Do investment mortgages typically have higher rates than primary residence?

9 Replies

I'm a first time investor looking at SFRs, and I'm noticing that the rates I get for "investment properties" (rates in the high 4%s) are higher than rates I would get if I were buying a primary residence that I'd live in (rates in the 3%s).

Is this normal?

Yes

yep, business is business (compared to just a place to call home).

my buyers have indicated that whenever they closed on a multifamily they intended to live in, in order to get he best rate, the lender required proof they own nowhere else as a primary residence (and if they do, a contract of sale to prove their other residence is beng sold).

Sadly yes.   You will pay more for a property that you don't occupy.   We just refinanced a house last year that used to be our home (and may be our home again in a couple of years).   We're renting it out while we're away on military assignment and wanted it to cash flow better while we were away so we refinanced it for a longer term.   Had to pay a higher rate because it was now considered an investment property.

Yup!

Wait till you find out how much you have to put down ;( so much higher too! personal is 5% while investment is 20% . There are definitely benefits to turning your peronsal into a rental. Unforutnalty that doesn't grow for us quickly enough so we buy rentals too. That being said being active duty does have some terrific benefits and this is the one of "join the navy, see the world buy real estate on the BAH dime"

Yes, this is completely normal.  The lender is taking a higher risk with an investment property than a primary residence because if the borrower on the investment property has financial difficulties, they will let the investment property go first before they let go on their primary residence.

Find a local, portfolio lender who will make the loan for you and build a relationship.

@Jeff L. ...being the financing arena, and reinforcing everything already said, yes, this is definitely and completely normal.

@Jeff L. Like everyone else has stated, Yes this is completely normal. Whenever I run the numbers, I always figure between 1-1.5% higher rate for the investment loan versus the personal loan.

Yes, it is definitely normal.  The risk profile for an owner-occupant is different than that for an investor.

@Jeff L.

Yes. It is a greater risk for you to walk away from an investment than a primary, when things get tough. Putting down 25% versus 20% can make a big difference in rates.

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