To refinance investment property or not?

Question

I just closed on an investment property in July for a really good price and area but unfavorable rates (4.75% 20 year with a 20% down payment). The only reason I went with that lender was because he was able to close in 2 weeks and in this hot market, that’s what made my offer the winning one to the seller.

American Express (and Rocket mortgage) is currently doing a promotion where they give $2k back for refinance and they are offering me 3.25% for a 15yr. My closing costs will be roughly $2500 PLUS they are requiring 25% down payment.

I have the liquidity to put in the extra 5% and $2500 closing costs, BUT I’m wondering if it’s even worth going through this. I’m not sure I’m going to hold the property long term I.e > 5yrs (depending on family plans) and the counter argument is that I can write my mortgage interest off on my taxes so why bother? (Not sure what % I can write off btw)

On the other hand, if I do keep the property long term, I’m thinking it’s a better idea to refinance?

What do you y’all think?

PS: The mortgage loan is only about $106k

Lola Og · Answer

Thanks for the response y’all! Decided it wasn’t worth it

Charles Carillo · Answer

@Lola Og

You say this is an investment property; is AMEX / Rocket Mortgage doing the promotion for investors or homeowners? The monthly payment will be higher on the refinance; is this what you want? Most investors want fixed debt (which you have) with the lowest monthly payment. I would work to add some value to the property over the next few years and then refinance out a portion of the equity you have created to reinvest.

Cassi Justiz · Answer

A great way to look at this is figuring out how many years it would take to break even on the additional closing cost funds and 5% down. If it's more than 2-3 years, I probably wouldn't mess with it.  On a loan that small, and the uncertainty of whether you plan to hold the property I don't know that I would worry about trying to refinance it.