Coastal Community Credit Union
Coastal Community Credit Union has 24 branches on Vancouver Island, from Port Hardy to Victoria. Coastal Community Credit Union’s One Grand Plan gives you $1,000 towards the down payment on your first home if you save at least $100 monthly to your One Grand Plan savings account.
Theirmortgages are re-advanceable, which means that you can re-borrow the amounts that you have paid with no extra fees.
Why Choose A Fixed Interest Rate
The biggest advantage of a fixed interest rate is the certainty that your home loan repayments will stay the same throughout the fixed rate term. You won’t have to worry about rate changes and how they could affect your repayments. This makes budgeting easier.
However, if you want to make additional repayments, pay off your loan early or refinance during the fixed rate period, you may need to pay Early repayment costs . Be careful and check with ANZ before doing this as early repayment costs can be very large, and can change from day to day.
Fixed home loan rates could work for you if your priorities are certainty and stability. Just remember that the trade-off is flexibility and the benefit of interest rate reductions .
Consider Different Types Of Home Loans
The 30-year fixed rate mortgage is the most common type of home loan, but there are additional mortgage options that may be more beneficialdepending on your situation.For example, if you require a lower interest rate, adjustable-rate mortgages offer a variable rate that may be initially lower than a 30-year fixed rate option but adjusts after a set period of time . Given that ARM loans are variable, the interest rate could end up being higher than with a 30-year fixed rate mortgage that has a locked-in mortgage rate. A 15-year fixed rate mortgage, on the other hand, may offer a lower interest rate that wont fluctuate like an ARM loan but requires a higher monthly payment compared to a 30-year fixed rate mortgage. Consider all your options and choose the home loan that is most comfortable for you.
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What Is A 30
A 30-year fixed mortgage is a home loan with an interest rate that stays the same over a 30-year period. For example, on a 30-year mortgage for a home valued at $300,000 with a 20% down payment and an interest rate of 3.75%, the monthly payments would be about $1,111 . Because the mortgage is fixed, the interest rate of 3.75% will stay the same for the life of the loan.
Is It Hard To Get A Loan For An Investment Property
Qualifying for an investment property loan is more challenging because lenders view investment properties as a greater risk. Lenders will want to make sure that you earn enough to afford monthly mortgage payments in the worst-case scenario, such as your tenant stops making their payments.
Compared to loans for your personal residence where you may qualify for a 0% or 3% down program, lenders want to see a larger down payment on investment properties, often between 20% to 35%.
To get the best rates and terms, youll want to get a traditional mortgage, which is why most of our winners here have come from that sector. However, you can max out at four conventional loans for investment properties. If you want to keep going, youll need to convert to private and hard money lenders
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Improve Your Credit Score
Most rental property buyers will finance the purchase with a conventional loan .
Rates for these types of investment loans are ultrasensitive to credit score. Following is an example of a buyer with a 650 score compared to a 720score buyer.
Because of the lower monthly payments, the home buyer with the better credit score could afford to offer tenants a better rental price.
This real estate investor could also use the lower monthly payment to create more cash flow.
What Are Current Investment Property Mortgage Rates
Investment property rates are usually at least 0.5% to 0.75% higher than standard rates.
So at todays average rate of 3.125% for a primary residence, buyers can expect interest rates to start around 3.625% to 3.875% for a single-unit investment property.
Note, todays average rates are based on a prime borrower profile, with a credit score of 740 and 30 percent down payment.
If you have lower credit or a smaller down payment, your interest rate will likely be higher than what you see advertised.
Thats why average rates shouldbe used as a benchmark only.
Your own investment property rate willbe different, so be sure to compare quotes from a few lenders and find the bestdeal for you.
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Best For Commercial Property: Lendio
Why We Chose It: We chose Lendio as our best for commercial property loans because their marketplace platform is the easiest way for an investor to fill out one application and receive offers from multiple competing lenders.
Wide variety of financing options and lenders
Personalized guidance and expertise to help you interpret your loan offers
High interest rates on some loans
You have to fill out their online application to see loan terms
Lendio is a free online service for investors where users receive potential commercial loan offers within minutes from the company’s marketplace of more than 75 lenders. Over 300,000 loans have been funded through Lendio, giving it a good reputation for success.
A marketplace like Lendio is great for commercial property investors because they can quickly and efficiently shop for the best terms. Unlike other commercial property options, they make the process simple with one application to shop rates.
Lendio lenders underwrite residential, multi-unit, and commercial real estate loans, as well as an array of business loans too. Down payments can be as low as 3.5% if you qualify for one of the agency loans, like FHA. Otherwise, traditional commercial property loan programs require 25% to 30% down.
Interest rates start at 4.25% on the Lendio platform for commercial property loans. Terms range from 20 to 25 years and take a minimum of 45 days to fund. Commercial property loan amounts range from $250,000 to $5 million.
