Quick question about Investment property Interest rates..

14 Replies

Sean,

I am cashing out a duplex (strictly investment) and getting a 30 year fixed mortgage at 5.75%. I am not really happy with that. I was looking through bigger pockets hoping to see some other recent rates. I still feel like that is high. Side note - credit score of 786. Let me know if you find any better then that. I am going to keep looking this week and will lock in if I can not find anything better.

As a mortgage broker, I would like to say that there is a LOT of missing information from this post then just asking if a 7% is a high interest. Rate is not only based on credit score, whats your loan to value, what type of property is it, are you going conventional financing, are you doing full docs, is it stated income, is this a purchase, refinance, cash out, how much is the loan, etc...

As you can see there are MANY things that go about determining if the rate is good or not and you really compare to others who say they got a lower rate without knowing if their situation is EXACTLY like yours.

I do suggest that you compare with others though.

Originally posted by @Sean Moore :

Would anyone happen to know if 7% the current going interest rate for investment properties financed through mortgage lenders /banks? I was told by a mortgage broker that's the best he give us with an 830 credit score?

 7% and a point or two is a good rate if it's a no income verification loan at 75% cash out on a 30 year fixed 1-4 unit property over $250K.  Full doc from a bank should be lower.

For all of you suggesting the mortgage broker is going for a big pay day, there's absolutely no way you can determine whether this rate is good or not because you have almost no information.  You have a rate, it's an investment property and the OP has really solid credit; that's it.

@Sean Moore it depends on several factors. The type of loan makes a difference, down payment, origination fees, closing costs and any points. You really need to compare everything, because one loan may have a lower rate, but the fees are much higher. Also keep in mind the type of loan and term play into this. If it is a traditional 30 year mortgage, the rate will be different than a 15 year mortgage.

All that being said, the 7% seems high given where rates are at. Usually for my investments, I am paying about a half point higher than owner occupied rates. That would put a 30 year rate in the low 5's. 

Shop around to several lenders. Make sure you get a "sample settlement" statement from them too. That will show all the fees.

Originally posted by @Justin Tyme :

Sean,

I am cashing out a duplex (strictly investment) and getting a 30 year fixed mortgage at 5.75%. I am not really happy with that. I was looking through bigger pockets hoping to see some other recent rates. I still feel like that is high. Side note - credit score of 786. Let me know if you find any better then that. I am going to keep looking this week and will lock in if I can not find anything better.

Just curious, why would you think 5.75% is high on a 30 year fixed mortgage?  We're still in a historically low rate period and I hear conventional rates have taken a dip lately, but 5.75% is a pretty solid rate.

Rates change daily, sometimes hourly depending on market volatility, so how do you know what the rate should be on any given day? In truth, most loan originators don't know what the rate is going to be until they plug it into their system. Rather than shopping lenders, if you've found one that you like working with, how about asking him/her how they can get the rate down or what goes into the rate. What are their add-on's (cash out, ltv, investor)? Ask what lowering the LTV by 5% would do. I bet it would make a significant difference.

Building a team of professionals that will perform when you need them to perform is worth not going through the hassle of shopping for a quarter point.

One girl's opinion

Stephanie

It's good you're going to keep calling around. But even then, don't go with the first lower interest rate you find. Ask local investors and Realtors for their best lender connections. Then check with a bunch of them for not only the best rate but the best terms. Doing thorough homework on them can save you the most money and get you the best possible terms.

Stephanie, 

That is really good advice and a lot of what you said I was thinking about doing. I spoke with her and lowered by rate by almost half a percent. I appreciate the post, helped me make my mind up. 

Originally posted by @Justin Tyme :

Stephanie, 

That is really good advice and a lot of what you said I was thinking about doing. I spoke with her and lowered by rate by almost half a percent. I appreciate the post, helped me make my mind up. 

 Glad I could help.  Made my day.

@Sean Moore

If your broker is funding this through a commercial bank. The loan will be based on Prime +1 or +2. Prime is currently 5.5%.

I'd this is a Fannie or Freddie back loan on a non owner occupied property. You could get a better rate. Unless like someone else posted your broker is trying to make a nice spread. Also if this is a small balance loan there may be an adjustment/hit on the rate.