I am new to obtaining bank financing on a deal. I have a couple questions that I am struggling to understand.
1) I called a few banks telling them I am interested in investing in a condo as an investment. I was looking for a 30year fixed with 25%down. The interest rates I am being quoted are significantly higher than friends of mine buying houses to live in. Additionally every bank I have talked to so far requires points to be paid. Is this just the nature of obtaining an investment loan or am I going about something the wrong way?
2) If I use the BRRRR strategy, once the property is rehabbed and rented, and I look to refinance, what is the best product to go for? HELOC or refi into a conventional mortgage for an investment property, which I am assuming will be similar to question 1 above?
Conventional loans for investment properties will have higher interest rate. Depending on the loan amount & your credit scores, you may or may not have to pay points.
Rates are low now so I would recommend doing a fix 30 year loan instead of a HELOC, just my opinion , but it depends on what you feel is right for your situation. HELOCs are variable tied to Prime Rate. Prime is currently 5.25%, and for investment, you will probably find that there is a margin added to the Prime rate.
A few questions that make a big difference in rates and points.
What is the loan size? Small loans - less than $50k properties sometimes require points to be paid.
Is this a Fannie Mae approved condo? If yes, you will be getting the lowest rates with conventional. If not, you are looking at a portfolio loan and rates are going to be higher.
An investment property loan is going to have higher rates than a primary home. Also, a condo is considered a single unit so you only need 15-20% down.