Though buying an investment property and getting it on the market to produce an income has several component parts, arranging for financing is often at the top of the list. An investment property mortgage with a low interest rate boosts the cash flow profits generated by the property for years to come, while offering secure financing from a world class lending institution.
Investment Properties and Mortgages
When buying an investment property, it’s likely you’ll need a mortgage.
There are three traditional mortgage options for investment property, as summarized by Zillow:
#1 Owner-Occupied Mortgages are mortgages for people who will live in the home as their primary residence. The owner must move into the home within 60 days, then stay there for at least a year. After a year, however, the owner can use the home as an investment property.
#2 Second-Home Mortgages are for people buying a home they intend to use as a second home, such as vacation property. Lenders prohibit rental of a home financed with this type of mortgage. If you rent the home out, the lender can call the loan due and the balance payable in one lump sum.
#3 Investment Property Mortgages are mortgages on non-owner occupied properties. These mortgages are intended for properties that will be rented out. And, you can usually change this home into your primary residence without any changes to the loan itself.
Investment Property Mortgage Rates
Typically, both mortgage rates and down payments are higher for investment properties. This is because lenders have more risk with an investment property, since it must be tenant occupied to produce a profit, and because rental homes may lose value more quickly than owner occupied primary residences.
Some of the different things that may impact your rate include:
- Your debt-to-income ratio and credit score.
- The property’s rental history.
- Your experience as a real estate investor.
Types of Investment Property Mortgages
Typically, investment property mortgages fall into one of two different categories – those that “conform” to Freddie Mac’s and Fannie Mae’s rules, and those that don’t.
You will need a non-conforming mortgage if you are over the lending caps for the investment property.
For a single home, Fannie Mae and Freddie Mac’s mortgage caps for an investment property are $424,100 for a single-family home, up to $815,650 for a building with four units. These values can change depending on the area.
Finding the Best Mortgage Rates for Investment Properties
If you are interested in getting the best mortgage rates for an investment property, you want to do the same things you would do for a traditional mortgage, including:
- Bolstering your credit score.
- Keeping other debts to a minimum.
- Save for a larger down payment.
Of course, a business plan and prior experience always help in terms of securing a better interest rate for investment properties.
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Marimark Mortgage serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.