Best Investment Property Mortgage Rates

If you’re thinking of purchasing an investment property, you may want to know more about how an investment property mortgage differs from a regular mortgage. Investment property mortgages are similar to traditional mortgages, but are often accompanied by higher interest rates and stricter eligibility requirements to borrowers. This is because lenders often view investment property mortgages as riskier than traditional mortgages, since borrowers are less likely to default on a mortgage for their primary residence.

In this article

    Current mortgage rates

    According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current refinance average rates for a 30-year, 15-year fixed and 5/1 adjustable-rate mortgage (ARM) refinance rates among others.

    Product Interest Rate APR
    30-Year Fixed Rate3.180%3.360%
    30-Year FHA Rate2.990%3.820%
    30-Year VA Rate2.760%2.930%
    30-Year Jumbo Rate3.190%3.270%
    20-Year Fixed Rate3.040%3.200%
    15-Year Fixed Rate2.440%2.690%
    15-Year Fixed Jumbo Rate2.410%2.470%
    5/1 ARM Rate3.090%4.030%
    7/1 ARM Rate3.160%3.840%
    7/1 ARM Jumbo Rate3.230%3.790%
    10/1 ARM Rate3.310%3.990%

    Rates data as of 4/13/2021

    Best investment property mortgage rates of 2021

    Best investment property lenders of 2021

    Lender30 Year Fixed APREligibility CriteriaKey Benefits
    Rocket Mortgage3.42%620Flexible options and easy application
    Better MortgageVaries620Streamlined application and no commission fees
    New American Funding3.18%620Wide variety of mortgage types
    Navy Federal Credit Union2.34%variesLow rates and no prepayment penalties
    PNC BankVaries620Online savings tools and resources
    SoFiVaries660Easy application and competitive pricing
    Guaranteed RateVaries580Neighborhood data and local experts

    Best for online application – Rocket Mortgage

    Rocket Mortgage takes the stress out of applying for a mortgage with a quick and easy online application process.

    J.D. Power Rating
    5/5
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.4 / 5.0
    close
    SimpleScore Rocket Mortgage 3.4
    Perks 4
    Credit Impact 4
    Customer Satisfaction 5
    Product Variety 3
    Fees 1

    It offers a variety of different investment property mortgage options, including fixed mortgages, adjustable mortgages, FHA and VA loans. Its online application makes it easy to start an investment journey in real estate, no matter what kind of mortgage you need.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    Best for preapproval – Better Mortgage Company

    Borrowers can apply entirely online and can be preapproved in as little as three minutes.

    J.D. Power Rating
    N/A
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore Better Mortgage Company 3.8
    Perks 2
    Credit Impact 5
    Customer Satisfaction N/A
    Product Variety 3
    Fees 5

    Better Mortgage prides itself on reinventing the mortgage industry to streamline the application process, eliminating unnecessary fees and extras steps so that the mortgage application process is as painless as possible. The lender features no commission, instant loan estimates and a simple, transparent application process.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    Best for loan options – New American Funding

    If you’re looking for options when it comes to an investment property mortgage, New American Funding won’t disappoint

    J.D. Power Rating
    N/A
    Min. Credit
    500
    Min. Down Payment
    3%
    SimpleScore
    4 / 5.0
    close
    SimpleScore New American Funding 4
    Perks 4
    Credit Impact 4
    Customer Satisfaction N/A
    Product Variety 5
    Fees 3

    This lender offers a wide variety of different types of home loans to fit your needs. These include 30-year fixed-rate mortgages, 15-year fixed-rate mortgages, VA loans, FHA loans, conventional loans, and others. This gives you the option to tailor your loan to fit your specific needs, depending on your age, income and personal history.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    Best for service members – Navy Federal Credit Union

    Navy Federal Credit Union is a not-for-profit credit union that serves members of the armed forces, veterans and their families, including individuals serving with the Army, Marine Corps, Navy, Air Force and Coast Guard.

    J.D. Power Rating
    5/5
    Min. Credit
    Not Specified
    Min. Down Payment
    0%
    SimpleScore
    3.4 / 5.0
    close
    SimpleScore Navy Federal Credit Union 3.4
    Perks 4
    Credit Impact 4
    Customer Satisfaction 5
    Product Variety 3
    Fees 1

    This lender offers 15-year conventional fixed-rate mortgages for investment properties. The mortgage requires a 25% down payment, which may be higher than some other lenders. Investment property mortgages from Navy Federal Credit Union feature no prepayment penalties, so you can pay off your loan any time you like. And if you already have an existing investment property mortgage, you may be eligible to refinance through this lender.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    Best for customer service – PNC Bank

    PNC Bank offers a variety of investment property mortgages, including fixed-rate mortgages, adjustable-rate mortgages, jumbo loans, FHA loans, VA loans and specialized loans.

