Looking for options and opinions on refinancing on a house we plan on tearing down in 3-5 years

We have a 100 year old, 700 sq ft house in WA that is currently down to the studs on the interior. The house is in poor shape. It needs foundation work, reframing, etc. we plan on tearing the place down and starting fresh in the future.

Items of possible importance:

1. Current mortgage is 7.5%
2. This is a second home/income property for us.
3. We owe $200k on the mortgage
4. Value of the home is close to $300k and I think this is realistic
5. Out credit scores are north of 800 and we have no debt outside of the mortgage.
6. We currently rent an apartment out of state

My main question is- For appraisal purposes - should we button up the interior by adding interior walls, painting, and getting the place as presentable as possible? This would take about $6k roughly. I could paint the exterior and do some additional work for low cost if needed.

I know that refinancing rates on a second home are higher than a primary residence. I’m just trying to find advice here. I tried searching for this answer but I haven’t found anything specific about this. I’m trying to educate myself but I just need a direction to look in order to understand the basics.

Thanks for your time in advance. It’s very much appreciated