How to Get the Best Rental Property Mortgage Rates

It’s not about just your credit score

 Real estate agent showing a couple a vacant apartment

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Whether you’re looking to purchase your first investment property or already have a portfolio of houses, understanding home loan financing is key. Unlike mortgages on your primary residence, financing for investment property has higher rates and stricter requirements.

Find out about average rental property mortgage rates, how they differ from conventional mortgages, and explore some ideas to help you score the best rates on your investment properties.

Key Takeaways

  • Mortgages for investment properties can be difficult to acquire due to their risky nature.
  • Lenders require better credit and a higher down payment for an investment property than for primary residences.
  • Depending on your lender, you may be able to use future rental income to help qualify for your loan. 
  • It’s possible to lower the interest rate on your rental property mortgage with a few different methods.

Average Rental Property Mortgage Rates

Mortgage rates for investment properties fluctuate, just as they do for primary residences. Generally speaking, interest rates for investment properties are higher than the ones you’ll see when buying a home for personal use. This is due to the fact that banks consider investment properties to have a reasonable amount of risk. Because of this, not every bank will choose to offer mortgages for investment properties.


Government-backed loans such as Federal Housing Administration (FHA) loans, U.S. Department of Veterans Affairs (VA) loans, and U.S. Department of Agriculture (USDA) loans aren't eligible for use with a non-owner-occupied investment property.

Investment Property vs. Primary Residence Mortgages 

Investment Property Primary Residence 
15% to 25% down payment minimum Widely varying down payment minimum; some loans require no down payment 
May use future rental income to qualify Must meet income requirements 
Tax deductible Not tax deductible 

Down Payments

As mentioned above, lenders consider investment properties to be a riskier proposition than other types of residences. Because of this, they’ll want a higher down payment from you when purchasing an investment property. Rates vary by bank, but you can expect to be required to put down anywhere from 15% to 25% of the purchase price.

This is in contrast to primary residences, where homebuyer programs and specialized loans can allow you to put down as little as 3.5%—or even skip a down payment altogether.

Income Requirements

Since the point of purchasing an investment property is to generate income, many banks will allow you to include future anticipated rent as part of your monthly income. This can help tip the scales in your favor when it comes time to calculate your debt-to-income (DTI) ratio.


You won’t be able to include all future rent in your income since you’ll need to account for vacancies, maintenance, and other home expenses. However, your lender may consider up to 75% of your anticipated rent as income.

When looking to buy your primary residence, however, you’ll need to qualify using your existing debt-to-income (DTI) ratio. 


Investment properties are treated differently than primary residences when it comes to taxes. Common owner expenses, such as maintenance, insurance, taxes, and mortgage interest are tax-deductible.

Primary residences, meanwhile, may only deduct the interest on the first $750,000 (or $375,000 if married and filing separately) of your mortgage.

How to Get the Best Rates for Your Rental Property

Although getting financing for an investment property can be costly, there are ways to navigate better mortgage rates. 

Live in a Unit

While it may not be something you’ve previously considered, purchasing a multi-family unit and living in one of the units can be a good option. FHA, VA, and USDA loans allow you to buy a property with up to four units as long as you intend to live in one of them.

Government-backed loan interest rates can be competitive with conventional mortgages, but more than this, using the anticipated income from these units can help you qualify for your loan.

Contribute a Sizable Down Payment

Lenders already mandate a larger down payment when purchasing a rental property compared with primary or even secondary residences. However, contributing more than the minimum requirement they ask for—which is usually as little as 15%—can help bring down your investment property mortgage rates.

Raise Your Credit Score

As with any transaction involving debt, your credit score will affect the rate that you receive. Although we’ve mentioned this several times already, it’s worth repeating: the rate you are able to negotiate for an investment property will directly reflect the amount of risk the bank perceives it’s taking on.

For a lender, a higher credit score means you’re a more stable investment, and the interest rate it will offer you will be lower as a result.

Use As a Second Home

Do you have any intention of living in the property? If so, you may want to consider seeing if you qualify to purchase a second home rather than an investment property. Second homes feature lower interest rates and lower down payment requirements than investment properties, but you’ll want to be sure that your property is eligible.


Lenders may impose additional restrictions on second homes and tax treatment also varies versus an investment property. You’ll want to consider all of these factors before deciding on a second home rather than an investment property.

The Bottom Line

Rental properties can be a great way to grow your money. Offering a steady passive income and the ability to appreciate, real estate makes a compelling option for investment. However, qualifying for a loan on a rental property isn’t as easy as other mortgages, and it can be more costly. Take advantage of the tips outlined above to get the best rental property mortgage rates.

Frequently Asked Questions

Why do mortgage rates go up and down?

Mortgage rates fluctuate according to the market. There are a number of external conditions that influence rates, including the Federal Reserve, inflation rates, housing market conditions, employment rates, the strength of the economy, and stock and bond markets. 

How low can mortgage rates go?

The lowest U.S. mortgage rates have gone to date was in December 2020, with a rate of just 2.6% for a 30-year fixed-rate mortgage.

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  1. Chase. “Primary, Secondary, and Investment Property: What Are the Differences?

  2. U.S. Department of Agriculture. "Applicant Eligibility," Page 3.

  3. U.S. Department of Veterans Affairs. “VA Pamphlet 26-7, Revised,” Page 3-12.

  4. U.S. Department of Housing and Urban Development. “General Information on Property Requirements and

    Restrictions,” Page 4-B-2.

  5. Chase. “Investing in Home Real Estate: What You Need to Know.”

  6.  U.S. Department of Housing and Urban Development. “Let FHA Loans Help You.”

  7. Pacres Mortgage. “Using Rental Income to Qualify for a Mortgage.”

  8. IRS. “Publication 527 (2020), Residential Rental Property.”

  9. IRS. “Publication 936 (2020), Home Mortgage Interest Deduction.”

  10. Freddie Mac. “Mortgage Rates.” (Download “Current Mortgage Rates Data Since 1971” spreadsheet.)

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