Mortgage rates skyrocketing !

Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes

Hello all. Apparently, the best terms on an investment property are currently 5.25-5.375% with 25% down, and 5.75-5.875% with 20% down, this is with a 740++ credit score. 30 year fixed. This is what a reputable lender told me. Is this what you guys are seeing? Would love some recommendations for lenders you like that can do better. Out of my current investments, the worst rate is 4.5%.

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Yep that’s right. Just google the current mortgage rate and then add .875 or so percent to that. Assuming you have good credit that’ll give you an idea
4 Reply
Andrey Y.
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Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
8y
Originally posted by @Russell Brazil:

Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
Hmm.. thats interesting. You thought rates would never go below 6%. Surely they have in the past?
I am a buyer at 6% or below. Above that, seems a tad risky.
1 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
30 year fixed rates owner occupied will be close to or over 5% probably by Thanksgiving. Still considered low as Feds feel they need to tighten the interest. Gas, food prices etc have gone up a lot. If rent, mortgage are part of inflation then we have inflation exposure.

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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
8y
Originally posted by @Sam Shueh:

30 year fixed rates owner occupied will be close to or over 5% probably by Thanksgiving. Still considered low as Feds feel they need to tighten the interest. Gas, food prices etc have gone up a lot. If rent, mortgage are part of inflation then we have inflation exposure.
How sure are you of this? I guess its time to load up on a few more SFH rentals!
Where is the evidence that gas and food has gone up "quite a bit"? Gas prices went up a little, but that is commensurate with higher oil (per barrel) prices. So that is expected, not necessarily inflation. Food, the average food item goes up about 20 cents per year, give or take.. is this a lot?
4 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
8y
Wow- that extra 5% down will reduce the rate .5%? That's a lot and good incentive to do so.
I also always check the 15yr also. Sometimes the spread is major. Standard is about .6%, but when I refi'd a bunch in 2012, the spread was 30%.
Applying the standard rate reduction of .6% and the 5% higher DP reduction of .5%, we can save 1.1% doing a 15 yr with 25% down. That's some real coin!
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
8y
Originally posted by @Steve Vaughan:

Wow- that extra 5% down will reduce the rate .5%? That's a lot and good incentive to do so.
I also always check the 15yr also. Sometimes the spread is major. Standard is about .6%, but when I refi'd a bunch in 2012, the spread was 30%.
Applying the standard rate reduction of .6% and the 5% higher DP reduction of .5%, we can save 1.1% doing a 15 yr with 25% down. That's some real coin!
Yea, I just talked with the lender on the phone, I was very surprised with the difference in rate between 20% and 25% down! I may seriously consider putting down 25% this year.
I don't believe in 15 year loans. So many disadvantages vs. perhaps one advantage. But to each their own :)
4 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
8y
Most don't on here so you are in quantity company. "I don't believe in unicorns, aliens or....15 year loans." Funny.
Thought I'd at least throw the check the 15yr rate idea out there. Sacrificing $300/mo in cashflow, one of those 2012 refi's will save me $193,000 from where I was (7 yrs in, so 23 yrs left) to going with the 15 at the much lower rate. I couldn't see anything else safe returning $193k only investing $300 a month over 15 yrs.
I know you can pay a 30 like a 15 if you want to, but sometimes the rate is drastically lower and worth checking.
13 Reply
Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
8y
Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:

Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
Hmm.. thats interesting. You thought rates would never go below 6%. Surely they have in the past?
I am a buyer at 6% or below. Above that, seems a tad risky.
At least you've now put the hyperbole of your thread title into proper perspective! Buy buy buy!
1 Reply
Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
Originally posted by @Steve Vaughan:

Most don't on here so you are in quantity company. "I don't believe in unicorns, aliens or....15 year loans." Funny.
Thought I'd at least throw the check the 15yr rate idea out there. Sacrificing $300/mo in cashflow, one of those 2012 refi's will save me $193,000 from where I was (7 yrs in, so 23 yrs left) to going with the 15 at the much lower rate. I couldn't see anything else safe returning $193k only investing $300 a month over 15 yrs.
I know you can pay a 30 like a 15 if you want to, but sometimes the rate is drastically lower and worth checking.
I totally agree! I sprinkled a couple 15 year loans in with my 30 year loans a few years back. I love those loans now. Lower cash flow, but the loans are 3.5% interest and the principal is paying down fast. I am ten years away from pay off. I will be an old man when the 30 year loans are paid off. Beyond higher payment, I am not really sure what the disadvantage is of 15 year loans. Advantages include lower interest rate, less total interest paid and faster pay off.
7 Reply
Account Closed
Rental Property Investor · Glens Falls, NY · Member since 2016 · 176 posts · 169 votes
8y
25% down on a 30 year fixed at 5.5% is the current rate I am getting on the current property under contract.
4 Reply
Account Closed
Investor · Leander, TX · Member since 2016 · 299 posts · 402 votes
8y
Credit Score 803
30-Year Fixed
25% down
5.25% on my current property
4 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Originally posted by @Andrey Y.:

