What are investment property interest rates in November 2024? That answer depends on several factors as interest rates can vary depending on your situation. The overall economy, personal credit and experience, type of loan, and property all matter. One major distinction is whether your property is a rental property or a property in need of rehab. Rental properties that are in good condition typically have lower rates. Types of loans for rentals include conventional loans or DSCR Loans. Interest rates for properties in need of rehab (for fix and flips or the BRRRR Method) are going to be higher. Here are the ranges of investment property interest rates to expect right now in November 2024:
Current Average Conventional Loan Interest Rate – 7.000%
Current Average DSCR Loan Interest Rate – 7.750%
Current Average Hard Money Loan Interest Rate – 10.900%
UPDATE November 2024: Mortgage Rates Increase as the Fed cuts rates
Mortgage rates have risen sharply following the Fed’s rate cuts in September and November, despite initial expectations that the cuts would lower mortgage rates. Released in early October, the monthly CPI report for September 2024 revealed higher than expected inflation (increasing to 2.4%) with additional “core” and more granular metrics. This, coupled with a strong September 2024 Jobs report , has metered expectations of future Fed cuts over the coming months and has contributed to big jumps in mortgage rates. Despite a disastrous October 2024 jobs report, yields and rates still continued to rise.
Additionally, towards the end of October, certain market observers noted a correlation between President-elect Donald Trump’s odds of victory and rising treasury yields (and subsequently, rising mortgage rates). It’s important to note that there were similar speculations of economic doom following Trump’s 2016 victory that were well off the mark. There is optimism that President Trump’s economic policy will spur growth and reign in out-of-control spending through lowering interest rates and re-emerging quantitative easing. Drops in mortgage rates and DSCR loan rates typically follow suit after rapid Fed rate cuts. While the rate environment still remains somewhat unclear, nothing strongly indicates a return of elevated levels of inflation or a super-hot jobs market that would cause a reversal of the recently-started cutting cycle. Make sure to check out our full article on the Fed’s recent rate cuts have impacted DSCR loans!
UPDATE September 2024: Mortgage Rates PLUMMET YET AGAIN!
August is usually the slowest month on the calendar in real estate finance. Many investors – from high finance on Wall Street to mom and pop flippers and rental property owners hit the beach for vacation before kids go back to school and the “stretch run” in real estate begins. Often, the busiest time in real estate lending is the period between Labor Day and Thanksgiving – where the most deals get done before slowing it down for the holiday season. August in 2024 generally followed this pattern – but saw yet another welcomed drift down in interest rates (and mortgage rates) – leading to market consensus that the Fed would cut rates in the next meeting on September 17, 2024 for the first time since March 2020!
The US Five Year Treasury Yield – the key benchmark for Non-QM and DSCR Loans (or the go-to loans for turnkey rental properties), dropped from a close of 3.97% as of July 31, 2024 to 3.71% as of Friday August 30, 2024 – another significant drop! This drop of 26 basis points is large – around a 6.5% drop, and mortgage rates for investment properties, particularly for DSCR Loans followed suit!
In response, Easy Street Capital issued a new rate sheet for its best in class DSCR Loan program on the first business day of September 2024, Tuesday the 3rd, the morning after Labor Day – improving our rates yet again!
August 2024 was a record-breaking month for Easy Street’s DSCR Lending Program, with 103 loans funded for real estate investors across the country. As rates continue to finally drift down, many investors that have been on the sidelines are taking advantage of the recent drops. The average interest rate of those DSCR Loans for August was 7.762% – but remember, these loans were mostly priced and quoted around 30-45 days prior, so these rates represent quoted DSCR interest rates primarily from the June or July 2024 time period. Its very likely that interest rates quoted in September 2024 are more around the 7% range and quite often in the 6%s range and even less!
Under our Signature Series DSCR Loan Program – we dropped rates by 75 basis points or 0.75% for equivalent scenarios in August. This is a massive drop for just one month – so that loan priced at 7.75% at the beginning of the month would be just 7% after Labor Day! This size of a drop can make a huge difference in returns and viability of rental property purchases, and investors serious about building rental portfolios should make sure to shake off the summer vacation and get back to searching before the greater market wakes up to these lowered rates!
