Investment Property Loans – Getting the best rates
Have you ever wondering why investment property loans have higher rates compared to primary residence loans? The simple answer is that banks and lending companies consider the property a higher risk since the owner does not plan to live in it. Since the owner is not occupying the property, the consensus amount lenders is that the property will not be taken care of as well, resulting in a greater risk for the lender. Investment property lenders generally have a 1% – 1.25% adder to the current mortgage rate trends. So if the current 30 year fixed rate is at 5.5%, lenders will offer investors a mortgage of 6.5% – 6.75%. It is very wise for a property investor to get rate quotes from several lenders, and start negotiating between the lenders. The reason is that some lenders consider investment property to be minimal risk, especially if you have an excellent credit score. Rates vary drastically between lenders, and with some simple steps you can acquire an investment property loan with a rate close to or within 0.25% of the what primary mortgage rates are offering.
So how can lenders offer such low rates for investment properties? Lenders can wrap up the 1.25% into closing costs, and some even reduce their fees by this amount to win over borrowers so they do not go with other lenders. So it is very wise for those seeking investment property loans to shop around, as there are very competitive rates out there.
Learn how to compare investment properties through Cap Rate or Capitalization Rate analysis.