Originally posted by @Russell Brazil:
Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
Hmm.. thats interesting. You thought rates would never go below 6%. Surely they have in the past?
I am a buyer at 6% or below. Above that, seems a tad risky.
Freddie Mac has only tracked rates since 1971, and they are our best source. The first time they tracked a below 6% was in January 2003. They bounced around from 5.5% to 6.5% for a couple years before rising well above 6% in 2005...then it took the housing collapse and operation spin from the fed to push them back below 6% at then end of 2008 where they continued their downward trend to the low 3's.
Even where they are today is historically low. While you may think there is risk in a 6% rate, we will eventually get back to a normalized interest rate enviorment and you will yearn for rates that low in the future.
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10 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Andrey Y.:

Originally posted by @Sam Shueh:
30 year fixed rates owner occupied will be close to or over 5% probably by Thanksgiving. Still considered low as Feds feel they need to tighten the interest. Gas, food prices etc have gone up a lot. If rent, mortgage are part of inflation then we have inflation exposure.
How sure are you of this? I guess its time to load up on a few more SFH rentals!
Where is the evidence that gas and food has gone up "quite a bit"? Gas prices went up a little, but that is commensurate with higher oil (per barrel) prices. So that is expected, not necessarily inflation. Food, the average food item goes up about 20 cents per year, give or take.. is this a lot?
Dimensional lumber on the west coast has gone up 50% in the last year..
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Russell Brazil:

Originally posted by @Andrey Y.:
Originally posted by @Russell Brazil:

Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
Hmm.. thats interesting. You thought rates would never go below 6%. Surely they have in the past?
I am a buyer at 6% or below. Above that, seems a tad risky.
Freddie Mac has only tracked rates since 1971, and they are our best source. The first time they tracked a below 6% was in January 2003. They bounced around from 5.5% to 6.5% for a couple years before rising well above 6% in 2005...then it took the housing collapse and operation spin from the fed to push them back below 6% at then end of 2008 where they continued their downward trend to the low 3's.
Even where they are today is historically low. While you may think there is risk in a 6% rate, we will eventually get back to a normalized interest rate enviorment and you will yearn for rates that low in the future.
we just had this conversation with our banker yesterday.. of course those who entered the market in the last 10 years only know HYPER low rates so it seems like rates are high.. those of us who have been doing it for decades and like me in 77 ish bought my first owner occ the rate was 9% and I felt lucky to get it.. rates in the mid 80s went north of 15%..
6 to 8% is basically historic norms for the last 25 years anyway.
and yes if your metric of a good deal is positive cash flow with ONLY 20% down then load up before its gone.. most west coast markets this even cash flow is more like 30 to 50% down so that is the norm.. its not norm to positive cash flow with only 20 to 25% down.
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Originally posted by @Jay Hinrichs:

Originally posted by @Russell Brazil:
Originally posted by @Andrey Y.:

Originally posted by @Russell Brazil:
Owner occupant rate was 4.75% this past week, so yes those rates are in line. Skyrocketing isna bit of hyperbole with rates still on the very low end historically. In the mid 2000s when the owner occupant rated dipped to 6% most of us felt that was the lowest they would ever go in our lives.
Hmm.. thats interesting. You thought rates would never go below 6%. Surely they have in the past?
I am a buyer at 6% or below. Above that, seems a tad risky.
Freddie Mac has only tracked rates since 1971, and they are our best source. The first time they tracked a below 6% was in January 2003. They bounced around from 5.5% to 6.5% for a couple years before rising well above 6% in 2005...then it took the housing collapse and operation spin from the fed to push them back below 6% at then end of 2008 where they continued their downward trend to the low 3's.
Even where they are today is historically low. While you may think there is risk in a 6% rate, we will eventually get back to a normalized interest rate enviorment and you will yearn for rates that low in the future.
we just had this conversation with our banker yesterday.. of course those who entered the market in the last 10 years only know HYPER low rates so it seems like rates are high.. those of us who have been doing it for decades and like me in 77 ish bought my first owner occ the rate was 9% and I felt lucky to get it.. rates in the mid 80s went north of 15%..
6 to 8% is basically historic norms for the last 25 years anyway.
and yes if your metric of a good deal is positive cash flow with ONLY 20% down then load up before its gone.. most west coast markets this even cash flow is more like 30 to 50% down so that is the norm.. its not norm to positive cash flow with only 20 to 25% down.
When I was on the podcast, I told people they need to load up on as much mortgage debt as they can at these low rates, and I still stand by that idea. Loading up on debt at 3 to 6% interest is going to make a lot of people rich in the long run. Even better if they do that in DC, San Fran, Boston, NYC, Etc.
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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Rates for non-owner occupied 30 year fixed loans could approach 7 percent by end of next year. The Fed is on track to raise rates 3 more times this year and probably 3 more next year. So if the owner occupied is around 6, then Mom will be around 7. At 7 percent I’m probably just paying down debt some and buying more slowly. Other thing to consider besides the above mentioned strategies is buy down loan some and deal with lower mortgages. If I get a 40-50k mortgage the rate difference is around 50 bucks a month.
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Caleb Heimsoth:

Rates for non-owner occupied 30 year fixed loans could approach 7 percent by end of next year. The Fed is on track to raise rates 3 more times this year and probably 3 more next year. So if the owner occupied is around 6, then Mom will be around 7.
At 7 percent I’m probably just paying down debt some and buying more slowly. Other thing to consider besides the above mentioned strategies is buy down loan some and deal with lower mortgages. If I get a 40-50k mortgage the rate difference is around 50 bucks a month.
or simply put more equity in.. to achieve the same cash flow if cash flow is what you want.. as you know cash flow to me is nothing I look for even if I was getting it I would be snowballing the mortgage. I want free and clear.. LOL
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
8y
In the late 70's/early 80's rates were 14% to 17%.
5% is a steal.
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Matthew Olszak
Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
8y
19 Reply
Gautam Venkatesan
Investor · Dallas, TX · Member since 2013 · 619 posts · 128 votes
8y
@Jay Hinrichs free and clear closer to retirement sounds like a good plan to me is that what you are referring to or free and clear to cashout refi to purchase another property or investment?
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Gautam Venkatesan:

@Jay Hinrichs free and clear closer to retirement sounds like a good plan to me is that what you are referring to or free and clear to cashout refi to purchase another property or investment?
through out my business life so that when things are not great I have some free and clear assets and not leveraged to the hilt.. its not always wine and roses.. and for sure close to retirement.
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
Inflation? Two years ago there was no inflation. A year ago -1 pt something 2018 is running over 2 pt + most Americans have lived thru 2 digit inflation for decades. Higher inflation is good for a normal economy.
2 Reply
Josh Huber
Rental Property Investor · Coldwater, OH · Member since 2017 · 28 posts · 11 votes
8y
@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Originally posted by @Josh Huber:

@Russell Brazil - Your post above stating that investors should load up on properties while interest rates are still low got my brain turning.
As interest rates rise, which do you think is more likely to happen; increased rents or decreased property values?
If all other variables remain equal (cost to purchase a property, tax, insurance, etc...) as interest rates continue to rise, profit margins for new purchases should continue to shrink. So wouldn't something have give somewhere? Otherwise there won't be enough ROI to motivate buyers to purchase properties.
In my opinion, I can see property prices decrease as interest rates continue to increase. If that's the case, then wouldn't it be better to load up when interest rates are high, then refinance when they go back down?
P.S. - I'm new to the REI world, so please don't take any part of this message negatively. I'm simply looking for your opinion/knowledge.
Numerous studies, including those by Nobel laureate Robert Shiller have shown that movements in interest rates have no impact on residential real estate. For most of the general public, this seems counter intuitive...but for loan officers and real estate agents it makes perfect sense. When a buyer goes into the market place, and they are preapproved for say a $400k house...they will buy a $400k house. If rates increase and now they can only afford a $350k house,....that original property they wanted at $400k, the price of that does not drop...but instead the buyer moves down to a cheaper property to coincide with their purchasing power. So as rates go up or down, the buyers simply move up or down in price range with the rates while the property values remain unaffected by rates.
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