Investment property mortgage rates are typically one percentage point (and up to four points) higher than traditional home loans. The lower your rate, of course, the better your potential cash flow from owning a property.
Like conventional home loans, rates for investment property loans have been elevated for several years — and don’t seem destined for a dramatic fall anytime soon. However, you can take steps to find and qualify for competitive interest rates. You’ll especially have leverage with strong credit and, if you’re an experienced investor, properties already generating income.
Current mortgage rates for an investment property
Real estate investors pay investment property mortgage rates when financing properties bought exclusively for investment purposes. Rates on these loans are higher than traditional mortgage rates because they carry more risk for lenders. After all, an investor may be more likely than a homeowner to ditch a debt.
Like any loan, mortgage rates for an investment property depend on multiple factors, including your credit scores, down payment amount, property details, choice of lender, loan terms and location. However, the investment property loan type (more on that below) also plays a significant role.
Conventional investment property mortgage rates are typically one percentage point or more above rates for primary residences. With 30-year fixed-rate home loans at 6.64% as of February 8, you can expect to pay at least 7.64% on a 30-year, conventional investment property mortgage.
Note that other types of investment property loans can be several percentage points higher — up to four or more in some cases. This means current investment property mortgage rates could approach double digits, depending on the lender and loan type.
For example, residential transitional loans, also called fix-and-flip or bridge loans, are typically at least two percentage points or more above traditional mortgage rates, according to American Association of Private Lenders vice chairman Anthony Geraci. For context, here are where current mortgage rates stand:
Where investment property mortgage rates are headed
Mortgage interest rates remain elevated compared to just a few years ago. Rates hit historic lows in 2021 and a 20-year high just two years later, when the average 30-year fixed-rate mortgage approached 8% in October 2023.
While average mortgage rates continue to fluctuate between 6.5% and 7.5%, industry forecasters expect rates to remain elevated for the near future, ranging from 6% to 7% throughout 2024.
“We expect the 30-year fixed-rate mortgage rate to average 6.7% in 2024 and 6.2% in 2025,” said Fannie Mae’s Economic and Strategic Research Group in its December 2023 commentary.
Investment property mortgage “rates will generally follow the overall interest rate environment, said Geraci. “In the near term… if rates stay the same, ours should as well.”
Factors affecting your rate for an investment property
Investment property mortgage lenders will weigh multiple factors to determine your creditworthiness as a borrower and to assign an interest rate to your loan. Some lenders may place more value on your credit scores and income, while other loan types more heavily weigh the property’s expected cash flow.
- Credit scores: As with most loans, your credit scores directly impact your rate. While you can get a conventional investment property loan with a 620 credit score (720 if you have over six properties financed, including your home), you’ll qualify for lower rates if your scores are above the minimum.
- Down payment: The minimum down payment for a conventional investment property mortgage is 15%; however, you may need to put up to 25%, depending on your credit score and the property. Regardless of the minimum, a higher down payment can decrease your quoted rate.
- Debt-to-income (DTI) ratio: Conventional investment property mortgage lenders will look at your DTI ratio to help determine your rate. The lower the ratio, the better the interest rate you’ll qualify for.
- Interest rate type: They can be fixed or adjustable. Typically, interest rates on fixed-rate mortgages are higher than adjustable-rate loans.
Comparing investment property mortgage rates today
To get a sense of the cost of financing at current investment property mortgage rates, here’s a look at a $250,000, 30-year fixed-rate loan. As illustrated, a single percentage point difference significantly impacts the monthly payment and total loan costs.
A mortgage calculator can help you crunch the numbers on an investment property you’re considering.
| Interest rate | 7.64% | 8.64% | 9.64% |
|---|---|---|---|
Monthly principal, interest | $1,772 | $1,947 | $2,127 |
Total interest paid | $387,943 | $450,971 | $515,979 |
Total loan cost | $637,943 | $700,971 | $765,979 |
How to qualify for a lower investment property mortgage rate
- Shop around and compare loan options. Since investment property mortgage rates vary by lender type, it pays to do your research and get preapproved. Look into various loan types and request quotes from several of the best mortgage lenders.
- Improve your credit scores. The higher your credit scores, the lower your interest rate offers. Know where you stand before applying for a loan — your bank or credit card issuer may offer free score tracking. Increase or maintain your scores by making timely payments and avoiding new credit.
