Let me tell you something that’s going to happen in 2026, and it’s going to happen fast.

Interest rates are going to drop. Not back to the 3% days—let’s be realistic—but they’re headed south. The Fed has signaled it, the market is pricing it in, and we’re already starting to see movement.

And if rates drop significantly, there’s going to be a refinance tsunami.

Here’s the problem: most investors are going to miss the window.

Why? Because they’re not preparing now. They’re waiting until rates actually drop, and by then it’s too late. The appraisers are booked out by six weeks. The lenders are overwhelmed. Your credit got dinged because you opened that new credit card last month. Your Schedule E from last year just came back to bite you.

I’ve seen this movie before. After 25+ years in lending and owning many investment properties myself, I can tell you precisely what will happen. And I can tell you how to be one of the investors who actually captures the opportunity instead of watching it slip away.

Let me be clear: the refinance window isn’t when rates hit bottom. That’s a myth.

The window is when rates drop enough to make financial sense AND you can actually execute. The “AND” is what kills most people.

Think about it like this: rates are at 6.625% today on investment properties. Let’s say they drop to 5.5% next year. That’s a 1.125% drop and significant savings. But here’s what happens:

• Investors start calling lenders
• Most aren’t prepared with documents
• Processing time: 30-45 days

• Word spreads, volume increases
• Appraisers are now booked 3-4 weeks out
• Processing time: 45-60 days

• Full tsunami mode
• Appraisers booked 6+ weeks out
• Some lenders stop taking new applications
• Processing time: 60-90+ days
• Rates start ticking back up in a desperate attempt to control volume

• Rates have crept back up 0.25-0.5%
• The window has passed

The investors who win are those who moved in in Months 1-2. They were prepared, moved fast, and captured the best rates before the chaos began.

Everyone else? They’re still waiting in line while watching rates climb back up.

If you want to be ready when rates drop, you need to start preparing now. Not when rates actually drop—NOW.

Not just your score, get the actual reports. You need to see what’s on there. I’ve seen investors discover collections they didn’t know about, accounts reporting incorrectly, or credit cards showing higher balances than they actually have. Keep in mind that systems like Credit Karma do NOT tell you the full picture.

Depends on the Lender. But with Ridge, we pull it at no cost initially until your loan closes.

Takes 30-90 days to fix issues, so you need to know NOW what needs fixing.

This is the fastest way to boost your score. Lenders want to see credit card balances below 30% of the limit on each card, not just in total.

A jump from a 739 to 740 credit score can sometimes unlock a 0.25% rate improvement. On a $300,000 loan, that’s about $43 per month.

But here’s the nuance most lenders don’t explain: statistically, most homeowners refinance or sell within ~5 years, not 30. Over 60 months, that $43 difference totals roughly $2,580—not $15,480.

So the real question becomes strategic, not emotional. Is it worth tying up significant cash or delaying your purchase to chase a few credit points, or is there a smarter way to structure the loan today and adjust later?

That’s why working with a knowledgeable, strategy-focused lender matters. Credit optimization should be weighed against loan size, timeline, opportunity cost, and future refinance plans—not treated as a one-size-fits-all rule.

The goal isn’t just a lower rate. It’s making the right decision for your specific situation.

This is critical. Your most recent tax return will be used for qualification.

• What’s my net rental income/loss on Schedule E?
• How much is depreciation vs. actual expenses?
• Should we adjust my strategy for 2025 taxes (filed in 2026)?*This is where RLG shines- we work closely with many of our clients CPA’s together, maximizing deductions and minimizing taxable incomes without compromising underwriting qualifications.

If your Schedule E shows a $15,000 loss, that can (but not always) mean $15,000 less in qualifying income if it’s not structured correctly. The way it’s reported matters.

When structured properly, you can still take the tax deductions without unnecessarily hurting your ability to qualify for a conventional loan. As they say, location, location, location, but in this case, it’s where your tax losses are located on the Schedule E.

Important tax note (especially if you plan to refinance). Don’t avoid depreciation—depreciation is typically a 100% add-back for mortgage qualifying, so it’s usually your friend. In most cases, we want to take all the depreciation you’re entitled to.

