Why do I need an appraisal to refinance an investment property, if I have never been late on a payment?

Just because you made the payments on time and you put 20% does not mean that the property maintained it's value. All purchases and refi's require an appraisal so that the mortgage company knows that they are not over lending on the property.

Since about every property in the US has declined in value by 20-50 % and you probably need at least 30%^ equity to refi, they need to make sure the property has the value TO refinance.

They often sell these loans rather than hold them for the full term. They will have a very hard time selling this loan if they don't have a current appraisal.

You can pay the old loan off early, the mortgage person wouldn't tell you this because they wouldn't make any money on a new loan. Some loans have a prepayment penalty built in for the first 2 or three years of the loan but after that you could pay as much in to the loan as you could and save on interest. Refinancing is not the only way to pay less in the long run. Don't sign anything until you have all the info. You can pay a 30 year loan off in 15 years, it isn't agains the law. The banks wouldn't bring this up because they make less money if you do that. Get more info first, you didn't put in enough info for a complete 100% accurate answer

The bank's decision is based on several factors. From the point of view of the loan officer handling your mortgage request ; #1: the rapidly changing property values. #2: Your ability to meet mortgage payments is based on a rental property, the occupancy of which could change for a number of reasons. #3: The stability of your job as income. #4: Most banks have been burnt badly on marginal mortgage loans and are being extra cautious even with responsible individuals such as you. Mortgage loans come under much greater scrutiny than a few years back. The phrase "better late than never" doesn't apply in this present situation, since the banks should have been operating under their present policy guidelines years ago. It would have prevented this housing mess. In your favor is that 20% down and all your payments on time. More than likely you will be approved. A part of the decision is the level of loan exposure your particular bank has which does not reflect on you or your ability to repay the mortgage. If you were refinancing your own residence you probably would have already been approved.