Why Is the Interest Rate Higher on an Investment Property?

Author: Boychuk Mortgage Group |

  • It all comes down to risk exposure from the lens of a lender.
  • One key factor that lenders consider includes the possibility that you might one day have to cover part of or the entire monthly mortgage payment given a vacancy occurs.
  • Lenders also factor in the general wear and tear of a tenant occupying a home. From a lender’s perspective, they also consider the priority a borrower may place on their primary homes mortgage payment over the rental property’s mortgage payment if you were to get sick, lose a job, or go through a financially challenging time.
  • Depending on the lender, a typical increase in rate for a rental property will be between 0.10% and 0.25%.
  • While this premium may not be attractive, simply increasing your 25-year amortization to 30-year can result in lower monthly payments and positive cash flow.