What matters is timing and how losses affect your returns. If you’re planning a refinance soon, talk with your CPA and lender about strategies like:

• Carrying certain losses forward (when allowed), so they don’t unnecessarily reduce qualifying income in the year you’re using for underwriting, and/or
• Filing a tax extension so your refinance can close using the most favorable qualifying documentation before the new return is finalized.

Create a spreadsheet with every property you own:

• Property address
• Current loan balance
• Current interest rate
• Current monthly payment (PITI)
• Extra credit if you separate PI from the TI
• Current rental income
• Current estimated value
• When the property was acquired

You need to know which properties make sense to refinance first. We are happy to provide you with a spreadsheet to help you organize all this information.

For each property, run this calculation:

Example: 123 Main Street

• Current loan: $250,000 at 7.25% = $1,706/month
• Potential refi: $250,000 at 6.0% = $1,499/month
• Monthly savings: $207
• Estimated closing costs: $7,500
  • Including any taxes/ins that might be required due at closing- for those with an existing impound account, remember you’ll be refunded that balance within 30 days of closing on the new loan.
• Breakeven: $7,500 ÷ $207 = 36 months

Decision: If you plan to hold this property for more than 3 years, it’s a candidate for refinancing.

Do this for every property. You’ll quickly see which ones make sense and which don’t. My rule of thumb here is 36-60 mo break-even; anything more than that, I’d hold off on a rate-and-term refi.  **Important note: the above is an entirely different conversation if we are talking about a cash-out refi. 

If you’re planning to use DSCR loans, you need to know whether each property qualifies.

DSCR Formula: Monthly Rent ÷ Monthly Payment (PITI) = DSCR

Example:

• Property rents for $2,200/month
• New payment would be $1,650/month (PITI)
• DSCR = 2,200 ÷ 1,650 = 1.33

Most DSCR lenders want to see 1.0 or higher. Some will go down to 0.75 with strong credit and reserves.

Lenders require reserves (liquid assets) for refinances, typically:

• Conventional: Formula uses UPB (unpaid principal balance) times 2, 4, or 6% of the rental properties plus 6 months PITI of the subject property. *ask us for the cheat sheet to see the calculation.
  • If the individual has 1-4 financed properties, use the 2%, 5-6 financed properties use 4%, and if they have 7-10 finance,d it’s 6% on the UPB
• DSCR: 6-12 months PITI of the subject property only

• Four financed properties. *One of these 4 is the subject property
• Each with 100k UPB
• Subject property PITI $1000
  • 300k x 2% plus $1000 x 6
• Reserve requirement here would be $12000

• Checking/savings: Counts 100% *must be your funds, sourced and seasoned (60 days conventional, less than 30 days required for DSCR)
• Stocks/mutual funds: up to 100% (Depending on the Terms of Withdraw)
• Retirement accounts: up to 100% (Depending on the TOW)

Don’t wait until you apply to start gathering documents. Mortgage underwriting has a way of escalating quickly—what starts as “two pay stubs and a bank statement” can feel like it’s one step away from vials of blood and DNA samples.

• Last 2 years’ complete tax returns (with all schedules)
• Last 2 months bank statements (all accounts with significant balances)
• Current mortgage statements (all properties)
• Current lease agreements (all properties)
• Property insurance declarations (all properties)

• Last two pay stubs (if W-2 employed)
• Two years W-2s (if applicable)
• YTD profit and loss (if self-employed)

Most lenders will force you to choose a priority order. Not because it’s optimal—but because their systems, underwriting teams, and modeling break down when multiple refinances run in parallel.

They’ll ask you to pick one loan at a time and delay the rest.

Ridge doesn’t work that way. When the numbers support it, we can stack and close refinances simultaneously. We recently closed 11 properties for a single investor in one day.

