Profile picture for dee105

are investment mortgage interest different than owner occupied mortage interest

  • April 11 2011 - Colebrook
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Answers (11)

Profile picture for Clearpoint

Clay is correct, your lenders are using the fact that most adjustments are rolled into the rate when in fact they do not need to be. 

  • April 20 2011
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A piece of advice, get some new lenders.
  • April 20 2011
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Profile picture for Al McCaw
Hi Clay, thank you for quoting me. Very much appreciated! It's always a welcome to have a friendly and healthy debate on Zillow.com.

Perhaps it is different in Georgia as it is in Las Vegas, NV. But just right now (8am west coast time) I just contacted 3 of my loan officers (all 3 work for 3 separate lenders and have been in the business over 20 years each) and all 3 said that there is, without a doubt, a rate difference of 0.25 to 0.75% (avg of 0.50%) regardless of the price adjustment.
  • April 20 2011
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"Slightly higher by an average of half a percent depending on credit score and financial standing."

There are no separate rates for investment properties, they are the same as owner occupied. The difference is the price adjustment, 1.75 points up to 75% LTV, and 3 points for 75.01-80% LTV.( a couple of lenders charge 2.00 @ 75 LTV and 3.25 over 75 LTV ) If you see a much higher rate than the current owner occupied rate, then the loan officer is offsetting the price adjustment in the rate. 
  • April 20 2011
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Profile picture for Al McCaw
Mortgage rates and terms for investment properties:

1. Slightly higher by an average of half a percent depending on credit score and financial standing.

2. Requires a higher downpayment for conventional loans, typically 20% to 25%. The exception: Currently Fannie Mae and Freddie Mac allows investors to buy their properties for only 10% down. (Call your realtor in your area for a list of Fannie homes. They can pull it up on the MLS and email it to you)

3. Requires an overall better financial position than the FHA borrower. For example, investor should have at least 6 months reserve of the mortgage payments in case of vacancy.

4. There may be a "hit" on investment loans, which is a fee (measured in % of the loan amount) above and beyond the origination and other fees. The hit could be half of one percent or 1% or 2%. Again, depends on the property, loan program, borrower's credit and financial status.


The only exception to the 4 items above is if the buyer of an investment property will invest in a duplex, triplex or fourplex AND live in one of the units as his/her primary residence and enjoy the rental income of the other unit(s). FHA allows this loan as if you are applying for a regular loan with only 3.5% down. One or two items of the four may apply but not all.

Please consult with your local lender for details.
  • April 20 2011
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Profile picture for S.Florida Realtor
They usually are. An investment property represents a higher risk for a lender than does an owner occupied property.
  • April 14 2011
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Profile picture for Jay Cusack
Investment interest rates are normally a little higher reflecting higher risk
  • April 11 2011
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Are you talking for federal income tax deduction purposes? If yes:

Schedule 1040 A - OO mortgage interest is an itemized deduction if your total itemized deductions on schedule A are greater then your standard deduction. If not, you use your standard deduction on the 1040 form.

Schedule 1040 E - Rental properties are calculated on schedule E so you must do the net taxable income or loss whole calculation and look at the Passive Activity Loss rules to see if you can use the losses, if any, which would include the deduction for your rental property mortgage interest.

Email me for more info if you like. Thanks!
  • April 11 2011
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In addition to the information already noted,  you will typically need to invest in a higher downpayment for an investment property.  In our area, Central Connecticut we are seeing a20 -25% down requirement for an investment property.  Best of luck

John Grady
  • April 11 2011
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Absolutely.  As Mr. Branch points out, by paying points you can get it down to the same rate, but by the same token, you could get a primary home rate down even further by doing the same thing.

Primary home loans are cheaper because when the going gets tough, people will dump investment homes before they dump their own homes.  Therefore when you do a primary home loan closing, you sign a lot of documents asserting that it really is your home, and you intend it to be.

This is not legal advice and is not intended to create an attorney-client relationship.  The post is only an opinion.  You should speak to an attorney for further information.  The poster is licensed only in CT & NY.    If this post is useful to you, please remember to upvote it.
  • April 11 2011
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 Yes and No. If the par rate for an owner occupied home is 4.75% today, then you will pay between 1.75 and 3 points for that same rate on a non owner occupied property. Most people do not want to pay the price adjustment in cash so that expense can be offset by raising the rate and the price adjustment can be offset with premium pricing. 
  • April 11 2011
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