancing a single-family rental in your personal name or a portfolio of multifamily units in an LLC, our team moves with the speed and clarity investors expect.

We also make it easy to run the numbers. Our team will walk you through different loan scenarios, help you estimate cash-out potential, and calculate your break-even point—so you can make a confident decision.

Summary: Is Now the Right Time?

Refinancing a rental property can be one of the smartest financial decisions an investor makes—if the math works. Whether you’re looking to reduce your rate, free up equity, or simplify your portfolio, a well-structured refinance can improve your cash flow, boost your returns, and put you in a stronger position to scale.