An investment property or rental property mortgage typically carries a higher interest rate than the mortgage on an owner-occupied property, such as your main home. Despite this fact, it is still worth shopping around to find the lowest investment property interest rates. The best way to track down the best deal possible is to shop and compare your options and know what to look for.
First, gather all of the information on the property together so that you have it in front of you when you contact lenders. Useful information includes the approximate value of the property, the type of property (single-family, condo, duplex or four-unit apartment building, etc), the estimate of the current mortgage balance and the current interest rate, if it is a refinance. Once you have this information, you can start contacting mortgage lenders.
Contact at least three mortgage lenders to gather information on establishing a new investment property mortgage or refinancing an existing one. Let the representative know up-front that it is an investment property and the type of property it is. They will also need the purchase price or current value of the home and any existing balance on the mortgage.
The representative will provide you with three pieces of information. They will provide the best rate for investment property interest they can offer, the annual percentage rate (APR) and the estimate of closing costs. You should write down all three pieces of information, and if possible get an itemized list of the closing costs.
Once you have all of the information from three or more mortgage lenders, then you are ready to evaluate the information. Place the information side-by-side, so you can go line-by-line and compare the options. First, make sure you are comparing the same type of mortgage, such as a 30-year fixed from Lender A with a 30-year fixed from Lender B.
Next, to find the best rate for investment property interest, it isn’t the interest rate that you want to look at first, consider the APR, which includes the closing costs and the interest rate as a percentage to illustrate the true cost to you for establishing the mortgage. Even in a situation where the interest rate is higher, but the APR is lower, this mortgage is costing you less in the long-run than a mortgage with a lower interest rate.
The interest rate itself is the rate that is used to calculate the monthly payments you are responsible for making. While your goal should be to save money in the long-run, if a mortgage with a higher APR but a lower interest rate better fits your budget, then this is the best rate for investment property interest for your financial situation.