Rental mortgage rates for single-family rental properties are usually 150 bps to 300 bps higher than consumer mortgage rates.
In other words, if the equivalent consumer mortgage rate is 3.25 percent, the mortgage rate for a single-family rental property is 4.75 percent to 6.25 percent.
Mortgage rates investment property will always be higher than conventional ones because they are riskier than conventional mortgage rates.
There will be times when things get hard. For example, when the tenant fails to pay the rent. If this happens, investors will likely pay their residential property instead of their investment property. Therefore, mortgage lenders tend to charge a higher interest rate and apply stricter requirements.
Understanding Rental Mortgage Rates
Mortgages rates on investment property ranges from 50 to 87.5 basis points higher than primary home mortgage rates.
For example, if mortgage rates for a 30-year, the fixed-rate mortgage on a home that the owner occupies is averagely around 3.25 percent.
You can expect a 30-year investment property loan to have an interest rate as much as 3.75 percent to 4.125 percent. It is because lenders have more risks when they lend money to real estate investors.
Higher risks mean higher interest rates as well as more stringent borrowing requirements. Property investors usually rent out their investment properties to gain rental income.
Periods of vacancy can increase the possibility of mortgage default if the investor is not financially prepared.
After all, they would want to cover the mortgage payment on their residential home first. When times get hard, owners of investment property can cut their loss and run. This is why mortgage rates investment property is always higher.
Rental Property Loan Recommendations
Quicken Loans offers a broad variety of loan types, lend nationwide, and make it totally easy for borrowers to apply for a mortgage online. It also offers competitive mortgage rates, making it the best overall mortgage lender.
Quicken Loans offers down payments as low as 3 percent on conventional mortgages, as long as you are qualified for their agency loans. It lends on VA loans, USDA loans, FHA loans, mortgage refinancing, and many more.
Veterans United Home Loans
As the name implies, this investment property loan is the best for veterans. Veterans United Home Loans specializes in VA-backed mortgages with professionals and experts who understand this loan type better than any firms. This firm is one of the biggest VA mortgage lenders in the United States in terms of volume.