Investment mortgage rates: Current interest rates and how they work
Investment mortgage rates currently range from 4.75% to 13%, depending on the type of loan and borrower qualifications. For shorter mortgages like hard money loans with terms up to three years, interest rates range from 7.5% to 13%. For permanent mortgages such as Federal Housing Administration (FHA) loans up to 30 years, interest rates range from 4.75% to 5.2% or more.
Average daily mortgage rates
| 30 years fixed | 4.07% | +0.02 |
| 15 years fixed | 3.65% | +0.01 |
| 7/1 adjustable rate mortgage (ARM) | 4.19% | N / A |
* Table updated on 14.12
Common mortgage rates and terms
| Compliant FHA loan | 3.6 to 4.2% + | 15 to 30 years fixed, 7/1 arm |
| Single Asset Portfolio Loan | 3.5% to 5.7% | 1 to 30 years |
| Jumbo loans | 3.5 to 4.5% | 15 to 30 years |
| Multifamily Mortgage | 4 to 12% | 5 to 30 years |
| Lump Sum Mortgage | 4 to 11% | 2 to 30 years |
| Commercial Mortgage | 5.5% to 7.5% | 5 to 25 years |
| Homestyle Renovation Mortgage | 5 to 7% | 15 to 30 years |
| FHA 203K Loan | 4.5 to 6.5% | 15 to 30 years |
| Hard Money Loan | 7% to 13 | 1 to 3 years |
| Bridge Loan | 6 to 9.5% | 6 months to 3 years |
* Table updated on 14.12
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FHA loan interest rate adjustment
The interest rate spread for conforming loans is as follows:
- 15 year fixed: 4.25% to 5.0% or higher
- 30 year fixed: 4.75% to 5.2% or higher
- 7/1 ARM: 4.4% to 4.6% or higher
A 15-year mortgage has the lowest interest rates, but your amortized payments are higher due to the shorter repayment period. A 30-year mortgage is the most common with a 30-year amortization schedule. A 7/1 arm is a loan with a fixed interest rate for the first seven years. The interest rate can then be adjusted once a year for the remainder of the term, based on the prime rate.
Conforming loan interest rates are typically among the lowest because they must meet Fannie Mae and Freddie Mac guidelines, which lowers lender risk. Interest rates are usually between 4.25% and 5.2% and vary depending on the qualifications of the borrower. Conforming loans typically have terms of 15 years, 30 years or 7/1 ARMs, which also affects the interest rate.
Conformity of the loan interest factors
Key interest rate factors are borrower qualifications such as personal credit score. The higher your credit score, the better the rate you typically qualify for. Other determining factors include the amount of the loan and the term of the loan.
The key interest rate factors for conforming loans are personal credit score, loan size, and asset type.
1. Personal credit score
If you have a credit score of 680 or higher (check your score here for free), you should expect a competitive interest rate of only 4.75%. Conversely, credit scores below 680 receive interest rates starting at 5.5%.
2. Size of the loan
To qualify for a conventional loan, it must meet Fannie Mae's credit limits with maximum amounts currently 424.Maintain $100. Loan limits are higher in high cost areas. If the loan exceeds the limit, it is considered a jumbo loan and the interest rate increases. This increase in interest rates is usually about + 0.3%. So if the 7/1 ARM is 4.4%, the jumbo 7/1 ARM is 4.7%.
3. Type of asset
Fannie Mae also examines the type of asset you will finance in determining your interest rate. For example, Fannie Mae will finance a property with up to four units. The prices you see published are generally for primary residences, which are single properties. Rates generally increase as the number of units increases.
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Interest rates for portfolio loans
Portfolio loans are used to finance single and multifamily properties, as well as multiple properties at once. These loans are used for both turnkey properties and properties in need of renovations. Interest rates generally range from 3.5% to 5.7% and offer fixed and variable rates.
There are different types of portfolio loans such as a single asset portfolio loan, a jumbo portfolio loan, and a lump sum mortgage portfolio loan. Because types of portfolio loans vary, lending criteria and factors that affect interest rates also vary, although lenders typically require that the borrower have a credit score of at least 600 (check your score for free here).
