Rentals in Milwaukie>Question Details

Rob, Home Buyer in Milwaukie, OR

What is the average interest rate for a 30 yr loan on a house that will be used as rental income?

Asked by Rob, Milwaukie, OR Sat Jul 9, 2011

If I wanted to purchase a home and rent it out, how much higher is the interest rate than the current market rate? Our credit is very good.

Help the community by answering this question:

Answers

5
Gregorio Denny’s answer
The rate is the same for an investment property, what is different is the cost to acquire that rate. If you assume that you could get a 30 year mortgage at 4.375% with no points on a primary residence with 20% down, you would have to pay 3 points on that same property if it was an investment property. If you put 25% down, then you would pay 1.75 points. What people usually do to offset the points is to take a slightly higher rate that can absorb the extra fees; this is why the rates seem as if they are higher on an investment property.

Hope that helps. For more info on how mortgage rates are priced, please read this blog entry: http://www.trulia.com/blog/gvd/2010/08/understanding_interes…
1 vote Thank Flag Link Sat Jul 9, 2011
It will depend on your credit rating, how many homes you own and have loans on and that type of thing. I think you would do best to find out what your actual rate will be with your lender.
0 votes Thank Flag Link Sun Jul 10, 2011
You may be able to get an idea using Dan's methodology (below) to extrapolate from the average interest rates for a conventional fixed-rate mortgage as of July 1, 2011. That rate was 4.51 percent.

The above rate was published by the Federal Reserve System and, although it's not disclosed in the Federal Reserve release, I suspect that rate applies to owner-occupied properties.

For more interest rate information, visit: http://www.bybryson.com/frames/interest.htm
Web Reference: http://www.bybryson.com
0 votes Thank Flag Link Sat Jul 9, 2011
That is a loaded question Rob.

If a rate is quoted so must an APR and the remaining terms. As with any loan there are many variables besides your credit. If you are considering purchasing a rental speak with a trusted mortgage professional to know ahead of time what you can qualify for.

Best of luck.
0 votes Thank Flag Link Sat Jul 9, 2011
Rob,
Looking at one of my rate sheets there is a 1.75 add to the fee if you are at 75% loan to value are less and a 3.0 add to the fee if you are more than 75% loan to value up to 80%.
In terms of how this translates, add .375% -.5% to a owner occupied rate with 25% or more down and add .5% -.625% for 20% down. So for example 4.5 for owner occupied becomes 4.875% or 5.00% for investment properties.
You will also need to have plenty of equity in your current home to be considered. Lenders are wary of buy and bail scenarios where people buy a second home, move in and quit paying on their first home.
I hope this helps.
0 votes Thank Flag Link Sat Jul 9, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer