Current investment property rates

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.

For context, the chart below shows current rates for mortgages on a primary residence:

National mortgage rates by loan type

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. 

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. This cushion varies not only by lender but also by your financial profile. A borrower with more debt, a lower credit score or both is likely to get a higher rate quoted than a borrower with better financials.

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.

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:

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:

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.

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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