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Current investment property rates

On Sunday, May 19, 2024, the national average 30-year fixed mortgage APR is 7.09%, according to Bankrate's latest survey of the nation's largest mortgage ... lenders. Use Bankrate's rate table to compare today's investment property APRs.

Today’s mortgage rates for investment properties

Mortgage rates on investment properties are higher than rates for primary residences, generally a half to a full percentage point higher compared to conventional loan rates.

That’s because lenders view investment properties as risky compared to primary residences. If you plan to rely on the rental income from a tenant to contribute to (or cover) the mortgage payments for the investment property, there’s a greater possibility you could default on the loan if your tenant fails to pay rent.

To get a sense of how much higher investment property rates will be, compare them to different loan types:

National mortgage rates by loan type

Product Interest Rate APR
30-Year Fixed Rate 7.04% 7.09%
15-Year Fixed Rate 6.47% 6.55%
5-1 ARM 6.63% 7.88%
30-Year Fixed Rate FHA 6.91% 6.96%
30-Year Fixed Rate VA 7.03% 7.07%
30-Year Fixed Rate Jumbo 7.13% 7.19%

Rates as of Sunday, May 19, 2024 at 6:30 AM

 

 

How are mortgage rates set for investment properties? 

Lenders typically determine fixed-rate mortgages based on two main factors: 10-year Treasury yields and investor demand. Because investment properties are considered riskier than primary residences or even vacation homes, lenders then add an additional cushion to compensate for the possibility of loss.

Types of investment property mortgage loans 

There’s a variety of options for financing an investment property:

  • Conventional loans: These widely-available mortgages are offered by banks, credit unions and other lenders, who typically resell them to Fannie Mae or Freddie Mac. For a conventional investment property loan, you’ll typically need to put down 15 to 25 percent.
  • Portfolio loans: Some lenders offer portfolio loans, which are not sold to secondary market investors but instead held in the lender’s portfolio. The benefit of a portfolio loan is that it may have more flexible guidelines than a conventional loan for an investment property.
  • DSCR loans: A type of non-QM loan, debt-service coverage ratio (DSCR) loans are underwritten based on the income generated by the investment property.
  • Non-warrantable condo loans: If the investment property is a condo, your best option could be this type of specialty mortgage.

 Alternatives to investment property loans 

Aside from an investment property loan, you can finance this type of property in some creative ways, including with a:

  • Cash-out refinance: A cash-out refinance allows you to turn home equity into cash by replacing your current mortgage with a new one with a higher balance. You can then use those equity proceeds to put a down payment on an investment property, or buy one outright
  • Home equity loan: A home equity loan also taps your equity, but unlike a cash-out refinance, you keep your original mortgage and instead get a second mortgage.
  • Bridge loan or hard money loan: These are short-term loans made by private lenders that are often used to flip properties. They help cover the expense between selling one property and buying another.

Investment property loans vs. conventional loans

When comparing investment property loans and conventional loans, you’re often really comparing two types of conventional loans: one for an investment property and one for a primary residence. Keep in mind that rates on loans for investment properties are higher, typically by half a percentage point or more.

Here’s an example comparing the payments on a 30-year, fixed-rate loan on a $400,000 home with 20 percent down:

Conventional Loan Investment property loan
Loan amount $320,000 $320,000
Interest rate 7% 7.75%
Monthly payment (Principal and interest) $2,129 $2,293
Total interest paid over 30 years $446,428 $505,307

The majority of mortgage lenders offer an investment property loan product that’s simply a conventional loan — in other words, not government-backed — but with stricter borrower qualifying requirements. An investment property loan lender might require a down payment of at least 15 percent, for example, while a conventional loan for a primary residence usually only requires 3 percent down.

