5.1% a good interest rate for rental property?

13 Replies

I am looking to purchase rentals in the Memphis area .  I have been quoted a 5.1% mortgage rate. Are Mortgage rates higher for rental property?

Yes they are. I'm not an expert but I think they run between 0.5 to 1.0 higher than if you where living in it. also you typically have to put 25 percent down instead of 20. At least that's my experience.

My last set of quotes for a rental property loan in my corporate entity ranged from 4.7% to 5.5% on a 15 year year loan with a 5 year ARM. They wanted 25% down but finally agreed to only 20% down.

I just got a 30yr fixed at 4.6 on a triplex refi, 25% down. 5% on 15yr, 5yr arm I have available to me through a couple local banks I work with. Curious to what others are getting as well. 

Rental loans are generally a half a percent higher to maybe one percent higher.  It's due to the higher risk level for the banks.  5.1% sounds ok for a 30 year loan but I would check local credit unions and banks where you live and where you want to invest.  If you have good credit and a good job I would think you'd find a rate under 5%.

Depending on whether you are trying to get cash flow or trying to pay off loans quick, you may want to look at a 15 year loan.  You can save a lot of money but if you need/want the cash flow do a 30 year loan and let the tenant pay it off over time.

It depends on the process. if you go through local banks and provide many years of tax returns, w2s, paystubs, leases, bank statements, etc... and go through their grueling 45 - 60 day process with DTI requirements and property limitations etc... you can get rates in the 4.75% range to 5.5% range. However, if you want to avoid all that garbage and have streamlined process with not as much documentation and still get a 30 years fixed from 6.0% to 6.875% or so then there are definitely Private Money options out there.

It really depends on what you're looking for and what you can qualify for. Personally I hate how long the banks take. It is so annoying these days.

Yes they are, as everyone else has said. Not  a ton more, but they are higher. And rumors are they are rising and going to rise more since the election. 

What kind of property are you looking at in Memphis?

Yes, that is a decent rate for a rental property. Yes, rates are higher for investment property. If you really worked it you might get another quarter percent off but not likely more than that. 

Keep in mind rates are continually changing. Rates have risen half a percent since last week.

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