How Much Higher Are Mortgage Rates for Investment Property?

Investment property mortgage rates are always higher than rates on primary residences (owner-occupied homes). This is because financing agencies usually have a separate set of fees for primary residence and for investment properties. These fees are directly correlated with your mortgage rate. Usually, when getting investment loans, investors pay higher fees and, therefore, get higher rates. How much higher? Technically, it depends on the type of investment property, your credit-worthiness, and your down payment. However, the rule of thumb is that rental property mortgage rates are 0.5% to 0.75% higher than primary mortgage rates. So, at current rates mentioned above:

• 30-year investment property mortgage rates would range from 3.5% – 3.75% for single-family homes
• 15-year investment property mortgage rates would range from 3.11% – 3.36% for single-family homes
• 5-year adjustable-rate mortgage (ARM) would range from 3.36% – 3.61% for single-family homes

Despite the fact that they’re higher, these rates are still much lower for investors than in previous years. Also, there are some basic down payment requirements of investment property loans. Fixed and adjustable rates for a single-family home require 15% down. As for fixed and adjustable rates for multi-family homes (2-4 units), they require 25% down. How much you put down on the rental property affects what mortgage rate you’ll get. And obviously, the higher your credit score, the better. A higher credit score combined with a larger down payment will give real estate investors a better chance at low mortgage interest rates for investment property.

Source: https://www.mashvisor.com/blog/investment-property-mortgage-rates-covid-19/