DSCR Interest Rates on our other programs continued to drop in similar amounts in August as well – so for investors looking to take advantage of DSCR Loans for Multifamily or Mixed Use Properties, currently eligible only under our Standard guidelines, can take advantage of equivalent drops as well!
Bridge Loan interest rates, or rates under our “hard money” loan program for financing property purchases in need of value-add, remained stable and relatively low (for this loan type), typically coming in still at 10.9%, but with lower rates (including in the single digits) for experienced flippers with solid track records of success.
Changes in Mortgage Rates for Rental Properties – August 2024 Recap
Here are some of the highlights that caused the biggest drops in interest rates in August 2024!
Jobs Report – Friday, August 2, 2024
The month of August started off with a bang with the all-important “Jobs Report” coming out on August 2nd. While concerns about inflation continuing to become more and more overshadowed by the employment picture for bond traders attempting to predict the future pathway of the Federal Reserve, this report, typically early in the month has now become the biggest driver of mortgage rates movement in the current time period.
The report rattled markets as the BLS reported a nonfarm payrolls growth number of 114,000 for July 2024 – below the consensus Wall Street estimate of 185,000. Additionally, prior months numbers were revised lower and the unemployment rate (a headline number watched closely by both economic analysts but also the general public, and one that has high visibility in election season as the US Presidential election heats up), rocketed to 4.3% (from a 4.1% expectation). This move was mostly driven by prior revisions and cast doubt upon the government-reported economic picture of the last couple of years.
Treasury yields predictably moved sharply downward, as bond traders braced for a Federal Reserve likely to start cutting sooner (and more), rather than later to aid the ailing employment picture, with the 5-Year Treasury moving al the way down to 3.62%, an incredible drop from the 3.97% close at the end of July just a couple days earlier. Mortgage rates followed suit and lenders dropped rates accordingly to start off the month.
Weekly Jobless Claims – Thursday, August 8, 2024
While volatile movements in the Japanese markets, specifically the value of the Yen versus the US dollar over the previous weekend led to some speculation that a reversal of the “Yen Carry Trade” could prompt enough volatility that there would be an “emergency rate cut” by the Federal Reserve and subsequent further drops in yields, by the middle of the first full week of markets for August the speculation subsided. Indeed, instead of a further freefall in yields, interest rates drifted upwards, evaporating some of the sharp drops caused by the previous Jobs Report.
Thursday’s weekly report on jobless claims furthered the reversal in rates, as the August 8, 2024 data showed the number of Americans filing for jobless claims was reported at 233,000, a drop from 249,000 in the prior week. This indicated that the employment picture may not have been as bad as thought, and yields on the 5-year treasury bond closed back up at 3.83%, 21 basis points higher than the start of the week. Mortgage rates, including rates for rental properties, drifted back up over this week but not too sharply.
PPI Report – Tuesday, August 13, 2024
While the PPI Report has historically come prior to the CPI Report, for whatever reason, in August 2024, the PPI report was delivered on Tuesday August 13, 2024, a day before the more attention-grabbing CPI data release.
The July 2024 PPI Inflation rate came in at an annual rate of 2.2%, below the consensus expectation of 2.3%. Additionally, the “Core” PPI inflation rate, a number focused on more meaningful items, came in at 2.4%, way below expectations of 2.7%. This was welcome news for mortgage rates and the overall bond market, as it indicated that the Fed’s “war on inflation” continued to yield fruit, and the 5-year treasury yield closed down seven basis points on the day following the release, closing at 3.68%.
CPI Report – Wednesday, August 14. 2024
Following the PPI Report, the CPI Report followed suit, with another reading “below expectations,” with the headline number coming in at 2.9% (vs. 3.0% expected) and the “core” number coming in right at expectation at 3.2%. This was the first CPI data release below 3% since March 2021, and indicated further progress towards the Federal Reserve’s stated goal rate of 2%.
However, maybe because of the “core inflation” number coming in above 3% and in line with expectations (many observers believe the Fed looks more closely at this marker than the “headline” marker), and that the jobs picture has become more meaningful, yields essentially stayed flat, with the five-year treasury yield ticking down only a single basis point on the day to 3.67%.
