Refinancing a rental property can be more complicated, so it's important to work with good mortgage lenders. There are more stringent requirements for the loan-to-value ratio. In addition, if you're seeking a cash-out refinance, you need to have significant home equity to make it worthwhile. You'll also typically need a higher credit score than you needed for your current mortgage. 

According to Fannie Mae rules, you must wait at least six months before you sign up a property for a cash-out refinance, but you can make a rate-and-term adjustment almost immediately. For a rate and term adjustment on an FHA loan, you have to wait seven months. For a cash-out refinance for FHA loans, you have to wait a whole year. The only exception to these rules is the delayed financing exception, which is when you purchase a property upfront with your cash reserves and then complete a cash-out refinance to reimburse yourself for the initial investment. This only works if you did not borrow money for the home.

You typically need pretty good credit to refinance. Visio Lending requires a 680 or more. If you want the best interest rate, strive for a 740 or higher.

The process of refinancing a loan is very similar to financing a purchase. See our process for details on Visio refinances.

There are many pros of refinancing a rental property, including getting better terms and rates, lowering your monthly payments, and accessing equity from your home for other investments. Some cons to consider are that you will have to pay fees and closing costs on a new loan.

The rule of thumb is that investment property rates are usually between 100 and 400 basis points higher compared to rates on a primary residence mortgage. We have a dedicated page for the latest investment property mortgage rates.

The documents required to refinance a rental property depend on the lender. Visio Lending does not require tax returns or income verification. 

There are no hard limits on how often you can refinance your investment properties, but there are some items to consider. First, most loans on investment properties have prepayment penalties. Whether to refinance a loan with a prepayment penalty depends on performing a break-even analysis — in other words, how much will you pay upfront in fees and prepayment penalties, and how long will it take you to recoup that amount through savings or returns on reinvestment of proceeds from the new loan?

Second, even if you don't have a prepayment penalty or it has expired, you likely will have some fees and other costs associated with refinancing. Again, you'll want to perform a break-even analysis to determine how long you'll need to hold the property to make the refinance worthwhile.

For example, let's assume you'll pay $5,000 in fees and other expenses (appraisals, title costs, etc.) to get a refinance, and you'll save $250 each month with the new loan. $250 each month until you get back the $5,000 in expenses means you will break even after 20 months. If you think you're going to hold the property for at least 20 months, the refinance probably makes sense. If you're considering selling the property later in the year, you might not proceed with refinancing.