    J.D. Power Rating
    3/5
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    4 / 5.0
    close
    SimpleScore PNC Bank 4
    Perks 5
    Credit Impact 4
    Customer Satisfaction 3
    Product Variety 5
    Fees 3

    Fixed-rate and adjustable-rate mortgages have terms between 10 and 30 years, with down payments as low as 3% and loan amounts up to $510,400. Jumbo loans have terms between 15 and 30 years along with a variety of different payment options. PNC also offers excellent customer service, with a variety of educational and savings tools customers can use to understand their finances, stick to a budget and save money over time.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    Best for low rates – SoFi

    While SoFi may have made a name for itself through its student loan refinancing services, this lender also offers a variety of other products, including investment property mortgages.

    J.D. Power Rating
    N/A
    Min. Credit
    660
    Min. Down Payment
    10%
    SimpleScore
    3.5 / 5.0
    close
    SimpleScore SoFi 3.5
    Perks 2
    Credit Impact 5
    Customer Satisfaction N/A
    Product Variety 3
    Fees 4

    SoFi features extremely competitive rates, along with the option to prequalify and an easy, stress-free application process. Depending on your financial situation, you may be able to qualify for a mortgage with as little as 10% down. SoFi offers 30-year, 20-year, 15-year and 10-year fixed mortgages.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    Best for customer satisfaction – Guaranteed Rate

    Guaranteed Rate offers a variety of different kinds of mortgages, including 30-year fixed rates mortgages, 15-year fixed rate mortgages, adjustable rate mortgages, jumbo loans, FHA loans, VA home loans and interest only mortgages.

    J.D. Power Rating
    N/A
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore Guaranteed Rate 3.8
    Perks 3
    Credit Impact 3
    Customer Satisfaction N/A
    Product Variety 5
    Fees 4

    Guaranteed Rate is a good choice for an investment property mortgage if you’re looking for a lender with excellent customer satisfaction ratings. The lender claims that 96% of customers would recommend Guaranteed Rate to their friends and family. Guaranteed Rate also features real-time neighborhood data, trusted local experts, and borrowers can apply online or in person.

    Note: The lender information (Min. Credit Score and Min Down Payment) included refers to a conventional loan. For more information on investment property mortgage loans, please visit the lender site.

    What is an investment property mortgage?

    Investment property mortgages are mortgages that individuals take out on properties that they plan to rent rather than live in. These residences are known as investment properties. Investment property mortgages tend to have higher interest rates than traditional mortgages, and they may have stricter eligibility requirements. This is because investment properties present more of a risk to potential lenders, since property owners are more likely to stop payments on an investment property mortgage than on the mortgage for the house that they actually live in. Property owners may also have trouble paying an investment property mortgage if they struggle to find tenants to rent the house or apartment.

    Investment loan pros and cons

    There are a number of good reasons to buy investment property with an investment loan, and there are also some reasons you may want to think twice about doing so.

    Some of the pros for buying investment property with an investment loan include:

    • Flexible lending parameters for the size and type of property — You can get an investment loan for different types and sizes of properties. If you want to buy an entire apartment building and can meet the requirements for approval, for example, you can. That’s not always possible with a regular mortgage loan, which are generally geared toward single-family houses or duplexes. In other words, these loans open up more options for the types of property you purchase.
    • Option to take out multiple loans — You can easily have two, three or four investment property loans at once if a lender will approve you. However, you can’t usually have multiple purchase loans in your name for single-family home purchases that you’d be expected to live in. The only way this is possible is with an investment property loan.
    • Potential profit from the investment — Without a property loan, you’d have a hard time getting funding for an investment property. You’d probably have to pay cash for your investment. With the help of an investment loan, you have the option to buy an investment property and make a profit from the rental, leasing or sale of your investment property.

    There are also a few cons to investment property loans. These include:

    • Stricter lending parameters — There’s a higher risk of default with investment loans, so you’ll have to meet the strict lending requirements for an investment loan. That could mean a higher credit score, more cash in your reserves or a number of other requirements.
    • Higher interest rates — Investment loans come with higher interest rates due to the increased risk to the lender. In turn, you’ll pay more on the interest for an investment property loan. This isn’t ideal for maximizing your profits.
    • Higher down payment — Most investment property loans require you to put down a hefty sum of cash for your loan. While you may be able to get away with 3.5% on some home purchase loans, you’ll likely have to cough up 25% to 30% or more to obtain an investment property loan. This can put these loans out of reach for some buyers.

    The tax benefits of investment properties

    Investment property owners could help you reap big benefits during tax season. The IRS notes few deductions that could add up in your favor if you own an investment property or two, including rental property repairs, maintenance, depreciation and property tax. You may also qualify for write-offs on necessary expenses for your property, such as advertising or listings, insurance and utilities. Writing off these, and other investment property expenses, could total up to $25,000 in tax deductions if you’re lucky. 

    Investment property owners may also deduct travel expenses that were paid to handle repairs. You’ll be able to deduct gas, meals, shipping and even tips paid on meals or services. Just make sure all travel expenses meet the criteria outlined in the Travel, Gift and Car Expenses outlined by the IRS. 

    You’ll need a few documents to accurately document your deductions. Be sure to keep copies of receipts from any upkeep or repairs, and keep all financial records of your rental income, too. The more paperwork you have, the better — just in case you’re audited.  

