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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Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
8y
I don’t think they’re necessarily skyrocketing. They’ve been climbing rather predictably the last few years. The fed has been very clear that they would raise them. Isn’t that supposed to be a healthy sign?
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Raymond J. RodriguesBusiness Member
Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
8y
I’m quoting someone with a 800 credit score, owner occupied, 80% ltv, 200k purchase a 4.75% interest rate on a 30 year fixed and they are still complaining. The nerve of some people!
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Terry Lao
Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes
8y
@Josh Huber
As interest rates rise, more likely slower increase in property values, and slower rent increases.
Terry
0 Reply
John Carr
quincy, MA · Member since 2014 · 2 posts · 2 votes
8y
I recently (60 days ago) did a re-fi on a condo I rent and got 4.75% 0 pts which would be a little lower if not a condo from an on line lender I've done my home with in the past. Nor sure of the current rates but I found they were about a half point lower than most and closed both loans I've done with them within 30 days. Here's the info below. Good luck!
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Diane G.
CA · Member since 2016 · 1k+ posts · 1k+ votes
8y
There are diff reasons why mortgage rates go up... Currently, the rates are going up partially due to Fed unwinding their balance sheet....
Asset prices are sooo overvalued because of the artificially low rates for years...
I expect asset prices to drop as rates go up.... Bottom line is dont buy RE when rate is 4%...Wait until rate and unemployment are both high to buy RE....
0 Reply
Alpesh Parmar
Investor · Dublin, CA · Member since 2016 · 344 posts · 228 votes
8y
These rates are what’s offered in current market. I got 5.75% with 25% down on a property in Dallas.
0 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
Mortgage rates reflect the Feds decision to tighten. What this means is a gradual but sure path to less liquidity in the market causing a slowdown in the investment cycle. Eventually this will translate into subdued economic growth and a slowdown or a stall in Asset prices. Mortgage rates are at their highest in 7 years. They are historically still low but compared to 7 years back asset prices have gone up, in some cases doubled or tripled. So the interest rate is going to appear more expensive now than back in 2011. Imagine 5% on a 1.2m home vs 5% on the same home that cost you 500k in 2011. Fact is last two times the Fed embarked on a tightening spree (2000 and 2006), the outcome was a recession. A lot of 5 year ARM resets are on the horizon and these rates could stress property owners who are not prepared for higher refi rates.
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
8y
Originally posted by @Diane G.:

There are diff reasons why mortgage rates go up... Currently, the rates are going up partially due to Fed unwinding their balance sheet....
Asset prices are sooo overvalued because of the artificially low rates for years...
I expect asset prices to drop as rates go up.... Bottom line is dont buy RE when rate is 4%...Wait until rate and unemployment are both high to buy RE....
Mark Twain popularized that there are three kinds of lies. Did you just use all three?...
3 Reply
Otto M.
Rental Property Investor · Louisville, KY · Member since 2018 · 6 posts · 2 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?
I was thinking the same exact thing today. I even ran some numbers on a deal. Not even a $100 increase in rents (25 units) would keep a COC return of 7.2% if the interest goes from 5% to 7% on this deal. That COC would still go down to 4.8%. And what's worse, if the rents are kept the same the COC would be just 1%. Decreased property values is what I think would happen.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
8y
Originally posted by @Sam Josh:

Mortgage rates reflect the Feds decision to tighten. What this means is a gradual but sure path to less liquidity in the market causing a slowdown in the investment cycle. Eventually this will translate into subdued economic growth and a slowdown or a stall in Asset prices.
Mortgage rates are at their highest in 7 years. They are historically still low but compared to 7 years back asset prices have gone up, in some cases doubled or tripled. So the interest rate is going to appear more expensive now than back in 2011. Imagine 5% on a 1.2m home vs 5% on the same home that cost you 500k in 2011.
Fact is last two times the Fed embarked on a tightening spree (2000 and 2006), the outcome was a recession. A lot of 5 year ARM resets are on the horizon and these rates could stress property owners who are not prepared for higher refi rates.
So, translation ... keep a lot of cash and hang on to yer helmet for the soon to be recession / price dips !!?!
0 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
I can’t predict a recession! I wish I could. The fact is between QE and the Fed’s rate easing policies we have had a flood of liquidity and very low interest rates. Now QE is being rolled back and the Fed is tightening, that should have some dampening in liquidity. Higher rates also mean more incentive for consumers to hoard money in savings accounts vs spend or invest.
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Chris Youssi
Rental Property Investor · Caledonia, IL · Member since 2015 · 290 posts · 213 votes
8y
Originally posted by @Brent Coombs:
Originally posted by @Diane G.:

There are diff reasons why mortgage rates go up... Currently, the rates are going up partially due to Fed unwinding their balance sheet....
Asset prices are sooo overvalued because of the artificially low rates for years...
I expect asset prices to drop as rates go up.... Bottom line is dont buy RE when rate is 4%...Wait until rate and unemployment are both high to buy RE....
Mark Twain popularized that there are three kinds of lies. Did you just use all three?...
Brent Coombs - I agree I was like HUH what did I just read and reread 2/3 times? LOL
1 Reply
Matthew McNeil
Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
8y
My lender is currently offering 5.5% with 20% on 30-year fixed. Discount of .25% if I put down 25%.
I agree with Jay; “it’s not norm to positive cash flow with only 20 to 25% down.” It just doesn't work in my market.
5.5% with 20% down will get me into the house, then I’ll recast the loan with $50K and re-amortize at year #3 which fits into my long-term goals.
0 Reply
Aaron Hunt
All Over, USA · Member since 2017 · 689 posts · 756 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.
30-50%?! Good God. Here I am cash flowing in Vegas off just 5% down 12 months out...seeing rainbows and unicorns with my entry into the world of RE.
And I was complaining to my agent that I only locked in 4.25%, ha!
1 Reply
Aaron Hunt
All Over, USA · Member since 2017 · 689 posts · 756 votes
8y
Originally posted by @Russell Brazil:
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.
Moving back to Mont County, MD soon. Really trying to figure out what to do with current rates and our primary residence.
Was offered the following by the lender: 3.5% 5/5 ARM rate (discounted w/ auto-withdrawal from separate acct), no PMI, 5% down (w/ approval of exceptions on previous places); OR 4.5% 30 yr fixed, no PMI, 5% down.
The raising rates are scaring the crap outta me!
0 Reply
Cody DeLong
Gorham, ME · Member since 2018 · 280 posts · 186 votes
8y
My commercial loan on a non owner occupied 11 Unit to an LLC is 4.75% with 20% down 5 years fixed
0 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
8y
Skyrocket is not the right word here. Check the 80's peak mortgage interest rates. That would be a sky rocketed situation.
2 Reply
Account Closed
Earth · Member since 2017 · 297 posts · 187 votes
8y
I had interest rate at 9%, 10%, 11% respectively before. Any Interest rate at 7% or below are considered low and good rate to me.
1 Reply
Deborah BurianPro Member
Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
8y
@Andrey Y. We bought our first home with a 13.5% ARM and when we started our company it was at 8.5% ARM. In 1967, my folks paid 7% for their home. A deal is a deal, funding is part of the package.
1 Reply
Jim Butterfield
Rental Property Investor · Cornelius, OR · Member since 2016 · 62 posts · 26 votes
8y
my lady is getting a 5.75% with 25% down on a duplex. Here credit is pretty good, 700 for sure.
0 Reply
Brad Pietrzak
Milwaukee , WI · Member since 2017 · 58 posts · 10 votes
8y
I personally think property prices will decrease with the rates because it in combined with a largely stagnant wage. consumer buying power has not increased. up till now we have been recovering from the 2008 mess and now that it pretty much is recovered wages are still the same and rates are increasing I could see flat pricing or slightly decreased property costs. playing the devils advocate however. there is a property shortage everywhere so the wage stagnation could just price lower income people out of the market allowing higher income people the chance to buy what they want. at the same coin flip there would be less demand this way. and considering only like 30 percent of Americans even bring home 50k a year as a individual there are far less high income individuals then regular folk with normal paying jobs. I'll just sit back and wait I'll be paying cash for my first primary residence within 8 to 12 months so I really don't care about rates. I like the cash buy because long term property values tend to rise and I am not owned by a bank less can go wrong.
0 Reply
Matt McKinney
Casanova, VA · Member since 2015 · 21 posts · 12 votes
8y
Did you see the home builders report yesterday? The title on MSNBC’s stock ticker was “home builders take a hit” their stocks all went down as their sales were much lower than anticipated for the quarter. They’re still talking about builders being in trouble this morning.
0 Reply
Ryan Henderson
Investor · Madison, MS · Member since 2017 · 4 posts · 2 votes
8y
I just locked in 5.25% w/ 20% down on a SFH rental.
1 Reply
Krishna Chava
Specialist · Carrollton, TX · Member since 2016 · 145 posts · 100 votes
8y
My operating expenses here in Texas have gone up a lot due to properly tax increases( runaway appraisals). I would any day take a bit higher mortage rate than higher property tax. If it's a loan I can payoff and be done eventually.
2 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
Combine high asset prices, with high appraisals and higher property taxes and then put rising interest rates on top! The cocktail sounds to taste bitter. Somethings got to give then.
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