Weekly Jobless Claims – Thursday, August 15, 2024
For a second straight week, the Thursday Jobless Claims Report came in below expectations, indicating further strength in the jobs market and causing corresponding increases in mortgage rates and treasury yields as the predicted pace and size of anticipated Federal Reserve rate cuts retreated. The weekly jobless claims report for Thursday, August 15, 2024 came in at 227,000, 11,000 less than expected. The five year treasury unfortunately reversed the yield drops from earlier in the week due to the soft PPI and CPI reports, and moved back up to a close of 3.79%, a substantial 12 basis point increase.
US Labor Department 12-Month “Revision” Release – Wednesday August 21, 2024
In a headline grabbing release, the US DOL released on Wednesday revisions of the previous jobs data over a prior 12-month period. This release indicated that the jobs data over 12 months of jobs reports was overstated by 818,000, thus implying that the employment data utilized by the Federal Reserve and many market analysts was grossly overstated. Remember, many of these data releases are significantly “adjusted” and rely heavily on estimated numbers. Additionally, many have speculated that some of this data may be manipulated by political concerns, especially in election years, as there is an obvious conflict of interest involved in government-calculated data which can impact acquisition of electoral power.
Regardless, the revised data that showed a significantly less robust employment picture than previously reported caused yields to fall, as traders re-upped bets that the Federal Reserve was ready to respond to the deteriorating labor market with rate cuts. The 5-year treasury yield dropped to a close of 3.64%, just six basis points on the day, but a continuation in downward movement that had characterized the week to date.
PCE Report – Friday, August 30, 2024
The PCE Report, an alternative measure of inflation, closely watched by the Federal Reserve in their measurements of inflation, came in at expectations across the board, showing a 2.5% rate (2.5% expected) and 2.5% “core” (below 2.7% expected). On the last trading day of the month, yields ticked up a bit higher to close out the month at 3.71%, cementing another month with rates moving lower, but not without some ups and downs.
Stay Tuned for more September 2024 Updates
With mortgage rates for investment properties (DSCR Loans) in a confirmed downward drift, make sure to stay tuned here to see the latest ups and downs. Many investors may not be paying attention as the economics of purchasing rental properties start to make a lot of sense, and close observers may be able to secure great deals by watching rates closely!
August 2024 Interest Rates Update: Mortgage Rates PLUMMET!
July 2024 – typically a sleepy summer month for the bond markets – was nevertheless, full of ups and downs in interest rates again.
The US Five Year Treasury Yield – the key benchmark for Non-QM and DSCR Loans (or the go-to loans for rental properties), dropped from a close of 4.33% as of June 28, 2024 (the last trading day of June)to 3.97% as of July 31st, 2024 – breaking the 4% barrier for the first time since February! This drop of 36 basis points is big – an almost 8% drop, and mortgage rates for investment properties, particularly for DSCR Loans followed suit!
In response, Easy Street Capital issued a new rate sheet for its best in class DSCR Loan program on the first of August – a mid week drop on a Thursday – improving our rates yet again!
For our Signature Series DSCR Loan Program – premiums were improved by a whopping 1.25% for long-term rentals and 0.625% for short term rentals versus our July 1, 2024 pricing! This generally means a drop of half a percent in rate or more – so the same deal that might have been at a 7.5% rate on July 1st is now 7% or below just one month later!
Our Streamline and Standard Series rates dropped precipitously as well – please make sure to contact your Easy Street Rep (or if you are new to Easy Street – fill out this Contact Us form to get connected!) for further details – remember, we have multiple loan programs for the benefit of our borrowers – if you qualify for multiple – you get the lowest rate program guaranteed!
For Hard Money – our rates are still super competitive, in the single digits for top borrowers even up to 90% Leverage.
Changes in Mortgage Rates for Rental Properties – July 2024 Recap
Here are some of the highlights that caused the biggest drops in interest rates in July 2024!
First Trading Day of Q3 2024 – Monday July 1, 2024
While there was a relative lack of economic data releases moving markets on the first day of the month – treasury yields (and mortgage rates) moved up sharply on Monday July 1, 2024. The five year treasury bond yield closed at 4.44%, up 11 basis points on the day. Perhaps due to the uncertainty dominating the news following the Presidential debate on the previous Thursday, and the political chaos that ensued, bonds sold off reflecting this turmoil. Regardless of the reasoning, it was a rough start to the third quarter for mortgage rates (However, that did not stop Easy Street Capital from kicking off the month with rate drops!)