That said, sequencing can still matter when there’s a strategic reason—reserves, cash flow timing, or qualification efficiency. When sequencing is required, we design it intentionally, not reactively:

• Highest-rate properties first: Immediate interest savings and fast cash-flow relief.
• Worst payment-to-rent ratios: Fixes portfolio drag and stabilizes performance.
• Largest remaining balances: Maximizes total interest reduction over time

The difference is simple: Most lenders make you choose an order.

Ridge chooses the structure that works best for your portfolio, whether that’s sequencing or simultaneous execution.

What if rates don’t drop as much as expected? What if they drop more? You need to know your decisions at various rate points.

Create your trigger table:

This way, when rates actually move, you know exactly what action to take. No decision paralysis. You execute.

Here’s something most investors don’t think about: when rates drop, your conventional “Golden Ticket” loans become available again. Meaning, as long as you haven’t exceeded the 10 max limit, refinancing those existing conventional loans into new conventional loans is allowed.

Remember, you can have up to ten 1-4-unit financed properties total when qualifying with Fannie/Freddie.

1. When rates drop significantly, conventional loans historically become much cheaper than DSCR loans. We are seeing the rate gap between programs change in 2026, which is good news for DSCR Borrowers, but we will want to review each property case by case and DO THE MATH.
2. Refinance your DSCR properties into conventional Golden Tickets
3. Your overall portfolio becomes more efficient

But here’s the thing: You need to clean up your qualification profile to pull this off. Your credit needs to be solid. Your DTI needs to work. Your reserves need to be there.

If you wait until rates drop to figure this out, you’ll miss the window.

Let me save you from the painful mistakes I see investors make constantly:

“I got approved for a new rewards card with a great sign-up bonus!”

Cool. You just potentially dropped your credit score 15-20 points and added a new inquiry.

You sell a vehicle for $8,000 cash and deposit it. The lender sees it, flags it as potential borrowed funds, and asks for sourcing documentation.

You see a collection on your credit report and pay it off. The tradeline gets updated to “Paid Collection.” Your score drops.

Why? Because you just reactivated an old negative item.

Lenders need to source and season assets. If funds keep moving between accounts, it’s a documentation nightmare.

“I’m going to wait until rates hit 5.5% before I refinance.”

Okay, but what if they only drop to 5.75% before bouncing back up?

You have 10 properties. Rates drop. You want to refinance all of them simultaneously.

Result: You’re overwhelmed. Your lender is overwhelmed. The whole thing becomes a nightmare.

Most lenders are built to handle one loan at a time. When you drop a full portfolio on them, they lose track of income, reserves, timelines, and conditions, and the borrower pays the price. We’ve built our process specifically to prevent that.

Sometimes the smart move is to NOT refinance, even when rates drop:

If you’re selling within 2-3 years, refinancing rarely makes sense. You won’t hit your breakeven period.

Maybe you locked in a 5.0% rate in 2021. Rates drop to 5.5% in 2026. Should you refinance?

No. You already have a below-market rate.  If this is just about saving money, you won’t.  If this is about gaining access to equity, we can discuss strategies.

You’ve been paying on a 30-year mortgage for 22 years. Most of your payment now goes to principal. Should you refinance?

On paper, refinancing late into a 30-year loan sounds like a bad idea because you’ve already burned through most of the interest, and your payment is now heavy on principal. Resetting the clock can feel like moving backward.

But that’s only true if you’re thinking in “payment history” terms instead of balance-sheet strategy.

Slightly off topic, but this is where outside-the-box strategies are most powerful. Like the All-In-One Loan (my favorite loan product) can change the math.

Instead of restarting amortization just to chase a lower rate, an All-In-One loan lets you:

• Keep your equity working without resetting a traditional 30-year clock
• Use your income to temporarily reduce the effective balance, cutting interest daily
• Access equity for liquidity or investments without permanently re-borrowing it
• Maintain flexibility if you plan to sell, invest, or re-leverage later

So the real question isn’t “Is refinancing bad after 22 years?” It’s “Does this improve my cash flow, flexibility, or long-term return?”

If the answer is yes, maybe you should refinance—just not the way most people do.