Rental Property Mortgage Types
When buying investment properties, you can access most of the financing options available to buyers buying a primary residence. They just cost a bit more and are a bit more difficult to get.
- Conventional Loans
It is possible to use a conforming or conventional loan for investment properties. The down payment is a minimum of 15%, but 20% is even better if you want to avoid having to pay for mortgage insurance.
- Government-Backed Loans
You can purchase investment properties with a VA or FHA loan IF you decide on a multi-unit property and you reside in a unit in the building. These options come with a minimum downpayment of 3.5% for FHA, or 0% for a VA loan .
- Portfolio Loans
Portfolio lenders often formulate their own rules when it comes to investment property loans. This could mean being able to put down less or finance more than one property with these types of programs. But you can expect that the interest rates will be higher.
- Hard Money Loans
Hard money lenders always charge steep fees and higher interest rates. However, these are short-term loans that can assist if you find excellent investment opportunities and you are needing money fast.
Financing speed is usually the only reason to go for one of the hard money loans. Many real estate investors usually find a better financing option with other loan types.
- Commercial Loans
- Alternative Investment Property Financing
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Mortgage Rate Predictions For 2021
At the time of this writing , the U.S. economy was in a strong growth period coming out of the pandemic. And the Fed had just announced plans to start withdrawing its mortgage stimulus, pushing interest rates higher.
Inflation was also at a 30year high. And rising inflation tends to drag rates up with it.
In short, all signs point toward higher rates in 2022 as the economy continues to expand.
So dont wait on lower 30year interest rates. They could fall for short periods of time, but were likely to see an overall upward trend in the coming months.
The Math Behind Investment And Rental Property Loan Rates
Behind the scenes, the rate your mortgage lender charges isnt totally up to the lender. Property lenders often adjust rates to meet rules set by Fannie Mae and Freddie Mac.
Fannie and Freddie set rules andfees for most mortgages today and the fees they charge directly affect thefinal interest rate you pay.
Thanks to the increased risk ofpurchasing or refinancing investment properties, Fannie Maeand Freddie Mac charge higher fees on those transactions. Their fees trickledown to you as a higher interest rate.
|Type of investment property|
Rates shown here are a sample set meant for comparison only. Your own rates will vary. Get a personalized investment property interest rate here
For instance, a 20-percent-downinvestment property loan would require a fee equal to 3.375% of theloan amount.
This is the same as $3,375 foreach $100,000 borrowed.
In most cases, the borrowerchooses to pay a higher interest rate instead of extra dollars in closing costs. So,how do these fees translate to your final rate?
In this case, 3.375% ininvestment property loan fees can be covered by an extra 0.5% to0.75% added to therate.
Keep in mind this is fora single-family home. Buy a duplex and you might pay another1.0% infees or 0.125% to 0.250% added to your rate.
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Finding Lenders Offering Investment Property Financing
- Investor-Only Lenders As the name implies these are lenders who specialize in underwriting mortgages for investment properties. Investment-Only lenders cater to business entities only, and do not provide loans for individual borrowers. Investor-Only lenders are the right choice if you are buying property through a legal entity , and intend to invest in multiple properties.
- Online Lenders and Mortgage Brokers Most online lenders and mortgage brokers are merely extensions of traditional brick-and-mortar banking institutions. These lenders are often the right choice for individual borrowers who have the necessary funds available to meet the expected 20% 25% down payment. Traditional banks and their online counterparts are a good option for borrowers who are purchasing a rental property as an individual and not a business entity. They are also the preferred choice for local investors, as the underwriters will have a better understanding of property values within the community.
Obtaining a mortgage on a rental property is often more time consuming than applying for, and receiving, a loan on a primary residence. Investors in rental properties need investigate all of their lending options and should be prepared to weather any delays in the approval process.
For your convenience here is a list of lenders offering competitive rates in your local area.
How Is My Mortgage Interest Rate Determined
Lenders determine your mortgage interest rate based on the type of loan you take out, your credit score, and the overall loan amount, as well as your down payment amount and the length of the loan.
- Loan Type: Government-backed loans are handled differently than conventional loans.
- : People with high credit scores generally receive lower interest rates. Although those with lower credit scores may still qualify, their mortgage terms may not be as favorable.
- Loan Amount: Your mortgage rate will be influenced by the total amount of money you need to borrow. Higher amounts tend to suggest higher interest rates.
- Down Payment Amount: A higher down payment can significantly lower your interest rate.
- Length of Loan: Long-term loans tend to bring lower monthly payments with higher interest rates, while short-term loans bring higher monthly payments and lower interest rates.
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Why Comparing Bc Mortgage Rates Matter
Due to British Columbias high home prices, mortgages in BC are larger than those seen in other provinces. According to theCMHC, the average new mortgage balance in British Columbia was $454,000 in 2021, much higher than the Canadian average of $335,000.
