The Big Picture On Loans On Rental Property:

    • Getting loans for rental property allow investors to take advantage of increased capital, leverage, improved cash flow, and more.
    • There are many potential sources of property loans, including conventional, personal, hard money loans, and seller financing. 
    • Being creative while coming up with ways to get rental property loans can secure lower interest rates and down payments, making the ownership of investment properties more achievable. However, it is best to consider your overall investment strategy, real estate goals, living situation, potential cash flow, and ability to pay off the loan to see if it fits with your preferred strategy. 
current interest rates for investment property loans

Wondering what interest rates you can expect to pay on loans for rental and investment properties?

It depends on your credit score, of course, and on your other risk factors as a borrower. But it also largely depends on what type of investment property loan you borrow.

 

Importance Of Loans In Rental Properties

The average US house costs $420,800 today. I’m not sure about you, but I don’t have that kind of money under my couch cushions.

Having access to loans allows you to invest in rental properties that would otherwise be out of your budget.  Aside from that, here are other benefits of loans for rental property investment:

    • Leverage: Allows investors to leverage their investment, potentially increasing return on investment (ROI).
    • Diversification: Enables the purchase of multiple properties, spreading risk across different investments.
    • Cash Flow: Properly structured loans can help maintain positive cash flow, covering expenses and generating profit.
    • Tax Benefits: Interest payments on loans for rental properties are often tax-deductible.

Now, here are rough ranges for today’s mortgage rates on rental properties, depending on the type of financing you get.

 

Cheat Sheet: Mortgage Interest Rates on Rental Property

We get into detail on all of these loan types below — which you should read, you lazy bum — but here’s a quick comparison chart for mortgage rates for investment properties today:

Owner-Occupied Mortgages for House HackingConventional Mortgages for Investment PropertiesLong-Term Portfolio MortgagesShort-Term Fix & Flip LoansPrivate Lenders & Seller Financing
Where to Check RatesTry CredibleTry CredibleTry Kiavi, Visio, or Forman LoansTry Kiavi, Forman Loans, Civic, or New SilverAsk people you know!
Loan to Value (LTV)80-97%80-97% owner-occ, 75-80% investorsUp to 80%Up to 90% + 100% of renovation costsNegotiable
Credit Score500+620+600+575+No minimum
Debt-to-Income Ratio (DTI)28% - 36%28% - 36%No income docs requiredNo income docs requiredNo income docs required
Cash Reserve Requirements6-12 mos.' payments6-12 mos.' payments0-6 mos.' payments0-6 mos.' paymentsNone
Interest Rates15-Year: 6.47%; 30-Year: 7.22%15-Year: 7.23% - 8.49%; 30-Year: 7.99% - 9.49%7.375% - 9.99% (ARMs) / 7.49% – 10.99% (fixed)8.49% – 13.99%Negotiable
Repayment Term15 or 30 Years15 or 30 Years3/1 ARM, 5/1 ARM, 7/1 ARM, or 30-year fixed 6-18 MonthsNegotiable (usually a balloon)
Time to Funding30-60 Days30-60 Days10-30 Days7-30 DaysNegotiable
Loan Limits$50,000 - $1,867,274 (multifamily)$50,000 - $1,867,274 (multifamily)$75,000 - $2M$75,000 - $2MNegotiable
Report to Credit Bureaus?YesYesNoNoNo
Where to ApplyTry CredibleTry CredibleTry Kiavi, Visio, or Forman LoansTry Kiavi, Forman Loans, Civic, or New SilverN/A

As you can see, loans for investment properties cost more than homeowner mortgages. But that doesn’t mean you can’t take out an owner-occupied mortgage for a rental property.

 

What Are Investment Property Mortgage Rates?

You can finance investment properties in many ways. So, any discussion of investment property loan rates has to start by distinguishing the different ways to finance rental properties.

Creative strategies such as owner financing and wraparound mortgages aside, get comfortable with the following ways to fund rental properties.

 

Types of Investment Property Mortgage Loans

If you plan to house hack, you can use homeowner financing. That includes not just multifamily house hacking but also live-in flips, housemates, ADUs, Airbnb house hacking, renting out storage space, even hosting foreign exchange students like Deni did.

Alternatively, you can take out an investment property loan from a conventional mortgage lender. Or borrow a short-term hard money loan, or a long-term portfolio loan, or take out a commercial loan on an apartment building with five or more rental units.

For that matter, you can even use unsecured business lines of credit or business credit cards to finance rental properties. I’ve done it myself.

No matter how you plan to finance an investment property, plan on paying higher interest rates than a homeowner mortgage loan. Why? Because borrowers default on investment property mortgages before they default on their home loan. That makes the risk higher for the mortgage lender, and all lenders price their loans based on risk.