Interest rates on portfolio loans for individual assets
The interest rate spread for single asset portfolio loans is as follows:
- 5% to 8% with terms ranging from three to 30 years
A single-asset portfolio loan is a conforming loan that a lender carries on its books to earn interest income, rather than packaging and selling it. These loans are also known as balance sheet loans, and interest rates typically range from 5% to 8% with terms between three and 30 years.
Interest rate factors for the portfolio of individual assets
Factors that affect the interest rate on a single asset portfolio loan are the lender's criteria and the term of the loan. The lender typically uses the six-month London Interbank Offered Rate (LIBOR) to determine the interest rate granted to the borrower. Long-term loans longer than 10 years typically have lower fixed interest rates. Conversely, shorter maturities of three to ten years tend to have somewhat higher variable interest rates. Fixed interest rates are less common for short-term individual loans.
Jumbo portfolio loan
The interest rate spread for jumbo portfolio loans is as follows:
- 4.6% to 5.7% with a term of 15 to 30 years
A jumbo portfolio loan is a loan that exceeds Fannie Mae's established maximum loan limits. These loans start at over 424.100 USD and have interest rates between 4.6% and 5.7%. Their typical loan terms range from 15 to 30 years.
Jumbo Portfolio Loan interest factors
Jumbo loans generally have lower interest rates than other portfolio loans because they are larger and at 600.000 USD to start and sometimes goes up to 2 million USD. Personal credit score also affects Jumbo portfolio loan rates. A credit score of at least 700 is usually required (check your score for free here).
Multifamily Mortgage
The interest rate spread for multifamily mortgages is as follows:
- 6.75% to 12% with a term of five to 30 years
A multifamily mortgage is a type of portfolio loan that investors can use to finance multifamily properties. These properties can be multifamily properties with up to four units or multifamily properties with five or more units. Rates range from 4% to 12% and terms can vary from five to 30 years.
Multifamily mortgage rate factors
Interest rates on multifamily mortgages are influenced by the loan size, the borrower's credit score, and the loan term. The larger the loan, the lower the interest rate generally is. However, there are no set guidelines for this. Lenders tend to look at the investment itself as well as the borrower's overall financial position, including liquidity.
Credit scores typically need to be 600 or above to qualify (check your score here for free), but a borrower with a score of at least 680 will benefit from the most competitive interest rates. Loan terms range from five to 30 years, but the most common terms are 15 to 30 years. For more information on multifamily mortgages, see our ultimate guide to multifamily loans.
Flat Rate Mortgage
Interest rates for blanket mortgages are as follows:
- 5% to 11% with a term of one to 30 years
A jumbo mortgage is a portfolio loan that finances two or more investment properties with a single loan. Lump sum mortgages have interest rates between 5% and 11% and loan terms between one and 30 years. There is usually no limit to the number of properties an investor can finance with a lump sum mortgage.
Lump sum mortgage interest factors
Factors that affect the interest rate on a lump sum mortgage include the amount of the loan and the term of the loan. A borrower's credit score and finances are examined, but portfolio lenders do not focus on them as much as FHA lenders do. Instead, they consider an overall picture of the borrower and the assets.
The typical minimum size of a lump sum mortgage is 100.000 USD and the maximum size 50 million USD. The higher loan sizes generally have lower interest rates, but again this depends on the overall financial picture. Generally, the lower the loan term, the higher the interest rate.
For more information on blanket mortgages, see our article on the basics of blanket mortgages.
Interest rates for commercial loans
The interest rates for commercial loans are as follows:
- 5.75% to 7.8% with a term of five to 25 years
Commercial loans are used to finance commercial properties. Because the loans are secured, they tend to offer lower overall interest rates than other loans. Fixed-rate and variable-rate loans are offered, and interest rates generally range from 5.75% to 7.8%.
Interest rate factors for commercial loans
The factors that have the greatest impact on commercial loans are the current market interest rates, the size of the loan, the term of the loan, the type of commercial loan, and the creditworthiness of both the individual and the company.
