What is the Investor Loan Rate?

I got an email from a friend and client a few days ago asking what the Investor Loan Rate is.

She owner financed a property and the way the agreement was written, she can now renegotiate the rate using the Investor Loan Rate.

Problem is, she doesn’t know what that is.

You know how you can go to Bankrate.com and they’ll post the 30 year fixed mortgage rate? Have you ever seen that for an investment property? Yeah, me neither.

There is a way you can ballpark  the going investor loan rate.

Typically lenders will use the “base rate” or par rate (the 30 year fixed rate) and add on pricing adjustments.

Here’s the Investor Loan Rate Formula:

Base rate: 5.00%
Non Owner Occupied Add On: 2.00-3.00% (depending on LTV)
Condo, Townhome or 2-4 Units Add On: 1.00%
Estimated Rate for a Rental Duplex at 80% LTV is 9%

Looking at the rate sheet for Fifth Third Bank today here’s the actual rates:

Base rate: 4.625%
Non Owner Occupied to 80% LTV: 3.00%
2 unit: 1.00%
Final Rate:  8.625%

Hey, we got pretty close!  Use this to estimate your residential investor loan rate and you’ll be in the ballpark every time!