When planning to purchase or refinance a rental property, you should research current investment property loan rates and determine which home loan program makes the most sense for your individual situation. Mortgage rates for investment properties can vary depending upon a number of variables including but not limited to the number of units the property contains, the loan amount, the percentage of equity owned, and the state that the rental property is located in. For example you should not expect to get similar investment property mortgage rates for a $50,000 rental condo with 25% equity as your would for a $400,000 duplex with 50% equity. The rates published in the surveys throughout this site are for primary residences.
Investment property loan rates are typically higher because they carry a greater risk for default than primary residences. Why are they considered more risky? If a borrower owns multiple rental properties and is at risk of not being able to keep up with monthly obligations, they are more likely to keeping making payments on their primary residence. Thus, rental properties have a higher risk for default.
Some Questions to Ask When Researching Investment Property Mortgage Rates and Programs
- What down payment is required? Note: Many lenders no require 25% down or more.
- What type of appraisal is needed? Note: Appraisals for investment properties may cost more as there is more work involved in calculating the value on multi-family and income producing properties.
- What are the principle, tax, and insurance reserve requirements needed (PITI)?
- Will I be able to use rental income to qualify?
- What type of documentation will be needed?
You can get an idea of who offers competitive current mortgage rates on rental property loans, check out the rate tables on PriceAMortgage.com. Please note that the pricing is for primary residences but it should give you a few companies in your state who can get you moving in the right direction.