# is the rate different for rental property/primary residence?

July 09 2010 - Alexandria
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• Contributions:9181
The rates are the same but there is a large fee for investment property. If you are looking at a rate of 4.375% for a primary home loan, then you can get the same rate for investment property but will pay 1.75% - 2.00% in discount. If you dont want to pay that fee it can be absorbed in the rate by paying aprx .500 higher rate, or 4.875% if 4.375 is the basis.
July 09 2010
• Contributions:47
At the end of the day, the direct answer is yes.  In order to keep the loan fees down to either zero points or to a 1 point range, you will typically find Non-Owner Occupied rates range from .325% to 1.0% higher than Owner-Occupied loan rates with similar loan fees.  The down-payment percentage will also determine the loan costs and thus the rate.
October 30 2010
• Contributions:293
All these post didn't exactly give you the correct answer, allthough the first post had it cost to correct. The actual interest rates are the same, that said, there are risk based pricing overlays specific ti investment properties.
With a 20% down payment the add'l risk cost is 3.0 points or  3 percent of the loan amount. With a down payment of 25% the add'l risk cost is reduced to 1.75% or points.
To minimize these additional costs most buyers arer more then willing to accept a higher interest rate, in doing so the loann officer actually pays a portion of these fees because the commission payback is higher.

The numbers really work best for an investor if they can put 25% down payment. The reason for this is when you factor in the lower risked based costs of 1.75% vs, 3.0% it actually saves more then the 1.25%.
Lets assume you have a sales price of \$225,000 a DP of 20% would be \$45,000 and the 3% cost would be \$5,400 total outlay of \$50,400

Now lets looks at the 25% down payment.. 225,000 x 25% = 56,200
1.75% = \$2,953 = total outlay of 59,203  What this shows is that the extra 5% down payment which you would assume costs 11, 200 more, actually costs on \$9,000 more becaus eof the lower risk factor. Best of luck
October 28 2010
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October 28 2010
• Contributions:470

Any way you slice it, rates are much higher on investment property's-  Fannie Mae / Freddie Mac have huge overlays when it comes to investment properties.  Rates today are still excellent -  A primary single family home is priced at say 4.25% and an investment property on a similar home is priced at say 4.875%.

October 28 2010
• Contributions:11
October 28 2010
• Contributions:219
Interest rates for investment properties are always higher, due to the higher risk involved with doing that type of mortgage.

The lender looks at it like this...

If you get into financial trouble, your more likely to default on the investment home and try and save the home you live in.

Hope this helps...
July 19 2010
Clay's right, almost any rate is attainable (down to a minimum set by the lender), but it is a matter of how much you are willing to pay for it.
July 09 2010
I wouldn't say it's a point higher... lately I've been able to quote about 3/8 higher than a primary... So it's really good!
July 09 2010
• Contributions:7435
It also requires a higher down payment. .... Happy funding, Rudi
July 09 2010
• Contributions:413
Yes it is about a point higher for rental properties than for your primary residence.  The tax man also often charges you higher tax rates since you are not eligible for a home owners exemption.  You also have to put more money down on a investment property then the one you live in. They calculate that you are more likely to default on a rental property then one you live in. Hope this helps.
July 09 2010
Yes it is.  Investment property will typically have a higher interest rate than a primary residence when comparing the same loan programs.
July 09 2010

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October 30 2010
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