Government surcharge on investment loans?

Question

Is anyone familiar with whether or not there is a government surcharge on conventional loans on residential investment properties and if so what are the details? I'm asking because a few years ago when I financed the purchase of a rental my loan broker told me there was one and that there will be one on any new loan/refinance on any residential investment property but it's not something I see mentioned on here or hear about in podcasts when closing costs are being discussed.

Dan Frio · Answer

yes, there is  It's hard to explain unless you're in the business but there is an average of a 2 point hit to your YSP.  Normally that may equate out to approx .75% to the rate.  So if the rate on a primary home is 4% then you're probably looking at 4.75% on a rental

Andrew Postell · Answer

@Jon K. this might have been explained incorrectly but the rates are slightly higher for investment properties over residential loans.  Do you think that is what the other person was referring to?  Interest rates are about risk.  The lower the risk the lower the interest rate.  It might sound strange but investment properties have a higher foreclosure rate then a residential property.  Probably something to do with if things went really bad a borrower would likely walk away from their investment property over their primary home.  There is not a "fee" for financing an investment property, so the closing costs would be the same but the rate it about .5 higher (or so).  Feel free to ask anything additional if you need.  Thanks!