How to Refinance an Investment Property (2025 Guide)

Yes, you can refinance an investment property. The process works much like refinancing a primary residence, but lenders view rental properties as higher risk. That means you will face higher refinance rates, need more equity, and must provide additional documentation – such as lease agreements and a detailed tax return history – to qualify.

Whether you want to lock in a lower interest rate, shorten your loan term, switch from an adjustable-rate mortgage to a fixed rate, or pull out cash, refinancing your investment property can be a smart financial move. This guide walks you through the requirements, costs, benefits, and risks so you can make an informed decision.

What Is an Investment Property Refinance?

An investment property refinance replaces your current mortgage on a rental or non-owner-occupied property with a new mortgage. The goal is usually to secure better loan terms – such as a lower interest rate or a different loan term – that improve your financial position.

There are two main types of refinance for investment properties:

• Rate-and-term refinance: You replace your existing loan with a new one that has a better interest rate, a different loan term, or both. Your loan balance stays roughly the same.
• Cash-out refinance: You borrow more than you currently owe and receive the difference in cash. This lets you access the home equity you have built in the property.

According to the Consumer Financial Protection Bureau, borrowers should carefully compare loan offers from multiple lenders before refinancing, as rates and fees can vary significantly. This applies even more to investment properties, where pricing differences between lenders tend to be larger.

What Is an Investment Property Cash-Out Refinance?

A cash-out refinance on an investment property lets you convert your built-up home equity into usable funds. For example, if your rental property is worth $300,000 and you owe $180,000, you might refinance for $225,000 and receive approximately $45,000 in cash (minus closing costs).

Investors commonly use cash-out refinance proceeds to:

• Fund renovations that increase rental income or property value
• Cover the down payment on another investment property
• Pay off higher-interest debt
• Build a cash reserve for property maintenance and vacancies

Most lenders cap cash-out refinances at 70% to 75% loan-to-value (LTV) for investment properties – compared to 80% for a primary home. This means you need to retain more equity in the property.

Investment Property Refinance Requirements

Lenders apply stricter standards for investment properties than for a primary residence. Here is what you should expect:

Credit Score

Most lenders require a minimum credit score of 680 for an investment property refinance, though 720 or higher will help you qualify for the best rates. According to Freddie Mac underwriting guidelines, higher credit scores are needed for investment properties to offset the added risk.

Equity

For a rate-and-term refinance, you typically need at least 25% equity. For a cash-out refinance, expect to need 25% to 30% equity. A lender will order an appraisal to confirm your property’s current market value.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio – the percentage of your monthly gross income that goes toward debt payments – generally needs to be 45% or lower. Some lenders allow up to 50% with strong compensating factors.

Documentation

Be prepared to provide:

• Two years of federal tax returns (including Schedule E for rental income)
• Current lease agreements for rental properties
• Proof of rental income (bank statements, rent rolls)
• Six months of mortgage payment reserves for each investment property you own
• Standard income and asset documentation

Cash Reserves

Lenders typically require six months of mortgage payment reserves for the property being refinanced, plus additional reserves for any other investment properties you own. This ensures you can cover payments during vacancies.

How an Investment Property Refinance Can Pay Off

Refinancing your investment property can benefit your finances in several meaningful ways:

Lower Your Monthly Mortgage Payment

Securing a lower interest rate reduces your monthly mortgage payment, which directly improves the cash flow on your rental property. Even a small rate reduction can add up to thousands of dollars over the life of the loan. Use Wirly’s refinance calculator to estimate your potential savings.

Improve Cash Flow on Rental Properties

Lower payments mean more of your rental income stays in your pocket each month. This improved cash flow can help you build reserves, reinvest in the property, or cover unexpected expenses.

Access Equity for Additional Investments

A cash-out refinance lets you leverage the equity in one property to purchase or improve another. Many real estate investors use this strategy to grow their portfolios without selling existing rental properties.

Switch Loan Types

If you originally financed with an adjustable-rate mortgage, refinancing into a fixed-rate loan provides payment predictability. This makes budgeting for your rental property much simpler and eliminates the risk of future rate increases.

Cost to Refinance an Investment Property

Refinancing is not free. Closing costs for an investment property refinance typically range from 2% to 5% of the loan amount. On a $250,000 loan, that means $5,000 to $12,500 in fees.

Common costs include:

• Appraisal fee: $400 to $700 (sometimes higher for multi-unit properties)
• Origination fee: 0.5% to 1.5% of the loan amount
• Title search and title insurance: $500 to $1,500
• Recording fees: $50 to $250
• Credit report fee: $30 to $50
• Prepayment penalty on current mortgage: Varies (check your existing loan terms)

Complete a Break-Even Calculation Before Refinancing

The break-even point tells you how long it takes for your monthly savings to offset the upfront costs of refinancing. This is one of the most important calculations for any refinance decision.

Here is a simple example: If refinancing costs $6,000 and saves you $200 per month, your break-even point is 30 months. If you plan to hold the property for at least that long, the refinance makes financial sense.

Use Wirly’s break-even calculator to run the numbers for your specific situation. If you plan to sell the property before reaching the break-even point, refinancing may cost you more than it saves.

Risks and Considerations

Refinancing an investment property is not always the right move. Consider these potential downsides carefully:

Resetting Your Amortization Clock

If you are 10 years into a 30-year mortgage and refinance into a new 30-year loan term, you restart the amortization schedule. This means you will pay significantly more interest over the life of the loan, even at a lower rate. Consider a shorter loan term if you can afford the higher payments.

