Compare investment property mortgage rates
Investment properties appeal to those who seek to build wealth by, perhaps, flipping fixer-uppers or buying rentals. Find and compare current investment property mortgage rates from lenders in your area.
About These Rates: The lenders whose rates appear on this table are NerdWallet’s advertising partners. NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a lender’s site. The terms advertised here are not offers and do not bind any lender. The rates shown here are retrieved via the Mortech rate engine and are subject to change. These rates do not include taxes, fees, and insurance. Your actual rate and loan terms will be determined by the partner’s assessment of your creditworthiness and other factors. Any potential savings figures are estimates based on the information provided by you and our advertising partners.
Primary home mortgage rate trends (APR)
NerdWallet’s mortgage rate insight
On Tuesday, Sept. 29, 2020, the average rate on a 30-year fixed-rate mortgage went up one basis point to 2.951%, the average rate on a 15-year fixed-rate mortgage dropped one basis point to 2.516% and the average rate on a 5/1 ARM rose six basis points to 2.977%, according to a NerdWallet survey of mortgage rates published daily by national lenders. A basis point is one one-hundredth of one percent. Rates are expressed as annual percentage rate, or APR. The 30-year fixed-rate mortgage is four basis points lower than it was one week ago and 113 basis points lower than one year ago.
Current mortgage and refinance rates
|30-year fixed rate||2.845%||2.951%|
|20-year fixed rate||2.750%||3.009%|
|15-year fixed rate||2.338%||2.516%|
|5/1 ARM rate||3.031%||2.977%|
|7/1 ARM rate||2.750%||2.874%|
|10/1 ARM rate||2.875%||2.969%|
Data source: NerdWallet mortgage rate index
How do you shop for current investment property mortgage rates?
NerdWallet's mortgage rate tool can help you find competitive investment property mortgage rates. In the "Refine results" section, enter a few details about the loan you're looking for and select "Investment property" from the "Home purpose" drop-down menu. You'll get a personalized rate quote in minutes, without providing any personal information. From there, you can start the process to get preapproved for an investment property loan. It's that easy.
Why are interest rates higher on investment or rental properties?
Your interest rate will generally be higher on an investment property than on an owner-occupied home because the loan is riskier for the lender. You're more likely to default on a loan for a home that's not your primary residence. That's a good reason to use our investment property mortgage rate tool to compare prevailing interest rates that you qualify for.
In addition to paying higher investment property interest rates, it's likely you'll have to make a higher down payment. Conventional mortgages generally require at least 15% down on a one-unit investment property and 25% down on a two- to four-unit investment property. And loan terms are usually shorter than the typical 30-year residential mortgage. After all, it's a business transaction, rather than a home purchase.
How do I compare investment and rental property mortgage rates?
The only way to find the lender with the most competitive investment or rental property mortgage rate is to compare multiple lenders, and then compare their rates and fees. Within days of being preapproved, you'll receive a Loan Estimate from each lender. These let you compare every aspect of the loan side by side, so you can see the total cost including the investment property mortgage rate, origination fee, closing costs and more.
What is a good investment property interest rate?
A good investment property rate varies from day to day, as rates change based on numerous economic and noneconomic factors. To find the best rate for an investment or rental property, you'll want to compare investment property mortgage rate quotes from multiple lenders.
Will investment property interest rates drop in 2020?
Average mortgage rates fluctuate daily and are influenced by economic trends including the inflation rate, the job market and the overall rate of economic growth. Unpredictable events, from natural disasters to election outcomes, can impact all of those factors. See NerdWallet's mortgage interest rates forecast to get our current take.
Investment loan pros and cons
- You don't put your primary residence at risk, as you would if you financed a home equity loan or a HELOC against it to go toward your investment property purchase.
- You may be able to use a portion of the projected rental income from the investment property to qualify for an investment mortgage.
- You'll have to make a higher down payment than you would for a primary residence. This could be as much as 25% for a multi-family property. Don't forget to factor in closing costs and fees, too, when you're figuring out your upfront costs.
- Investment property interest rates are higher, and though you may be able to get a rental property mortgage with a credit score as low as 640, you'll need a higher credit score to get the lowest possible rate.
- Though it varies by lender, you're likely to be required to have extensive cash reserves. This can be anywhere from four to eight months' worth of mortgage payments, taxes, insurance and homeowners association fees. That may be calculated per property, which adds up fast if you already own other investment or rental properties.
How are mortgage rates set?
At a high level, mortgage rates are determined by economic forces that influence the bond market. You can't do anything about that, but it's worth knowing: Bad economic or global political worries can move mortgage rates lower. Good news can push rates higher.
What you can control are the amount of your down payment and your credit score. Lenders fine-tune their base interest rate on the risk they perceive to be taking with an individual loan.
So their base mortgage rate, computed with a profit margin aligned with the bond market, is adjusted higher or lower for each loan they offer. Higher mortgage rates for higher risk; lower rates for less perceived risk.
So the bigger your down payment and the higher your credit score, generally the lower your mortgage rate.
» MORE: Get your credit score for free
What's the difference between interest rate and APR?
The interest rate is the percentage that the lender charges for borrowing the money. The APR, or annual percentage rate, is supposed to reflect a more accurate cost of borrowing. The APR calculation includes fees and discount points, along with the interest rate.
APR is a tool used to compare loan offers, even if they have different interest rates, fees and discount points.
A major component of APR is mortgage insurance — a policy that protects the lender from losing money if you default on the mortgage. You, the borrower, pay for it.
Lenders usually require mortgage insurance on loans with less than 20% down payment (in a home purchase) or less than 20% equity (in a refinance).