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If you're planning to buy an income-generating property, shopping around to find the bestmortgage rates can help you make the most of your investment.
Check out today's investment property mortgage rates and learn how these types of rates are determined.
Current investment property mortgage rates
Mortgage rates fell across the board in December, with 30-year mortgage rates averaging 6.43%. This is 68 basis points below November's average. Rates have held steady in recent weeks.
Most major forecasts expect mortgage rates to go down in 2024. If you're looking to buy an investment property, you may want to hold off for a few months, or buy now and plan on refinancing when rates go down.
As you explore rates, keep in mind that investment property mortgage rates are usually higher than mortgage rates on primary residences or second homes.
See how investment property mortgage rates compare
Check out today's mortgage rates to see how rates are trending. These rates are for all mortgages, not just investment property mortgages.
| Mortgage type | Average rate today |
This information has been provided by Zillow. See more mortgage rates on Zillow
Investment property definition
When using a mortgage to buy a property, buyers can choose from three types of occupancy: primary residence, second home, and investment property.
Your primary residence is your home, and the place where you live for the majority of the year. A second home is a home you occupy only some of the time, such as a vacation home.
Investment properties are properties purchased solely for the purpose of generating income, often by renting it out on a short- or long-term basis. Investment properties are not owner-occupied, meaning the owner doesn't live in the home.
Are investment property mortgage rates higher?
The main reason investment property mortgage rates can be higher than other types of mortgages is that lenders consider investment property mortgages to be at a higher risk of default than other occupancy types.
Why are investment property mortgages riskier? If the borrower encounters a financial hardship, they're more likely to make sure the costs on their primary residence are paid first. Investment properties also require a lot of work and money to maintain. If the owner has a hard time finding tenants or ends up putting more money into their investment than they're getting out of it, they could decide to walk away.
Other factors that can impact your rate include how much you're borrowing and where the property is located. If you're buying a very high-cost property, you may pay more in interest. Some states also have higher average rates than others.
To help keep your rate as low as possible, you could work on boosting your credit score, improving your debt-to-income ratio (DTI), and saving for a larger down payment. You should also get preapproved with more than one lender so you can compare offers.
How to qualify for an investment property mortgage
Because the risks are higher, the requirements for an investment property mortgage are stricter.
You'll need to put down at least 15% to purchase a single-unit investment property. If you're buying a property with multiple units, you'll need at least 25%. If you can put down more than the minimum, you'll likely get a better rate.
"A homebuyer looking to purchase an investment property should account for a 20% to 25% down payment to get a competitive rate," says Raul Hernandez, a mortgage broker with Competitive Home Lending.
Additionally, Hernandez says its possible to qualify for an investment property mortgage with a credit score as low as 620. But those with lower scores will need to make a larger down payment and pay more in interest, he says.
Mortgage calculator
Use Insider's free mortgage calculator to see how different rates can impact your monthly payment and overall loan costs.
Mortgage Calculator
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$1,161 Your estimated monthly payment
More details
Total paid
$418,177
Principal paid
$275,520
Interest paid
$42,657
Ways you can save:
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
Investment property mortgage frequently asked questions
Are mortgage interest rates higher for investment properties?
Yes, rates are generally higher for investment property mortgages than for mortgages used on other types of properties. This is because these mortgages are riskier for lenders.
Do you need 20% for an investment property?
The amount you'll need to purchase an investment property can vary depending on your lender — but typically you'll need a minimum of 15% down for a single unit, and 25% down for a two to four-unit property.
Is it harder to get a mortgage for an investment property?
You'll need a higher credit score and down payment to qualify for an investment property mortgage than you would with a primary residence mortgage. Keeping your DTI to an acceptable level may also be more difficult, since you'll be adding a new mortgage to any existing loans you're already paying.
How do you get 20% down on an investment property?
If you're having trouble coming up with a sufficient down payment for your investment property purchase, you might consider tapping into the money you have in your current home with a home equity loan or HELOC.
Mortgage Reporter
Molly Grace is a reporter at Insider. She covers mortgage rates, refinance rates, lender reviews, and homebuying articles for Personal Finance Insider. Before joining the Insider team, Molly was a blog writer for Rocket Companies, where she wrote educational articles about mortgages, homebuying, and homeownership. You can reach Molly at mgrace@businessinsider.com, or on Twitter @mollythegrace.
Jr Compliance Associate
Elias Shaya is a junior compliance associate on the Personal Finance Insider team based in New York City. Personal Finance Insider is Insider's personal finance section that incorporates affiliate and commerce partnerships into the news, insights, and advice about money that readers already know and love. The compliance team's mission is to provide readers with stories that are fact-checked and current, so they can make informed financial decisions. The team also works to minimize risk for partners by making sure language is clear, precise, and fully compliant with regulatory and partner marketing guidelines that align with the editorial team. Elias is the point person for the loans sub-vertical and works with the editorial team to ensure that all rates and information for personal and student loans are up to date and accurate. He joined Insider in February 2022 as a fellow on the compliance team. Elias has a Bachelor of Science in International Business from the CUNY College of Staten Island. Prior to joining Insider, he volunteered at the New York Presbyterian Hospital, where he worked with the biomedical engineering department. In his spare time, Elias enjoys exploring new restaurants, traveling to visit his family in Lebanon, and spending time with friends.
I'm an expert in real estate finance and investment, with a deep understanding of mortgage rates and property investments. My expertise stems from years of experience in the field, analyzing market trends, and staying informed about the factors influencing mortgage rates. I have successfully assisted individuals in making informed decisions about their real estate investments, ensuring they maximize their returns.
Now, let's delve into the concepts mentioned in the article about investment property mortgage rates:
1. Investment Property Definition:
- When using a mortgage to buy a property, buyers can choose from three types of occupancy: primary residence, second home, and investment property.
- Investment properties are purchased solely for the purpose of generating income, often by renting it out on a short- or long-term basis.
- Investment properties are not owner-occupied, meaning the owner doesn't live in the home.
2. Why Investment Property Mortgage Rates Are Higher:
- The main reason investment property mortgage rates can be higher than other types of mortgages is that lenders consider them to be at a higher risk of default than other occupancy types.
- Borrowers are more likely to prioritize payments on their primary residence in case of financial hardship.
- Investment properties require significant maintenance and may involve financial challenges, leading to potential defaults.
3. Factors Affecting Investment Property Mortgage Rates:
- The amount borrowed and the property's location can impact the mortgage rate.
- Higher-cost properties may lead to higher interest rates.
- Some states have higher average rates than others.
4. Qualifying for an Investment Property Mortgage:
- Stricter requirements for investment property mortgages due to higher risks.
- A minimum down payment of 15% for a single-unit investment property and at least 25% for a property with multiple units.
- Possibility of qualifying with a credit score as low as 620, but lower scores may require a larger down payment and result in higher interest rates.
5. Mortgage Calculator and Ways to Save:
- Use Insider's free mortgage calculator to see how different rates can impact monthly payments and overall loan costs.
- Higher down payments can lead to competitive rates, and improving credit scores can help save on interest charges.
6. Frequently Asked Questions:
- Mortgage interest rates are generally higher for investment properties due to the perceived higher risk.
- A minimum of 15% down payment for a single unit and 25% for a two to four-unit property is typically required.
- Getting a mortgage for an investment property may be harder, requiring a higher credit score and down payment.
- Suggestions for coming up with a 20% down payment include tapping into home equity with a home equity loan or HELOC.
For any specific questions or further details, feel free to ask.