For each of the most common financing options, we’ll cover today’s investment property mortgage rates. And since we’re such big fans of house hacking, let’s start with homeowner mortgage rates.

 

Owner-Occupied Multifamily Loans (House Hacking)

Homeowners get the cheapest mortgage loans available. So how can you take out an owner-occupied mortgage loan for a rental property?

You could buy a property with a homeowner mortgage, move in for a year, then move out and keep it as a rental. But there’s a better strategy to build your real estate portfolio faster: house hacking.

When you house hack a multifamily property, you buy a 2-4 unit building and move into one of the units. You rent out the other units, whether on a long-term lease agreement or as short-term rentals on Airbnb. That rental income ideally covers your mortgage payment, and maybe even your repair and maintenance costs.

Best of all, you can use a traditional homeowner mortgage. And after living there for a year, you can move out, either to do it all over again or move into a single-family home.

Other ideas for house hacking include:

    • Finished basements or lofts which can be rented out separately
    • Additional dwelling units on a property (for example, guest houses)
    • Multi-bedroomed homes where you can rent out extra bedrooms to tenants

Beyond offering lower interest rates, you can also score a lower down payment with an owner-occupied loan. Perhaps as low as 3%, when you house hack with a Fannie Mae loan.

 

Today’s 15-Year Mortgage Rates

Conventional 15-Year Average Fixed Interest Rate: 6.29% 

52 Week Low for Average 15-Year Conventional Mortgage Rates: 4.50%

52 Week High for Average 15-Year Conventional Loan Rates: 8.13%

Today’s 30-Year Home Loan Rates

Conventional 30-Year Average Fixed Interest Rates: 6.99%

52 Week Low for Average 30-Year Conventional Mortgage Rates: 5.63%

52 Week High for Average 30-Year Conventional Loan Rates: 9.13%

Check Current Rates At: Credible*

Pros
    • Lowest possible interest rates for investment property loans
    • Lowest possible down payment for loans for investment property
Cons
    • Not scalable: most lenders only allow four mortgage loans on your credit report
    • Your tenants will live with or near you
Real estate investments? Awesome. Being a landlord? Less fun.

Learn how to earn 15-30% on passive real estate investments in one free class.

Katie earning passive income from real estate syndications

Conventional Rental Property Mortgages

Most new real estate investors think first of conventional mortgages, when brainstorming loans for investment properties. You probably worked with one when you bought your own home, so you instinctively call up the same mortgage lender.

But these lenders limit the number of mortgages allowed on your credit report. They typically stop lending to you once you have four mortgages reporting on your credit.

That makes conventional loans for investment properties a good fit for your first rental property or two, but not scalable after that.

Expect a down payment requirement in the 20-30% range for conventional loans for investment properties.

“How much higher are interest rates on investment property mortgages than homeowner mortgages?”

As touched on above, investment property loans cost more than owner-occupied mortgage loans. In general, expect to pay 0.5 – 0.75 percentage points more for investment property mortgage rates. If a homeowner loan would cost you 5%, expect to pay 5.5% – 5.75% for a rental property mortgage rate.

 

Today’s 15-Year Investment Property Loan Rates

Conventional 15-Year Fixed-Rate Loan: 5.87% – 6.95%

Today’s 30-Year Rental Property Loan Rates

Conventional 30-Year Fixed-Rate Loan: 5.8% – 8.27%

Check Mortgage Interest Rates At: Credible*

 

Pros & Cons of Conventional Rental Property Loans

mortgage for rental propertyPros

    • Lower interest: often lower investment property mortgage rates than portfolio lenders

Cons

    • Not scalable: most lenders only allow four mortgage loans on your credit report
    • Conventional real estate investor loans are reported to credit bureaus, and too many mortgages on your credit report will wreck your credit
    • They usually don’t allow mortgage loans to LLCs and other legal entities
    • Minimum credit score: most types of loan require a score of at least 620, often 660 or higher
    • Lenders verify your personal income tax returns and check your debt-to-income ratio
    • Slow to settle: minimum 30 days, typically
    • Lots of paperwork and headaches

 

Portfolio & Hard Money Loans

With conventional loans for investment properties capped at around four properties, where else can you get financing?

Portfolio lenders don’t sell your loan immediately after closing, the way that conventional lenders do. Instead, they keep the loans within their own portfolios (hence the name).

Most also offer short-term purchase-rehab loans — hard money loans — for buying and renovating fixer-uppers. So investors using the BRRRR strategy can often refinance their hard money loan into a long-term portfolio loan, with the same lender.

