Difference interest rate for 1 and 4 units?

Question

I’m by no means an experienced investor but I have never heard that the interest rate between residential multi family interest rates are different.

A broker told me the interest rate for a 1, 2, 3, 4 are all different. Is this true?

I’m attempting to cash out refinance my 4 unit that’s my personal residence house hack.

And take that money for a down payment on a duplex property I already came to an agreement on.

Stephanie P. · Answer

I'm going to say yes with a caveat.  It could vary from lender to lender.  Pricing is lender specific depending on the overlays.  If their secondary dept thinks units are riskier, they'll do an add on (usually a half to the rate).  There may not be much of a difference between a 2 unit and a 4 but certainly between a sfr and a 4.

Chris Mason · Answer

Unit count and occupancy status are both interest rate factors, yes.

Fannie Mae publishes her pricing adjustments publicly. Link.

All those numbers you see are price adjustments, not rate adjustments. Meaning you add all that stuff up, and that's how many discount points you'd have to pay to get the rate you see advertised everywhere. You can swap those points for rate at a ratio of about ~0.5 points for 0.125% to rate (depending on the whims of Wall Street on a given day, it might be 0.546 today and 0.416 tomorrow), which lenders typically do ahead of time when quoting a rate, since we know without asking that no one wants the rate that comes with $15,000 in lender/Fannie fees.

Individual lenders can impose additional "loan level pricing adjustments," but typically only do so over FICO score issues, or when it's not a Fannie loan.

Stephanie P. · Answer

Yes, single family properties are less expensive than units if you're talking about conventional financing.  Portfolio financing has no discernible difference in general.

Stephanie P. · Answer

Thanks @Chris Mason and @Stephanie Irto for the clarification.

Stephanie Medellin · Answer

@Bradley LaBrie  Yes, interest rates for a 4 unit will be higher than for a single family home on conventional loans.  Sometimes 2-4 units are priced the same, sometimes 2 units will be different than 3-4 units.

If it's an FHA loan, the rates may not be any different whether it's a 1, 2, 3, or 4 unit.

Bradley LaBrie · Answer

@Stephanie P. so the interest rate on a duplex is different than a 4-unit for conventional financing with it being my homestead?

Thanks

Difference interest rate for 1 and 4 units?

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