British Columbians also pay largermortgage paymentsdue to their higher average mortgage balance. In 2021, the average mortgage payment for Vancouver was $1,975 per month, higher than the Canadian average of $1,358. Such large mortgages means that a small difference in your BC mortgage rate can mean thousands of dollars savings or paying extra inmortgage interest.
What Is A Fixed Rate Home Loan
Fixed rate home loans have a fixed interest rate for a set period of time. That means the interest rate you pay on your home loan doesnt change during that period.
Home loan interest rates can go up or down at different times, so fixing your home loan interest rate can provide greater certainty. If interest rates were to increase, you would continue to pay your lower fixed rate for the duration of the fixed period. However, if interest rates were to fall, you wouldnt be able to benefit from the reduction during your fixed rate period.
The fixed interest rate that will apply to your loan is the rate which applies on the day your loan is drawn down. If there is a great fixed interest rate on offer at the time of your loan application and youd like to secure that rate, talk to your lender about whether applying to lock in that rate is an option for you .
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A Path Forward For Rental Investors
While every real estate investor follows a different path, heres a sample outline for how a rental investor might finance their first rental properties:
Property 1: House hack a 2-4 unit property with conventional or FHA financing .
Property 2: Use either a conventional bank or online landlord lender .
Properties 3-4: If youre getting more ambitious with the renovations, use either an online buy-and-rehab loan, a community bank loan, or a hard money loan for the purchase and renovation. Then refinance it using an online investment property mortgage.
Properties 5-8: Start raising some capital from friends and family. Use this to help with the down payment and/or renovation costs. Use either a local community bank or an online landlord loan for long-term financing.
Properties 9+: Try to increasingly use private funds. To free up some of the private funds tied up in your existing portfolio, consider refinancing several of your properties under a blanket loan to cash out and use the money towards new acquisitions. Use either community banks or online landlord lenders for financing as needed.
When Should You Refinance A 30
If you want to pay off a 30-year fixed-rate mortgage faster or lower your interest rate, you may consider refinancing to a shorter term loan or a new 30-year mortgage with a lower rate. Thebest time to refinancewill vary based on your circumstances. Keep in mind that closing costs when refinancing can range from 2% to 6% of the loans principal amount, so you want to make sure that you qualify for a low enough interest rate to cover your closing costs. Learn more abouthow to refinance and compare todays refinance rates to your current mortgage rate to see if refinancing is financially worthwhile.
The rate and monthly payments displayed in this section are for informational purposes only. Payment information does not include applicable taxes and insurance. Zillow Group Marketplace, Inc. does not make loans and this is not a commitment to lend.
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What Is The Difference Between Interest Rate And Apr
While interest rates show the percentage a lender may charge for a loan, it gives an incomplete look at total costs.
An annual percentage rate includes the interest rate as well as other fees, including origination fees, mortgage insurance, closing costs, mortgage points and more.
The APR gives borrowers greater insight into what theyre actually paying for their mortgage. For more on what you need to know, visit our Interest Rates vs Annual Percentage Rate page.
Other Guidelines For Rental And Investment Property Loans
When you apply to buy a rental property, underwriters will verify your ability as a potential landlord. If youve never owned a home or managed any property, youll have a tougher time.
Some lenders allow firsttime real estate investors to get around this by hiring a property manager. There is nothing definitive about this in the official guidelines so check with your loan officer.
There are limits to the number of properties you can own with mortgages on them, if you go with conforming financing.
And youll be required to have reserves several months of mortgage payments in the bank to cover those months when your property is unoccupied.
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Best For Rehab Loans: Lendingone
Why We Chose It: LendingOne earns our nod for best rehab lender because they are one of the very few commercial lenders that make it easy to get a pre-approval letter, they finance up to 90% loan-to-cost and provide lower rates and fees than their competition.
Pre-approval/proof of funds available online within minutes
Founded by investors to improve upon traditional lenders limitations
$150 charge for each draw
Only available for one- to four-unit properties, no commercial
In 2014, Bill Green and Matthew Neisser founded LendingOne in response to their frustrations felt toward the difficult lending environment from rigid bank criteria and the easier, though more expensive, hard money alternatives.
As a direct private real estate lender, LendingOne has become the best rehab lender in the industry because they help investors get what had been missing in the market, such as pre-approval letters and proof of funds, higher leverage, and lower rates and fees.
LendingOne offers fix-and-flip and rehab-to-rent loan products. Down payments range from 10% to 20%. For rehab to rent, they have a 30-year fixed-rate loan as well as 5/1 and 7/1 ARM loans. Their fix-and-flip loans can finance up to 90% of your repair costs. Two years of interest only payments are an option on the fix-and-flip loans too. LendingOne loans on two- to four-unit properties only, including condos and townhouses.