Portfolio lenders offer affordable and scalable real estate investor loans. As collateral-based lenders, they’re more interested in putting the property under the microscope than you as the borrower. Often they don’t even require income documentation: they calculate the property’s cash flow using DSCR instead.

Still, your credit score matters. The better your credit, the lower your interest rate and down payment, and the more lenders will consider you. While you can still potentially get an investment property loan with bad credit, start working on improving your credit for more options and cheaper loans.

Portfolio lenders generally require down payments similar to conventional lenders, in the 20-30% range.

Finally, some community banks and credit unions also offer portfolio loans for investment properties. Try calling around to compare pricing with the online lenders below.

Today’s Mortgage for Rental Property Rates

    • Adjustable Rate Mortgages (ARMs): 6.61% – 7.38%
    • 30-Year Fixed Interest Loans: 8.49% – 10.99%
    • Short-Term Fix & Flip Loans: 9.25% – 13.99%

Check Investment Property Mortgage Rates At: Kiavi, Visio, RCN Capital, Forman Loans or Lendency. In fact, you can get an instant quote from Lendency below:

 

Pros & Cons of Portfolio Loans & HMLs

Like every other type of rental property financing, portfolio loans come with their share of upsides and drawbacks.

Pros

    • Scalable: no limit on the number of mortgages
    • Don’t report to the credit bureaus
    • Allow loans to LLCs and other legal entities 
    • Fast: many can settle within 10-21 days
    • No income documentation required, for many lenders
    • Allow purchase-rehab loans

Cons

    • Sometimes more expensive than conventional mortgages (although they now offer competitive rates)
    • Decent credit required: most require a score of at least 620, sometimes 680

investment property loansWhat do lenders charge for a rental property mortgage? What credit scores and down payments do they require?

How about fix-and-flip loans?

We compare the best purchase-rehab lenders and long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

What Affects My Investment Property Loan Rate?

No matter what kind of rental property loan you take out, your credit score impacts your interest rate. Hard stop. Get serious about improving your credit score if you’re serious about investing in real estate.

Likewise, the loan-to-value ratio (LTV) of the investment property loan also affects your interest rate. This value is the result of dividing the total loan amount by the estimated value of the property, and is used for risk assessment. The less you borrow as a percentage of the property value, the less you’ll pay in interest (and sometimes closing costs).

Your cash reserves also impact your loan rate. More cash on hand helps you negotiate a lower interest rate.

Remember, lenders price their loans based on perceived risk. Lower the risk for them to lend to you if you want better interest rates!

As a final note, your debt-to-income ratio impacts your mortgage rate on conforming loans but not on portfolio loans. Portfolio lenders don’t typically look at your personal income — they calculate the property’s debt service coverage ratio (DSCR). It measures how well the property cash flows against expenses and debt.

 

Private Loan for a Investment Property

As you gain experience as a landlord and establish a track record of success, people you know might want to get on your rental investment gravy train. Private loans for rental property from individuals offer an infinite source of funding for seasoned property investors.

These loans from friends and family gives you ultimate flexibility. You negotiate the terms directly with the lender, from points and fees to interest rates to the loan term.

Investment property owners may pay higher interest rates, but you may also avoid origination points and junk fees at closing. While that doesn’t improve your monthly cash flow, it still reduces your total borrowing costs.

If they know and trust you, they may not even pull your credit report. And they likely won’t ask for income documentation either.

They don’t report on your credit, and you can scale private loans indefinitely.

But if you default, you risk damaging your personal relationships and credibility.

Private Loan Interest Rates: Negotiated between you and your lender.

Pros

    • Scalable: no limit on borrowing
    • Don’t report to the credit bureaus
    • Potentially no upfront loan fees or points added to closing costs
    • Allow loans to LLCs and other legal entities
    • Fast: you can potentially settle immediately
    • No credit requirements
    • No income documentation required
    • Flexible loan term

Cons: 

    • You need to establish a track record of success in your real estate investments before borrowing money from individuals
    • Potential for damaging your credibility and personal relationships

 

Seller Financing (Owner Financing)

When you borrow money privately, it doesn’t have to be from a friend, family member, or anyone else you know well. Why not borrow from the seller?

While they may not have thought of the idea on their own, many sellers warm to the idea of owner financing after you explain it to them in full. They hold the promissory note, and you make monthly mortgage payments to them on loan terms you negotiate.

Like other types of private financing, everything is negotiable. Many sellers don’t want to hold the note for the next 30 years, so offer them a balloon mortgage. With a balloon loan, you negotiate a earlier deadline for paying off the remaining loan balance.

Imagine the seller inherits a property outright from a family member but can’t afford to renovate the property. Instead of paying taxes and local fees for a vacant property they can’t live in or rent out, they provide you with owner financing and turn the property into a source of income.