- Lower your debt-to-income (DTI) ratio. Paying down debts (and increasing your income) can lower your DTI ratio and unlock lower rates.
- Increase your down payment. You’ll qualify for a better rate if your down payment exceeds the minimum requirement.
- Consider term lengths and rate types. When getting loan estimates, review your options for the mortgage terms (such as a 15-year or 30-year loan) and interest rate type (fixed or adjustable). Shorter terms usually carry lower rates, and adjustable rates typically start lower than fixed APRs.
For some investment loan types, your experience as an investor will also come into play. “The more experienced track record, the more negotiating power you will have,” said Geraci.
If you’re a first-time real estate investor, that doesn’t mean you won’t qualify for a loan.
“You have to start somewhere,” said Geraci. “If this is your first ‘buy,’ understand that the rates will be high unless you're putting down a significant down payment.” If you plan to purchase multiple investment properties in the future, your first transaction will pave the way to better mortgage deals. “With greater experience comes cheaper rates,” he added.
Types of investment property mortgages
As a real estate investor, you have multiple paths for financing investment properties. Whether this is your first rodeo or you've been around the block a few times, explore your available loan options to know which meets your current needs.
| Type | The basics | Best for |
|---|---|---|
Conventional investment property loan |
| First-time investors and borrowers with a strong financial profile |
Portfolio investment property loan |
| First-time investors and borrowers needing flexible qualifications, such as self-employed buyers and small business owners |
Debt-service coverage ratio (DSCR) loan |
| Experienced investors and borrowers who don’t qualify for conventional loans or need flexible requirements |
Hard money loan |
| Fix-and-flippers and borrowers needing short-term financing |
Non-warrantable condo loan |
| Investors buying a non-warrantable condo |
Investment property loans vs. conventional loans
Guidelines for investment property loans can vary widely depending on the loan type and lender. For example, portfolio loans and debt-service coverage ratio loans don't follow rules established by Fannie Mae and Freddie Mac. As a result, they have unique terms and flexible qualifications.
However, conventional investment property mortgages are structured similarly to conventional loans for primary residences.
| Conventional investment property loan | Conventional primary residence loan | |
|---|---|---|
Widely available? | Less so | More so |
Eligible properties | Investment properties (one to four units) | Primary residences (one to four units) |
Do conforming loan limits apply? | Yes | Yes |
Minimum down payment | 15% to 25% | 3% for some programs |
Mortgage insurance required? | No | Yes, if putting less than 20% down |
Mortgage interest tax deduction | Yes | Yes |
What qualifies as an investment property?
It’s worth noting that the term “investment property” is sometimes used to refer to several property types, including second residences, vacation homes and multi-family properties in which the owner lives.
However, in the eyes of lenders, an investment property is not lived in by the owner — even for part of the year or in just one unit. A residential investment property is owned to generate a profit through renting or selling it.
Related >> Second home mortgage rates
The pros and cons of investment property mortgages
| Pros | Cons |
|---|---|
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With these loans, you can purchase and finance multiple income-producing properties. You can also use the property's rental income to help qualify for the mortgage. Some options, such as debt-service coverage ratio (DSCR) loans, look at the property’s cash flow rather than your personal income.
However, because investment property loans are riskier for lenders, they carry stricter guidelines, such as a 15% to 25% minimum down payment and higher cash reserve requirements.
Additionally, interest rates are higher than primary residence home loan rates. Some investment property loans, such as portfolio and DSCR loans, have higher rates than conventional investment property loans. Some also carry shorter loan terms, high fees and prepayment penalties.
Frequently asked questions (FAQs)
Lenders consider investment property mortgages riskier than loans for primary residences or second homes. To offset the increased risk, mortgage lenders charge higher interest rates.
Mortgage rates for investment properties can be fixed or adjustable. When comparing loans, review both rate types to see which provides the better deal and is more befitting your budget.
Having credit scores above the lender’s minimum can qualify you for a better interest rate. Note that some investment property loan types, such as conventional mortgages from national banks and portfolio loans from community banks, may emphasize your credit scores more than other investment property mortgage types.
Yes, you can negotiate mortgage interest rates, terms and fees. It’s ultimately up to the lender whether they will adjust their rates and terms, but you can improve your chances by knowing what your lender is looking for and by having loan estimates from several lenders to use during negotiations. High credit scores and a large down payment help, too.