The most important interest rate factors for commercial loans are current market rates, loan size, loan term, and personal credit score.
1. Current market rates
Current market interest rates affect interest rates on commercial loans. These market rates vary depending on the stability of the economy. When consumers have more money to spend, interest rates are lower, which helps boost the economy. On the other hand, when consumers do not have as much money to spend, interest rates are generally higher.
2. Loan Size
The size of the loan also affects the interest rate. The larger the loan volume, the lower the interest rate typically is when dealing with commercial loan products.
3. Loan term
Longer-term commercial loans typically have higher interest rates than their short-term counterparts. Each lender has its own criteria that affects interest rates.
4. Personal credit score
The borrower's credit score directly affects the interest rate on commercial loans. The higher your credit score, the lower your interest rate (check your credit score for free here). Most lenders want to see a borrower with a credit score of at least 680.
If your credit score is 680 or higher, your interest rate is generally around 5.75%. If your credit score is below 680, your rate is usually above 7.8%. For information on calculating your potential interest rate on a commercial loan, see our commercial loan calculator.
Homestyle Renovation Mortgage Rates
Interest rates for homestyle renovation loans are as follows:
- 5% to 7% with a term of 15 to 30 years
A homestyle renovation mortgage is a government-backed, permanent mortgage that can be used to purchase and renovate an investment property or second home. It can also be used to purchase an owner-occupied primary residence between one and four units. Interest rates generally range from 5% to 7%.
Interest rates for home renovation loans are slightly higher than conventional loan rates. These interest rates can be variable or fixed, depending on the lender and the borrower's qualifications.
Homestyle Renovation Mortgage Rate Factors
The borrower's credit score and the amount of the loan are key factors that affect the interest rate. The other factor that affects mortgage rates for home renovations is the type of property, especially if it is a primary residence or an investment property.
The main interest rate factors for home renovation mortgages are personal credit score, loan size, and asset type.
1. Personal Credit Score
To qualify for a homestyle renovation loan, a borrower typically must have a credit score of 640 or more (check your score here for free). The higher the credit score, the lower the interest rate. For example, if a borrower has a credit score or higher, the interest rate is generally around 5%. If the borrower has a credit score of 640 or less, the interest rate is typically closer to 7% or higher.
2. Size of the loan
Since the lending criteria for residential renovation loans are set by Fannie Mae, there are maximum loan limits. They vary by state, but a loan on a single property can generally range from $424.100 USD and 636.150 USD. Homestyle loans offer a loan that can combine the purchase and renovation of the property. However, a higher loan amount does not necessarily mean a higher interest rate.
3. Type of asset
If the property is a primary residence, the borrower's interest rate is lower. For example, if a borrower is buying a single-family home to use as a primary residence, he or she can generally expect an interest rate of about 5%. If he instead buys an investment property in which he will not live, the interest rate is usually closer to the 7% range.
FHA 203 (k) loan interest rates
The interest rate spread for FHA 203 (k) loans is as follows:
- 4.75% to 6.5% with a term of 15 to 30 years
An FHA 203 (k) loan is a permanent government-backed loan for owner-occupants. It is used to purchase and renovate a primary residence. This long-term loan finances properties with one to four units. Interest rates typically range from 4.75% to 6.5% and terms range from 15 to 30 years.
With these loans, a homeowner can finance both the purchase and renovation of a primary residence. These renovations can be either more cosmetic or extensive, but must be approved by the lender and cannot include luxury items like a pool.
FHA 203 (k) loan interest rate factors
The main factor affecting the interest rates on an FHA 203 (k) loan is the borrower's personal credit score. The borrower's debt-to-income ratio and overall financial situation also affect the interest rate.
The most important interest rate factors for FHA 203 (k) loans are the borrower's personal credit score and financial capability.
1. Personal credit score
If you have a credit score of 680 or higher (check your score for free here), you should expect a competitive interest rate as low as 4.75%. Conversely, credit scores below 680 receive interest rates starting at 5.75%. To qualify for an FHA 203 (k) loan, a borrower must have a credit score of at least 640.
