To succeed in the world of real estate investment, it’s essential to have a solid grasp of mortgage rates for investment properties. This guide is here to help, offering the latest rates, insights into what affects them, and strategies to secure the best possible terms.
Current investment property mortgage rates
Today’s rates for a rental property - 30 yr fixed
| Loan Type | Date updated | 75% LTV | 80% LTV |
|---|---|---|---|
| 30 year DSCR loan | 03/16/2025 | 6.750% | 6.999% |
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*Assumptions: For a 30-year DSCR loan. Credit score - 760+. Meets any personal guarantee requirements, $250k - $1M loan amount, no buydowns etc. included. Note: Rates can vary depending on the lender, your credit profile, the specific loan you apply for, and the property type.
Key takeaways:
- Loan rates for investment properties are higher and have stricter requirements due to the additional risk lenders take compared to primary residence loans.
- Several factors influence your mortgage rate, including your credit score, down payment amount, debt-to-income ratio, loan-to-value ratio, property type, and location.
- Take steps to secure the best rates, such as improving your credit score, making a larger down payment, reducing existing debt, shopping for competitive quotes, and negotiating with lenders.
- Explore different loan types available, like conventional loans, DSCR loans, and Fannie Mae’s 5% down for 2-4 unit loans, to find the best-fit loan for your investment strategy.
- Use online tools for calculating rates and ROI to compare investment property loan options and understand the impact mortgage rates will have on your investment returns.
What is an investment property loan?
An investment property loan is a type of mortgage specifically designed for purchasing a property you intend to rent out rather than living in it as your primary residence. These loans typically come with different terms and requirements than traditional mortgages for primary homes and a typical mortgage rate for an investment property is higher than a conventional mortgage.
How investment property loan rates differ from primary residence loans
Investment property loans typically have higher mortgage interest rates than primary residence loans. That’s because investment properties have a higher risk of vacancies and non-payment.
Lenders typically require larger down payments for investment properties (15-25% compared to 3-5% for primary residences) and have stricter qualification criteria, including higher credit score expectations and lower debt-to-income ratio thresholds.
How Lenders Set Investment Property Interest Rates
Lenders determine mortgage interest rates for investment properties based on the perceived level of risk and the loan type. Here’s how it works for conventional loans versus rental property loans:
Conventional loans for primary residences
Conventional loans are designed for owner-occupied properties. These loans typically come with:
- Lower interest rates due to the reduced risk associated with primary residences. Homeowners prioritize mortgage payments to avoid foreclosure since they live in the property.
- Lower down payment requirements, sometimes as low as 3-5%, especially for borrowers with strong credit.
- Flexible qualification criteria for credit score, debt-to-income ratio (DTI), and loan-to-value ratio (LTV).
Conventional loans for primary residences often align with guidelines from Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that influence mortgage pricing and risk assessment.
It is possible to get a conventional mortgage for a single-family or a 2-4-unit property. Fannie Mae’s 5% Down Multifamily Loan is a great program to leverage for first-time investors who can live in one unit and rent out the rest with just 5% down.
The mortgage rates for conventional loans can be readily found on many websites. Just google “today’s mortgage rates,” and you’ll find multiple options.
Rental property loans
Investment property loan rates are higher because lenders face increased risk. This stems from the possibility of:
- They are not owner-occupied most of the time
- Vacancies, which may disrupt rental income.
- Non-payment, as borrowers may deprioritize investment property payments during financial hardship.
To mitigate this risk, lenders add rate adjustments and stricter conditions:
- Higher interest rates: Typically 0.5% to 1.0% above conventional rates. The increase depends on factors such as property type, location, rent comparisons, and loan size (not comprehensive).
- Larger down payments: Investors must generally put down 15-25% of the property’s value to secure financing. A higher down payment reduces the lender’s exposure to risk.
- Tighter qualification criteria: Lenders demand higher credit scores, often 650+, and lower Debt to Income (DTI) ratios to ensure the borrower has strong financial health.
