Investment Property Mortgage Rates vs. Primary Home Rates: The Real Difference
Every investor eventually asks the same question: why does the same lender quote a higher rate on a rental than on the house they live in? Here's what's actually behind the gap.
The rate gap, in real terms
Investment property mortgage rates typically run roughly 0.5-0.75 percentage points above a primary residence rate for an otherwise identical conventional borrower profile. That gap widens further for DSCR and other Non-QM investor products, which can run another 0.5-1.5 points above investment-property conventional pricing.
Why lenders price it this way
Risk of default. Historically, borrowers are statistically more likely to stop paying on an investment property before they'd risk losing their own home.
Occupancy risk. A primary residence has a built-in reason to keep paying: you live there. A rental's cash flow depends on a tenant, adding a layer of income risk the lender prices in.
Fannie Mae / Freddie Mac loan-level price adjustments. Conventional investor loans carry specific pricing add-ons for non-owner-occupied properties, baked directly into the rate or closing costs.
How to narrow the gap
A larger down payment, stronger credit, and a higher DSCR ratio all move pricing in your favor. Some investors also compare conventional investor financing against DSCR loans on the same deal — conventional often prices lower if you can document income and stay under Fannie Mae's financed-property limits.
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We'll price your deal both ways — conventional investor financing and DSCR — so you see the real trade-off.
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