Investment Property Mortgage Rates

Most Popular Reply

Zach Wain
Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
1y

If you are getting a conventional (full doc) loan, the delta in rate between primary homes and rental homes varies depending on the downpayment amount.  Long term and short term rentals are priced the same on conventional.  These numbers will change daily, but it gives you a ballpark idea

15% down, 1%-1.25% higher rate and high PMI

20% down, 0.75% higher in rate

25% down, 0.5% higher in rate

30% down, 0.375% higher in rate

If you are talking about DSCR loans, that is an entirely different animal with different pricing options and prepayment penalties to consider. Jumbo rates will look different as well.

3Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    1y

    What is your definition of "short term"?

    0Reply
  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    1y

    3 months or 3 years or 5 years?

    0Reply
  • Zach Wain
    Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
    1y

    If you are getting a conventional (full doc) loan, the delta in rate between primary homes and rental homes varies depending on the downpayment amount.  Long term and short term rentals are priced the same on conventional.  These numbers will change daily, but it gives you a ballpark idea

    15% down, 1%-1.25% higher rate and high PMI

    20% down, 0.75% higher in rate

    25% down, 0.5% higher in rate

    30% down, 0.375% higher in rate

    If you are talking about DSCR loans, that is an entirely different animal with different pricing options and prepayment penalties to consider. Jumbo rates will look different as well.

    3Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    1y

    This is all a function of your bank, your relationship with your bank, and what they are willing to lend at.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    2Reply
  • John O'LearyPro Member
    Lender · Winter Park, FL · Member since 2021 · 737 posts · 412 votes
    1y

    It's not really based on the market. For Short-Term Rentals (STRs), you'd typically use a DSCR loan, where your credit score and loan-to-value (LTV) determine the base rate. These loans are qualified using the property's rental income, not your personal debt-to-income (DTI) ratio.

    Rates generally range from the high 6s to 7s, with most borrowers falling somewhere in between.

    The most important factor with STR financing is how the lender qualifies the rental income, as that can vary significantly from one lender to another.

    [email protected]800-663-4122
    2Reply
  • Zach Edelman
    Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
    1y

    DSCR Rates for STRs are right now in high 6's to mid 7's range. They will have prepayment penalties though, but this is customizable. Typically though, as you go down in duration in prepayment penalty, the rate/points goes up. Hope this helps!

    1Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    1y

    There are many products by many lenders in many markets. I recommend you to talk to a local broker specializing in conventional and portfolio products and a lender specializing in DSCR. Good luck!

    [email protected]813-563-0877
    Vacation Rentals of Florida53 Reviews
    WebsiteView Page
    0Reply
  • Zach Wain
    Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
    1y

    @Anne-Marie Singer - When looking at DSCR loans and getting generic rate quotes, I think it is 100% crucial to ask how long is the prepayment penalty and what are the origination fees!

    A 5 yr Pre payment penalty with massive origination fees for a low rate is most likely not a good deal. DSCR loans have lower rates with long prepayment penalties, so the rate can sound more appealing but the rest of the deal can be detrimental.

    Always ask that if you are considering DSCR! Conventional will usually have a better combo of rates/fees with No prepayment compared to DSCR

    0Reply
  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    1y

    When you say short term investment, are you referring to Short term rentals? or hard/private money financing?

    Rates for primary residence is usually lower than investment properties. Long term investment property financing can be in the high 6's to high 7's depending qualifications, and short term financing typically range in the 9's to 11's.

    310-848-9776
    0Reply
  • Anne-Marie Singer
    OP
    New to Real Estate · Santa Barbara, CA · Member since 2017 · 9 posts · 3 votes
    1y

    @Mike Grudzien We are thinking of moving out of our home and turning it into an investment property as a short term to mid-term rental. I am trying to understand how refinancing from a primary into an investment property mortgage affects the numbers. Assuming this is the correct thing to do if we’re planning to rent it liability wise because our insurance is so for a primary owner occupied and that would have to be changed as well. Are these assumptions correct?

    0Reply
    • Craig Jones
      Member since 2023 · 113 posts · 129 votes
      1y
      Quote from @Anne-Marie Singer:

      @Mike Grudzien We are thinking of moving out of our home and turning it into an investment property as a short term to mid-term rental. I am trying to understand how refinancing from a primary into an investment property mortgage affects the numbers. Assuming this is the correct thing to do if we’re planning to rent it liability wise because our insurance is so for a primary owner occupied and that would have to be changed as well. Are these assumptions correct?


      No, not correct in most cases. But read your mortgage fine print to be sure. Typical primary residence mortgages only require owner occupancy for the first year. You should definitely get a different insurance policy if you're going to rent it STR or LTR, but that's independent of the mortgage.

      We have a large SFH STR that was previously our primary residence. Bought with a 2.5% 30-year fixed mortgage in 2021. Which is a primary driver of the mega profitability on that property.

      0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free