- Loan-level price adjustments (LLPAs): GSE guidelines impose additional fees or rate increases for investment properties. For example:
- Single-family investment properties typically see a 0.5% to 0.75% rate hike.
- Multifamily properties (2-4 units) face an even larger increase of 0.625% to 1.0%.
Most rental property loans are recourse loans, requiring a personal guarantee from the borrower. This means:
- If the borrower or investor defaults on the loan, the lender can seize the property and pursue the borrower’s personal assets (e.g., bank accounts, wages) to recover outstanding loan balances.
- Lenders reduce their risk and ensure borrowers remain committed to repaying the loan with this personal guarantee.
Factors influencing rental property mortgage rates
Fannie Mae and Freddie Mac guidelines aren’t the only factors influencing investment property mortgage rates. Your personal finances and market conditions play a critical role.
Credit score
Borrowers with a credit score above 650+ are generally eligible, and those with a credit score of 740 get better rates. Over time, even a slight decrease in your interest rate will result in substantial savings. Higher credit scores can also give you leverage to negotiate a lower down payment.
Down payment
While you’ll likely have to put more money down on an investment property than a primary residence, a larger down payment can lower your rates and monthly payments. Plus, lenders may consider a substantial deposit as a sign of financial stability and offer you more favorable terms.
Debt-to-income ratio
Lenders prefer a debt-to-income (DTI) ratio below 43%. A lower DTI indicates that you can comfortably manage monthly payments, making you a more attractive borrower. To improve your DTI ratio, prioritize paying down existing debts and avoid taking on any new debt before applying for a mortgage.
Loan-to-value ratio
A loan-to-value (LTV) ratio compares your loan amount to the property’s value. A lower LTV ratio indicates less risk for the lender, which generally means better rates for you. To improve your LTV ratio, consider making a larger down payment or increasing the property’s value through renovations.
Property type and location
Mortgage rates can vary significantly based on what type of property you buy (single-family homes vs. multi-unit properties) and where it’s located. Properties in high-demand areas often have lower rates due to perceived stability, while less desirable locations come with higher borrowing costs. Researching local markets before you buy will give you a better idea of what rates you can expect.
| Loan Type | Pros | Cons |
|---|---|---|
| Conventional Loans: Standard loans with fixed or adjustable rates, typically requiring good credit and a substantial down payment. | Competitive rates, flexible terms. | Stricter credit requirements, larger down payments. |
| FHA Loans: Government-backed loans that allow lower down payments, suitable for first-time investors but with mortgage insurance. | Lower down payment requirements, easier qualification. | Mortgage insurance premiums, limits on loan amounts. |
| VA Loans: Loans for veterans with favorable terms, including no down payment and no mortgage insurance. | No down payment, no mortgage insurance. | Limited to veterans and active-duty service members, funding fees may apply. |
| Hard Money Loans: Short-term loans based on property value rather than creditworthiness, often used for quick financing but with higher interest rates. | Quick access to funds, less stringent qualification. | High interest rates short repayment terms. |
| Private Money Loans: Loans from private individuals or groups, are often more flexible but can vary widely in terms and rates. | Flexible terms, faster approval. | Higher costs, less regulation. |
| DSCR Loans (Debt Service Coverage Ratio Loans): Loans that focus on the income generated by the property rather than the borrower's personal income, are ideal for investors with multiple properties. | Income-based qualification, suitable for investors with multiple properties. | Higher rates for lower-income properties may require a larger down payment. |
| Portfolio Loans: Loans held by lenders in their own portfolios, offering flexibility in terms and qualification criteria. | Customized terms, less stringent qualification. | Higher rates compared to conventional loans, limited availability. |
How do you apply for an investment property loan?
While the steps involved in applying for investment property mortgage loans may vary depending on the lender and type of loan, here’s a general overview of the mortgage process:
- Get pre-approved: Start by getting pre-approved for an investment property loan. This estimates how much you can borrow and shows sellers that you’re a serious buyer.