    The IRS does note, however, that tax deductions don’t apply to rental improvements or upgrades. You’ll see a return on your investment through the depreciation deduction instead, or you can use Form 4562 to file for any exceptions.

    If you face any rental losses, you can also deduct up to $25,000 when it’s tax time. You’ll just need to own 10% of the property and handle the majority of the rental management, such as new tenants and leases.

    Why are interest rates higher on investment or rental properties?

    Interest rates are higher on investment properties because the risk of default is greater. There’s a gamble when buying an investment property — you’re banking on it making enough money to cover the costs. That doesn’t always happen, and buyers can’t always afford to carry the properties long term if they remain unoccupied or unsold (in the case of flips), which means you’ll pay more for the privilege of taking out this type of loan.

    This includes a higher rate on your loan. Owner-occupied properties have a much lower risk of default, which is why it’s safer for lenders to offer lower interest rates. Lower risk equals lower rate. Higher risk equals higher rate.

    How should I choose the right investment property mortgage?

    Finding the right investment property mortgage will depend on your financial situation and what loans you qualify for. In general, you should look for mortgages with low interest rates and few fees. If you plan on buying a multi-unit property and living in one of the units, you may also qualify for an FHA loan or a VA loan, as long as the property has a maximum of four units.

    Do you have to put 20% down on an investment property?

    No — you won’t have to put 20% on an investment property. You’ll probably have to put down more than 20% to get your loan approved. If you’re buying a single-family residence as an investment, you may be able to find a lender that lets you put down 15% to 20%, but if you’re trying to buy a multi-family unit, expect to cough up at least 25% to 30% as a down payment to get approved.

    This is again because the risk to the lender is greater on certain types of investment properties. They aren’t always as quick to sell or be rented out as many investors would hope, making it easy to get buried under an investment you can’t afford.

    Other financing for investment properties

    Conventional loans

    If you’re buying a single-family home as an investment, you may be able to get a conventional loan to fund the purchase of the property. You’ll likely have to put more down to obtain a conventional loan on an investment property, though, and your debt-to-income ratio will also factor in like it did when you purchased your home. Keep that in mind when you’re considering this route.

    Fix or flip loans

    If you’re planning to flip a home after updating and rehabbing it, you may be able to get a fix-and-flip loan. This is a short-term loan that allows you to fund renovations before putting the home back on the market as quickly as possible. This type of loan isn’t appropriate for buyers who want to purchase and then lease out apartments or duplexes. It’s limited to flippers who buy cheap and sell high after fixing up the property. These are basically hard money loans that are secured by the property, and specialized lenders or some crowd-funding platforms offer them.

    Use your home equity

    Do you own a home with lots of equity? You can use the equity in your home as a source of funding for an investment property. Most lenders will let you borrow up to 80% of your equity, so if you’ve paid down your home significantly and want to purchase an investment property with a price tag that fits in that range, this is an option. You can tap into your equity via a cash-out refinance or home equity loan, which most traditional lenders offer.

    Check Your Home Equity Loan Rates

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    We welcome your feedback on this article and would love to hear about your experience with the investment property mortgages we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Methodology

    SimpleScore

    We’ve created the SimpleScore to help you objectively compare products and services here at The Simple Dollar.

    Our editorial team:

    • Identifies five factors to compare across each brand
    • Determines the rating criteria for each factor
    • Calculate an average of those five factor scores to get one SimpleScore

    We break down each of these five factors and their rating criteria for our review of the best mortgage companies.

    Why do some brands have different SimpleScores on different pages?

    Some brands like Bank of America, Wells Fargo, and Chase have different SimpleScores because they offer more than one financial solution — like home loans, auto loans, personal loans and more.

    For instance, in our Bank of America Mortgage Review, we give the company a 3.8 out 5 based on our five rating factors for mortgages. In our Bank of America Auto Loans Review, we give the company a 4.4 out of 5 based on our rating factors for auto loans. By tailoring our SimpleScore to each financial solution, we’re able to give you a more accurate view of a brand’s services and how it compares to competitors’ services.

    Perks

    Mortgage lending companies that provide more perks receive a higher score from us.

    Hard/Soft credit checks

    We know that credit checks affect your score –– that’s why we favor companies that offer soft credit checks or hard credit checks when you want to see your pre-approval rates.

    Customer satisfaction

    We use the J.D. Power 2019 Mortgage Origination Satisfaction Study℠ to find out how customers rate their experience with each company. (If a company is not included in J.D. Power’s study, we skip this rating factor and average the remaining factor scores.)

    Product variety

    Mortgage lenders that offer more products for their home loans are given higher scores.

    Fees

    Fees can add up fast. Companies that don’t require as many fees for your home loan receive a higher score with us.

    Margaret Wack

    Contributing Writer

    Margaret Wack writes about personal finance, health, wellness, arts and culture, among other topics.

    Reviewed by

    • Angelica Leicht
      Angelica Leicht
      Mortgage Editor

      Angelica Leicht is an editor at The Simple Dollar who specializes in mortgages, mortgage refinancing, home equity loans, and HELOCs. She is a former contributing editor to Interest.com and PersonalLoans.org.