Here are key points to know:

Conventional investment property loans Conventional primary residence loans
Not offered by every mortgage lender Offered by virtually all mortgage lenders
Often have higher interest rates, but also no restrictions on loan amount Lower conforming loan limits, plus jumbo (non-conforming) options
Stricter credit, debt-to-income (DTI) ratio and down payment requirements Standardized credit, down payment and DTI ratio requirements with most mortgage lenders
For one- to four-unit properties For one-unit properties or owner-occupied multifamily properties
Possible to deduct mortgage interest (within IRS guidelines), plus rental expenses Possible to deduct mortgage interest (within IRS guidelines)

Pros and cons of investment property mortgages

Pros of investment property loans

  • You can borrow more compared to a conventional conforming loan. Investment property mortgages don’t have set loan limits, unlike conforming loans.
  • You don’t have to live in the property. Unlike a loan for a primary residence, you don’t have to live in the property to get an investment property loan.
  • You can deduct mortgage interest. If you itemize your tax return, you can deduct mortgage interest, as well as other rental expenses.

Cons of investment property loans

  • You’ll have a higher interest rate compared to a loan for a primary residence. Investment property mortgages are riskier for lenders. Added risk translates to higher interest rates.
  • You’ll need to meet stricter underwriting requirements. When compared to a mortgage for a primary residence, investment property mortgages often require more cash reserves, a better credit score and a higher down payment.

How to get an investment property mortgage

Here are some tips to get an investment property loan at the best possible rate:

  1. Get your credit and down payment in order: Well before applying for an investment property loan, take steps to improve your credit score (or maintain an already-strong score) and organize the funds for a down payment and closing costs. In general, lenders give the best rates to borrowers with a credit score of 740 or higher and a higher down payment than the lender’s minimum requirement.
  2. Take stock of debt: Now’s the time to pay down or pay off debt and understand your debt-to-income (DTI) ratio, which impacts the interest rate on your loan. If you own more than one property, your lender will want to know about any mortgages on it. Ditto for debt like a car loan or student loan. If you plan to buy the investment property through an LLC, your lender might want to see paperwork tied to that, too.
  3. Compare rate quotes: When you’re ready to look for properties, get rate quotes from at least three mortgage lenders. These might include a community bank, credit union or a lender you’ve done business with before. A mortgage broker can also help you find the right loan. Because fewer lenders finance investment properties, this takes a bit more work compared to shopping for a conventional loan on a primary residence. Consider the APR, or annual percentage rate, which reflects the interest rate and any lender fees and points.
  4. Research borrower experience: Before you decide to go with a lender, see what others have to say about it. Read consumer reviews, check its status on review sites and see if it's been awarded a J.D. Power award for servicing. 

Lender compare

Compare mortgage lenders side by side

Mortgage rates and fees can vary widely across lenders. To help you find the right one for your needs, use this tool to compare lenders based on a variety of factors. Bankrate has reviewed and partners with these lenders, and the two lenders shown first have the highest combined Bankrate Score and customer ratings. You can use the drop downs to explore beyond these lenders and find the best option for you.

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Rating: 4.94 stars out of 5

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Investment property FAQ

Meet our Bankrate experts

Written by: Andrew Dehan, Writer, Home Lending

I’ve covered mortgages, real estate and personal finance since 2020. At Bankrate, I’m focused on all of the factors that affect mortgage rates and home equity. I enjoy distilling data and expert advice into takeaways borrowers can use. Prior to Bankrate, I wrote and edited for Rocket Mortgage/Quicken Loans. My work has been published by Business Insider, Forbes Advisor, SmartAsset, Crain’s Business and more.

Read more from Andrew Dehan

Edited by: Laurie Dupnock, Editor, Home Lending

I’ve spent five years in writing and editing roles, and I now focus on mortgage, mortgage relief, homebuying and mortgage refinancing topics. I’m most interested in providing resources for aspiring first-time homeowners to help demystify the homebuying process. In 2021, I earned a Poynter ACES Certificate in Editing. I have an MA in English. 

Read more from Laurie Dupnock