- Find the right property: Once you know your budget, search for properties that meet your investment goals.
- Complete a loan application: When you’ve found a property, complete a formal mortgage application with your chosen lender.
- Provide documentation: Be prepared to provide documentation, such as income verification, tax returns, and credit reports.
- Appraisal and underwriting: The lender will order an appraisal of the property and underwrite your loan to assess the risk.
- Loan approval and closing: If your loan is approved, you’ll move forward with the closing process, which involves finalizing the loan documents and transferring ownership of the property.
How to get the best rate for investment property loans
To get the best investment property mortgage rates, follow the five best practices below.
1. Improve credit scores
Paying your bills on time and reducing credit card debt are the best ways to boost your credit score. Avoid opening new credit accounts before applying for a mortgage. And remember to check your credit report regularly for errors and dispute any inaccuracies you find.
2. Make larger down payments
When you pay more upfront, you’re borrowing less money. This generally means you’ll have lower monthly mortgage payments, giving you more cash flow to cover operating expenses or reinvest in the property. On top of lower rates, a larger down payment can also reduce mortgage insurance costs.
3. Reduce existing debt
Consider consolidating debts into a single loan, negotiating lower interest rates with your creditors, or paying down debts with the highest interest rates first. Any way you can reduce your debt will help improve your DTI, giving you a better shot at scoring lower rates.
4. Shop around for competitive quotes
Don’t settle for the first mortgage offer. Get quotes from multiple lenders – banks, credit unions, online lenders – to compare rates and loan terms. Casting a wider net increases your chances of finding the best deal.
5.Negotiate rates with lenders
Compare quotes and let lenders know you’re considering other offers. If one lender is willing to give you a lower rate, others may match or even beat it to secure your business. If rates drop after you’ve received an initial quote, don’t hesitate to reach out to your lender to discuss lowering your rate.
Calculate rates and ROI
Leverage online tools to compare your loan options and better understand the overall mortgage landscape.
Use Baselane’s investment property mortgage rates calculator, which calculates your 30-year projections and investment returns.
- Investment property loan calculator: Provides a personalized rate estimate based on the loan amount, down payment, credit score, and other key variables. This will help you quickly gauge how much you might be allowed to borrow.
- ROI simulator: Shows how rate changes can impact your return on investment over time (5, 10, or 15 years). Focusing on key metrics such as cash flow, appreciation, and tax benefits will help you make informed decisions about your investment properties.
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Annual Cash Flow
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50% Rule
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Bottom line
When comparing rates and loans for investment properties, weigh the pros and cons of all your options and think about what returns you’re getting in the long run. A 30-year mortgage offers stability, while adjustable-rate mortgages (ARMs) may start lower but fluctuate over time. A lower rate may seem attractive initially, but future rate increases could lead to higher overall costs.
Explore Baselane’s financing options and find the best rates available. From conventional investment property loans to DSCR loans, new construction to fix-and-flip, and everything in between, we’ve got you covered! Find out if you qualify for up to $3M pre-approved rental loan.
FAQs
How do investment property loan rates differ from primary residence loans?
Real estate investment property loan rates are typically higher than primary residence loan rates due to the increased risk lenders face. Mortgage lenders (also called mortgage brokers) consider investment properties to be riskier because they are more likely to experience vacancies and non-payment.
What factors influence rental property mortgage rates?
Several factors influence mortgage rates on investment properties, including:
- Credit score
- Down payment amount
- Debt-to-income ratio (DTI)
- Loan-to-value ratio (LTV)
- Property type and location
How can I secure lower investment property mortgage rates?
To secure lower investment property mortgage rates, consider the following strategies:
- Improve your credit score
- Make a larger down payment
- Reduce existing debt
- Shop around for competitive quotes
- Negotiate with lenders
What types of loans are available for investment properties?
There are several types of loans available for investment properties, including:
- Conventional Loans
- FHA Loans
- VA Loans
- Hard Money Loans
- Private Money Loans
- DSCR Loans
- Portfolio Loans