Okay, you’ve read this far. Here’s exactly what to do starting today:

• Get the application process started by applying here.
• Ridge Lending Group (RLG) will run credit reports from all three bureaus (Remember, lenders use different and more robust reports).
• Review for accuracy and issues.
• Start paying down high credit card balances.
• Schedule a call with your CPA about the Schedule E strategy.
  • Include RLG in that conversation if you already have your application in with us.
• Start gathering all documentation requested by your lender.
• Create an organized digital folder with all the docs or upload them into the lender portal.

• Create your property spreadsheet with all current loan data (we have a very specific one we use; contact us and we can send it over).
• Calculate the current estimated values for each property.
• Run breakeven analysis on each property.
• Identify which properties are refinance candidates.

• Run per property qualification calculations with your loan officer.
• Assess reserve position and identify gaps.

• Get preliminary quotes and timelines.
• Finalize your priority order for refinances.
• Set trigger points for action when rates drop.

If you need help at any point, reach out now—not in week 4. We’re here to help you organize and plan from day one so you feel confident and in control.

Here’s the truth that separates successful real estate investors from everyone else.

Success in real estate investing isn’t about timing the market perfectly. It’s about being prepared when opportunity arrives.

When rates drop in 2026, there will be two types of investors:

• Hears that rates have dropped
• Scrambles to find documents
• Discovers credit issues they didn’t know about
• Waits 6 weeks for an appraiser
• By the time they’re ready, rates have moved
• Misses the opportunity

• Has been monitoring rates
• Knows exactly which properties to refinance
• Has all documentation ready
• Credit is optimized
• Calls the lender on day one of the rate drop
• Locks rate immediately
• Closes in 30 days
• Captures maximum savings

Which one do you want to be?

The difference isn’t luck. It’s not timing. It’s preparation.

And the time to prepare is RIGHT NOW, while rates are still elevated and everyone else is waiting.

I’ve given you the framework. You know what needs to be done. But here’s the thing: every portfolio is different. Every investor’s situation is unique.

Maybe you have 3 properties, or maybe you have 15. Maybe they’re all financed conventionally, or maybe you’ve been using DSCR loans. Maybe your credit is pristine, or maybe it needs some work.

Your refinance strategy should be customized to YOUR situation. Not a one-size-fits-all approach.

That’s where Ridge Lending comes in. We will:

• Review your entire portfolio, property by property
• Analyze which properties make sense to refinance
• Calculate your potential savings accurately
• Identify any qualification issues BEFORE they become problems
• Map out your optimal refinance sequence
• Set clear trigger points for action
• Be ready to execute immediately when rates move

This isn’t just about getting you a lower rate. It’s about optimizing your entire investment portfolio for maximum long-term wealth building.

Remember: I’m not just a lender. I’m a fellow investor who’s navigated multiple rate cycles, held 42 properties at once, and refinanced more times than I can count. I’ve made the mistakes, so you don’t have to.

Interest rates are headed down in 2026. That’s the good news.

The bad news? Most investors won’t capitalize on it because they’re not preparing NOW.

The math will not lie. If you follow this 90-day preparation checklist, if you get your documentation organized, and if you work on your credit and Schedule E strategy TODAY, you’ll be positioned to capture maximum savings when the opportunity arrives.

And that opportunity is coming faster than you think.

Don’t be the investor sitting on the sidelines watching rates drop while you’re stuck waiting for an appraiser or fixing credit issues. Be the investor who’s first in line when the window opens.

Ridge Lending Group

Reach out today. Let’s prepare your portfolio together. Because when those rates drop, you’ll want to be ready.

• Website: www.ridgelendinggroup.com
• Phone: 855-747-4343 (855-74-RIDGE)
• Email: info@ridgelendinggroup.com

Disclaimer: The rates, projections, and timelines discussed in this article are based on current market conditions and expectations as of December 2024. Actual rate movements may vary. The strategies outlined are for educational purposes and should be evaluated based on your specific financial situation. All financing is subject to credit approval. Geneva Financial, LLC.  DBA Ridge Lending Group is an Equal Housing Lender. NMLS #1843.