Refinance investment property (credit, rate, financial, payment)

[hobodbf]

I'm looking to possibly refinance my investment property. It's a condo with 30 yr mortgage at 5.56% with $204k balance. I'm wondering if it's worth it financially to refi? Thoughts?

[snowdenscold]

The short answer - if you can bring your rate from 5.56 down to something in the 4's, and you bought the place in the past 10 years, then yes.

Long answer:

Depends on how much time you have left on your current mortgage, how long you plan to keep it, what the rate reduction is, and then your closing cost amount.

So if you save $200 a month in P+I payment due to a lower rate, and it costs $3,400 to close on the re-fi, then you're paid off in 17 months. So good deal, but obviously don't sell before then.
If your credit sucks and your rate reduction is only 25 basis points (and let's say you're early on so the financed amount doesn't drop that much from the current), then it will take you maybe 7 years to pay that off. If your probability of selling it within 10 years is decent, then probably not worth it.

Also, it only makes sense to re-fi if you're still in the shallow part of your amortization curve - i.e. bought it in the past 10 years or so. If you're 20 years into your 30 year mortgage, at that point you're paying a majority principal each month, and only have 10 years to go - why make it 30 to go? But if you're only 5 years in, then absolutely it probably makes sense.