2. Borrower's financial situation
A borrower's overall financial condition also affects the interest rates on a 203 (k) loan. For example, the lender looks at the borrower's debt-to-income ratio and charges 45% or less to qualify. The lender also verifies the borrower's bank statements and monthly income. Generally, the higher the income and debt, the lower the interest rate.
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Hard money loan interest rates
The interest rates for hard money loans are as follows:
- 7.5% to 13% with a term of one to three years
Hard money loans are used by real estate investors for short-term interest rate financing. Close quickly and allow investors to compete with cash buyers' schedules. They are typically used to renovate rental properties and buy fix and flips. Their interest rates are usually on the high side between 7% and 13%.
Hard money loan interest rate factors
Hard money loan rates are affected by both the business and the borrower, including real estate experience and overall financial condition. These loans are non-conforming, so the lending criteria that affect their interest rates can vary widely by hard money lender.
The key interest rate factors for hard money loans are the deal, the personal credit score, and the borrowers' experience and financial standing.
1. The deal
The total requirement must make sense to the lender in some respects. First, look at the loan-to-value (LTV) ratio and after-repair value (ARV). Generally, LTV must be 90% or less and ARV must be 80% or less. Lenders also consider the borrower's exit strategy. Typically, the property is either sold at a profit or refinanced into a permanent financing solution.
2. Personal credit score
Borrower's credit is less important to lenders than to other lenders, but generally must be 550 or higher (check your credit score for free here). A higher score alone does not guarantee a lower interest rate, but when combined with experience flipping homes and a strong overall financial profile, helps lower the interest rate.
3. Experience and financial situation of the borrowers
The borrower's bank statements and experience with real estate are the final factors that affect the interest rate. Since an experienced investor with money in the bank is considered lower risk, they usually qualify for an interest rate of about 7% to 8%. If the borrower does not have much experience with home rehabilitation or has less of a financial cushion, interest rates can be more than 8%.
One of our top recommended lenders is LendingHome. If you're interested in a hard money loan for your next fix-and-flip project, you can fill out a quick online application. You can get pre-qualified online in minutes with interest rates as low as 7.5% for prime borrowers.
Bridge Loan Interest Rates
Bridge loan interest rates are as follows:
- Commercial bridge loan: 6.75% to 10.0%
- Residential bridge loan: 6% to 9%
Bridge loans are short-term loans used to purchase commercial or investment property when permanent financing is not available. These loans offer higher interest rates because they are used for interim financing only. Commercial bridge loan interest rates range from 6.75% to 10.0% and residential rates range from 6% to 9%.
Bridge loans are interest-free short-term loans that are typically 2% or more above the prime rate. They are used by borrowers with lower credit scores for rehab properties or to spice up properties with high vacancy rates.
Interest rate factors for bridge loans
Factors affecting loan rates vary between commercial and residential loans. For home bridge loans, interest rates are based on the borrower's overall credit score and the current prime rate. For commercial bridge loans, interest rates are typically based on the six-month LIBOR index plus a spread of 4.5 to 5.5 points.
1. Housing bridge loans
Interest rates on housing bridge loans are higher than most other loan products due to the short-term, non-permanent nature of the loans. Lenders consider the buyer's credit score when offering interest rates, and the minimum FICO requirement is generally 650 or higher (check your score here for free).
The interest rate is also influenced by the debt to income ratio of the buyer, which should generally be in the range of 43% to 50%. The overall borrower's financial profile and business are also considered.
2. Commercial bridge loans
Interest rates on commercial bridge loans are less influenced by the creditworthiness of the borrower, but are instead based on overall business and the LIBOR index, which reflects current market and economic conditions. It also contains a point distribution.
For more information on bridge loans, see our article on bridge loans. It is described in detail what bridging loans are and how they work.
Final effect
Mortgage interest is important to know because it affects your monthly payment and how much you will pay over the life of the loan. They are influenced by a variety of factors, most often personal creditworthiness, the term of the loan, the amount of the loan, and the type of asset for which the loan is designated.