Over the past few months, mortgage rate locks from five years ago have started expiring, creating a significant shift in the real estate investment landscape. This presents a major opportunity for refinances, as many investors who locked in historically low rates on rental properties are now facing the reality of higher market rates.
The Big Shift: From 2% to 7% Interest Rates
A large number of investors purchased their rental properties around 2019-2020, locking in incredibly low rates—often around 2%—on adjustable-rate mortgages (ARMs), particularly 5/6 ARMs. These mortgages offer a fixed rate for the first five years, but after that period, they reset to market rate.
Now, five years later, we’re in Q1 2025, and those same investors are seeing their rates adjust—except now, instead of paying 2%, they’re staring at a market rate of nearly 7%.
From Cash Flow to Barely Breaking Even
Let’s put this into perspective: An investor who purchased a rental property in 2020 for $300,000 with a 2% interest rate may have been enjoying monthly cash flow of $2,000+ per month. With the rate now jumping to 7%, that same property might only generate a few hundred dollars per month—or even dip into negative cash flow.
For investors who relied on strong cash flow to fund additional property acquisitions, lifestyle expenses, or simply to sustain their real estate business, this shift is a game-changer.
This massive shift creates two key opportunities:
Cash-Out Refinances: Many investors will seek to pull equity out of their properties to offset the increased costs. Fortunately, home prices have surged in the past five years. Even without major appreciation, most investors likely have at least 25% equity, and those who renovated their properties could have 40%+.
Rate Buydowns: Some investors may opt to refinance into a longer-term fixed-rate loan and use their home equity to buy down their interest rate, stabilizing their cash flow.
How Big is This Market?
According to Fannie Mae, over $2.4 trillion in ARMs were issued between 2019 and 2020. Many of these were investor-owned properties. As these loans reset, we’re seeing a surge in refinance demand from investors trying to restructure their debt before their cash flow evaporates.
Data from CoreLogic shows that home prices have increased by nearly 40% since 2019, meaning most investors are sitting on substantial equity. This puts them in a prime position to refinance or cash out—rather than struggle with a suddenly unprofitable investment.
Funded Capital: Your Solution for Smart Refinancing
At Funded Capital, we specialize in tailored refinance solutions for real estate investors. Whether it’s a cash-out refinance, a rate buydown, or a more strategic loan restructuring, we’re here to help investors adapt, maximize cash flow, and stay profitable.
If you’re an investor facing an expiring rate lock—or you know one who is—now is the time to act. Reach out to us today and let’s find the best strategy to keep your investments working for you. 🚀
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