Higher Rates Than Primary Residence Refinances

Investment property refinance rates are consistently higher than those for a primary home. According to Freddie Mac’s loan-level price adjustments, expect to pay 0.50% to 0.875% more in interest. This rate premium can reduce the savings you expect from refinancing.

Closing Cost Surprises

Borrowers frequently underestimate closing costs. Appraisal fees, title insurance, and prepayment penalties on your current mortgage can add up quickly. Ask your lender for a Loan Estimate – a standardized form required by the CFPB – within three business days of applying.

Credit Score Impact

Applying with multiple lenders generates hard inquiries on your credit report. The good news is that credit scoring models typically treat multiple mortgage inquiries within a 14 to 45 day window as a single inquiry. Still, plan your rate shopping strategically.

Rate Lock Risks

Investment property refinances can take longer to close than primary residence loans. If your rate lock expires before closing, you may face a higher interest rate. Ask about lock extension fees and float-down options when you apply.

Common Servicing Issues

According to CFPB complaint data from 2024, the most common mortgage complaint category across all major servicers is trouble during the payment process. When your loan transfers to a new servicer after refinancing, keep careful records and confirm your first payment details in writing.

Does Refinancing an Investment Property Affect Taxes?

Yes, refinancing can affect your taxes in several ways. The mortgage interest you pay on an investment property is generally deductible as a business expense on your tax return (Schedule E). If you refinance at a lower interest rate, your interest deduction decreases – but your cash flow improves.

With a cash-out refinance, the additional interest on the cash-out portion is deductible if the funds are used for the investment property. Points paid at closing may also be deductible, though they typically must be amortized over the life of the loan rather than deducted in the year paid. Consult a tax professional for advice specific to your situation.

Which Loan Is Best for Refinancing an Investment Property?

Several loan options exist for refinancing rental properties:

• Conventional loan: The most common option, available through most lenders. Backed by Fannie Mae or Freddie Mac guidelines.
• Portfolio loan: Held by the lender rather than sold on the secondary market. May offer more flexible terms but potentially higher rates.
• Home equity loan or HELOC: A home equity loan or home equity line of credit lets you borrow against equity without replacing your current mortgage. Rates tend to be higher, but closing costs may be lower.
• DSCR loan: Debt-service coverage ratio loans qualify you based on the property’s rental income rather than your personal income. Useful for investors with complex tax returns.

Compare offers from multiple lenders to find the best combination of rate, fees, and terms. Wirly’s lender comparison tool can help you evaluate your options side by side.

State-Specific Considerations

Some states have unique rules that affect investment property refinancing. For example, Texas has specific constitutional provisions governing cash-out refinances, including a cap at 80% LTV and requirements about when you can refinance. If you are looking to refinance an investment property in Texas or another state with unique regulations, work with a lender familiar with local requirements.

Frequently Asked Questions

Can you refinance an investment property?

Yes. Most lenders offer refinance options for investment properties, including both rate-and-term and cash-out refinance products. Requirements are stricter than for a primary residence, with higher credit score minimums, more equity needed, and additional documentation.

What are current refinance rates for investment properties?

Investment property refinance rates are typically 0.50% to 0.875% higher than rates for a primary home, based on Freddie Mac loan-level price adjustments. Exact rates depend on your credit score, equity, loan amount, and the lender. Use Wirly’s refinance calculator to get a personalized estimate.

Should I refinance my investment property?

It depends on your break-even timeline, how long you plan to hold the property, and your financial goals. If you can recoup closing costs before selling and the new terms meaningfully improve your cash flow, refinancing may be worthwhile. Run the numbers with a break-even calculator before deciding.

How does a refinance investment property calculator work?

A refinance calculator compares your current mortgage payment to the estimated payment on a new loan. It factors in the interest rate, loan term, closing costs, and remaining balance to show your monthly savings and break-even point. Try Wirly’s free refinance calculator to model different scenarios.

Does Rocket Mortgage refinance investment properties?

Many major lenders, including Rocket Mortgage, offer refinancing for investment properties. According to 2024 CFPB complaint data, Rocket Mortgage received 339 mortgage-related complaints, with 28% related to applying for or refinancing a mortgage. Compare multiple lenders and review complaint data before choosing a provider.

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Wirly is not a lender or mortgage broker. Refinancing involves costs and risks that vary by individual circumstance. Consult with a qualified financial professional before making any refinancing decisions.

Sources

• Freddie Mac Single-Family Seller/Servicer Guide – Investment property underwriting guidelines and loan-level price adjustments
• Consumer Financial Protection Bureau (CFPB) – Mortgage refinancing consumer guidance and Loan Estimate requirements
• CFPB Consumer Complaint Database – 2024 mortgage servicer complaint data referenced in this article
• Home Mortgage Disclosure Act (HMDA) Data – Mortgage origination and refinance data
• Federal Reserve Economic Data (FRED) – Historical mortgage rate trends

Sources

• Freddie Mac Primary Mortgage Market Survey – Weekly benchmark mortgage rate survey dating to 1971
• CFPB (Consumer Financial Protection Bureau) – Official consumer protection guidelines and mortgage resources
• HMDA (Home Mortgage Disclosure Act) – Lending volume, approval rates, and loan characteristics
• FRED (Federal Reserve Economic Data) – Daily and weekly mortgage rate data sourced from Freddie Mac PMMS

---

Last reviewed: March 29, 2026
Fact-checked against: Freddie Mac guidelines, CFPB 2024 complaint data, CFPB consumer guidance
Written by the Wirly editorial team. Our methodology: /methodology