However, a borrower is due for a down payment of less than 20% for your owner-occupied home private mortgage insurance (PMI), which can cost between 0.25% and 2% of the loan balance per year. PMI does not cover investment property, so investors should make a larger down payment.
“Borrowers usually get the best deal on an interest rate if they pay at least 25%,” says Dalzell. She recommends asking for a lender make an estimate for both 20% down and 25% down so you can see the difference in interest rates and payments.
2. Your mortgage interest will likely be higher
In an environment with low interest rates, the interest on a mortgage for a rental home is still relatively low. For most borrowers, the rate will be about three-quarters of a percentage point higher for an investment property than for a primary home, Dalzell says, or about the middle of 3% currently.
3. You may have to pay off the mortgage earlier
In some cases, the loan may have a shorter term than the typical 30-year term offered when purchasing a primary home. But, as with other types of mortgages, a real estate rental loan can be either fixed or variable, depending on the loan and the borrower’s relationship with the lender, said Tom McCormick, regional branch officer at Trustco Bank in Saratoga County. New York.
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