You negotiate a 6% interest rate, with the loan amortized over 30 years, and a five year balloon payment. So you make monthly payments as if it were a 30-year fixed mortgage at 6%, but by the end of five years you need to either sell it or refinance it to pay the owner the rest of their balance in full.

Private Loan Interest Rates: Negotiated between you and your lender.

Pros

    • Scalable: no limit on borrowing
    • Don’t report to the credit bureaus
    • Allow loans to LLCs and other legal entities 
    • Fast: you can potentially settle immediately
    • No credit requirements
    • No income documentation required
    • Flexible loan term

Cons

    • Not always available: many sellers aren’t open to owner financing

 

Other Ways to Finance Investment Properties

The more creative you get with financing investment properties, the more options you have at your disposal.

One more option in your “financing toolkit” involves opening unsecured business lines of credit and credit cards. As a real estate investor — even a part-time one — you qualify for business credit lines and cards. Check out business credit concierge Fund&Grow, which specializes in helping real estate investors open $50-250K in unsecured credit. Here’s an explanation video we hosted with them:

real estate investor credit lines

If you’re wondering how to get around cash advance limits and fees with business credit cards, they show you. Some cards even come with introductory 0% APR periods for up to 18 months interest-free financing.

Which raises another creative option: personal credit cards. I’m not saying I recommend it, I’m just saying it’s an option. I’ve done it myself, and it worked out, but only because I was able to pay off the card balances in less than a year.

Alternatively, you can use HELOCs to fund property purchases or rehab projects. That includes lines of credit secured against rental properties, not just your primary residence.

For that matter, you could use personal loans to buy or renovate investment properties. Just sayin’.

 

Investment Property Mortgage Rate FAQs

New and even intermediate real estate investors often have endless questions about financing rental properties. Here a few we see all the time:

What are investment property credit score requirements?

Investment property loans require higher credit scores than homeowner mortgages. In most cases, the minimum credit score is around 660, although a few portfolio lenders might allow borrowers with scores as low as 600.

Many conventional loan programs require credit scores of 700 or higher.

Are mortgage rates higher for investment properties?

Yes. Expect to pay 0.5 – 0.75 percentage points higher for single-family rental properties and 0.625 – 1 percentage point higher for multifamily property loans.

How are mortgage rates set for investment properties?

Like most mortgage loans, investment property interest rates are usually priced on a margin over and above some benchmark interest rate, such as the LIBOR or the Fed funds rate. For example, if a homeowner mortgage program is priced at 3 percentage points over the Fed funds rate, a rental property mortgage program might cost 3.75 percentage points above the benchmark. 

Can you get a 30-year loan on an investment property?

Yes, many conforming lenders and portfolio lenders offer 30-year mortgages, either at fixed interest rates or variable rates (ARMs).

What is the minimum down payment for an investment property loan?

Count on putting down a minimum down payment of 20% for investment property mortgages. In fact, many investment property down payments start at 25% and could be as high as 50%. 

Are there zero-down rental property loans?

No. That said, you can potentially house hack with a VA loan or USDA loan with 0% down. You can also keep those loans after moving out of a property, and convert the property to a rental. 

Are there investment property loans available with 10 percent down?

Not typically, but again, you can house hack or convert your home into a rental property, using the original owner-occupied financing. 

Is there an easier way to own an investment property?

Absolutely: invest passively in group real estate investments. Or buy fractional real estate ownership, or invest through real estate crowdfunding platforms. All are completely passive investments, with no labor or financing required on your part. 

 

Final Thoughts On Rental Property Loans

Getting loans for an investment property can be an overwhelming and tricky business. Novice real estate investors often don’t know where to start.

House hacking is an excellent springboard into rental property investing. You qualify for a primary residence mortgage, with its low interest rate and high loan-to-value ratio (LTV). But you can still buy a multifamily property, and only have to live there for a year.

Conventional mortgages also offer low mortgage rates on rental properties. But with strict caps on the number of mortgages on your credit report, these rental property loans aren’t scalable. Once you hit four mortgages, you have to look elsewhere.

If you’re serious about growing your portfolio, you’ll have to get creative in finding loans for investment properties. Consider online portfolio lenders, private lenders, and seller financing, not just traditional mortgages.

Or better yet, get creative with these clever ways to cover a down payment.

 

What are you seeing among interest rates for investment property loans? Any questions about loan for investment property rates? We’d love to hear your thoughts on loan options below!

 

Learn More, Earn More:

*Credible Disclosure: Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time.
Credible Operations, Inc. NMLS# 1681276, “Credible.” Not available in all states. www.nmlsconsumeraccess.org.

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