rayout wrote:I am in the process of refinancing my residence - a duplex where I reside in one side and rent the other. I would drop from a 4.375% rate down to 3.625%. However the appraisal came back 20% less than my original purchase price from a year and a half ago due to the difficulty in finding comps for the property. 4 of the 5 properties used for comps had 20% less living space than my property.
You might try another bank if the appraisal is unrealistic.
I have the liquid assets to buy down my mortgage to meet 80% LTV and proceed with the refinance without dipping into my emergency fund (the past year I've been saving for the purchase of another rental property). Doing the math this nets me a return of around 6% on this "investment" (due to the extra savings on the remaining balance of the mortgage at the new rate).
This may be a good idea even if you could refinance the whole thing. Paying down a mortgage that you already hold gives you a long-term return; you don't get any money back until the mortgage is gone and all payments are eliminated. Paying down the balance before taking the mortgage out gives you a combination of short-term and long-term returns, because you will reduce the payments every month over the life of the mortgage.
If you can get a better appraisal with another bank, another option would be to refinance to a shorter term at a lower interest rate; since you have spare liquid assets, you can afford the higher payments on a shorter-term loan.