Invested interest rates - conventional loan

5 Replies

In the last month, I've closed on non owner occupied loans at 3.75% and 5.625%. 

Go to the following link, add everything up. That would be the one-time price expressed as discount points to get the owner occ rate even though it is a rental.

https://www.fanniemae.com/content/pricing/llpa-matrix.pdf

Almost no one actually does that, though as you might have guessed from the above I had a couple people recently come pretty close, and one fellow knew he was going to sell the thing in less than a year, so he didn't care about the rate, he wanted the bank to cover his closing costs in exchange for a higher rate.

If that price is too high, you can swap points out for rate at a ratio of about 1 point to 0.25% to rate.

Today's rates sheet go from 2.5% to 6.5%. So will tomorrow's. Rates never change. What changes daily is the sticker price next to each one, from each bank, which is then adjusted up or down depending on the parameters specified in the link above.

Chris, an amazing share of information, as always.  

So an investment refi would add up 

Credit score discount 

Investment discount 

Refinance discount

All at the appropriate levels?

Then multiply by .25 to approximate the increase in interest rate vs paying the discount in points?

Thanks and Happy New Year!

Originally posted by @Dan Schwartz :

Chris, an amazing share of information, as always.  

So an investment refi would add up 

Credit score discount 

Investment discount 

Refinance discount

All at the appropriate levels?

Then multiply by .25 to approximate the increase in interest rate vs paying the discount in points?

Thanks and Happy New Year!

 Yup, that'll be ballpark accurate. 

[ Sum of point adjustments * .25 = rate bump ] will be ballpark. 

A rate sheet might read

X.875% = -1.312

X.750% = -1.084

X.625% = -0.624

X.500% = 0.422

X.375% = 0.517

So you can see that going down 0.25% from X.875% was a little less than a point, but going from X.750% to X.500% was a little more than a point, closer to a point and a half! (note that it turned to a positive number). This means that wall street REALLY doesn't want to buy mortgage backed securities with loans at X.500% in them, they'd rather have X.625% or X.375% (people buy/refi/etc based on emotion not math, Wall St has data saying that X.500% people refinance really quick, one would assume). Sometimes a bank wouldn't even post the 0.500% option, they'd go right from 0.625% to 0.375%. 

They go in increments of 0.125% b/c British Empire.

Kate - thanks for the  question ....several variables  will  affect the  rate for INV  properties :  credit score / loan to value /  type of property  1-4 /  type of  loan ......if you add  soem of these details -  your  responses will likely be more accurate and helpful

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