ISM Nonmanufacturing Purchasing Managers (PMI) Report – Wednesday July 3, 2024
Thankfully for real estate investors the spike in rates to start the month was short-lived. Rates began to fall following the first with indications of a weakening economy (thus raising the odds of sooner and potentially larger Federal Reserve rate cuts). On Wednesday, the Institute for Supply Management released its PMI Index (non-manufacturing) which came in at 48.8 – which was a big drop from 53.8 for May 2024, well-below the economic forecast of 52.5 and the lowest level since May 2020.
Additionally, Wednesday saw Jobless Claims come in at 238,000 (slightly above estimates of 235,000) and the ADP jobs report (an alternative reading of the job market by private company ADP) showed a change of 150,000 jobs (versus expectations of 165,000). As market watchers waited for the more impactful monthly BLS Jobs report that would be due in two days, these dueling employment indicators coming in below expectations likely caused forecasters to reduce expectations for the upcoming Fridays’ report slightly.
The ISM data paired with the jobs data caused the five year treasury yield to close back down at 4.33%, erasing the spike since June’s close entirely.
Jobs Report – Friday July 5, 2024
While most of America took Friday the Fifth off – or was slow to start after an independence day celebration – the arguably most impactful economic report was due out 8:30 AM sharp eastern time. The BLS reported a nonfarm payrolls rise of 206,000 (versus a median Bloomberg forecast of 190,000). However, despite the payrolls beat, the biggest takeaway was revisions to the last couple of months – a total of 111,00 of downward revisions. This caused the unemployment rate to rise to 4.1% – above expectations – and sparked a flurry of downward movement in treasury yields. The five-year treasury yield dropped eleven basis points to 4.22%, the lowest since June 14, 2024 and mortgage rates dropped accordingly.
CPI Report – Thursday July 11, 2024
Further evidence that CPI or consumer inflation is falling quickly was the official CPI Report for June data, released on Thursday July 11th. The CPI Report for the “headline number” came in at 3% year over year versus consensus expectations of 3.1%. So-called “Core CPI Inflation” also came in one tenth of one percent (0.1%) less than estimates, at 3.3% versus 3.4% expected. This led to a nice drop in rates and the five year treasury yield falling nine basis points to close at 4.13%
PPI Report – Friday July 12, 2024
In perhaps one of the most surprising market reactions to data in months was the PPI Report coming in a day after CPI on Friday July 12th. PPI Inflation, often seen as a precursor to future CPI, came in at 2.6%, way above expectations of 2.3%. Remember, point three percent in data like this is HUGE even though in many other contexts it would seem small.
Despite the large upside PPI surprise, the five-year yield actually ended up LOWER by three basis points at close! This highly unusual bond and interest rate market reaction may indicate that the focus of the Fed has shifted way closer to the employment side of their dual mandate, and the fight against inflation may have taken a backset to overall employment concerns.
Federal Reserve Decision and Press Conference – Wednesday July 31, 2024
The second half of July saw news dominated by political turmoil and shocking events. Economic data bounced around and yields generally stayed in a consistent band in the low 4% range. However, one interesting deviation was that the five year and ten year treasury yields started to diverge a bit, with the five year noticeably lower by around 10 basis points. For the last year, these two yield numbers have been generally equivalent, and this may be a precursor to the long-awaited “un-inversion” of the yield curve, which typically signals the start of a recession.
The last day of the month saw a Federal Reserve meeting and interest rate decision where the Fed decided to keep rates steady for yet another month. While there was some potential chatter around a rate cut in July, it eventually became consensus that things would hold still, however, many current indications in the bond market are foreshadowing a cut at the next meeting in September. Bond yields in continued to react favorably, drifting down in the last few days of July and settling at just 4.03% by close on July 31st – dovishly digesting the Fed meeting and heading near that three handle mark that would be breached the very next day.
Stay Tuned for more August 2024 Updates
The market is moving and volatile – and many real estate investors ahead of the curve are starting to see a large drop in mortgage rates that may start making real estate investing pencil again for rental properties!
UPDATE July 2024: Mortgage Rates Drop Again!
Its hard to believe that 2024 is halfway over, but as we head into Q3 interest rates for investment property mortgage loans continue to drop across the board.
The US Five Year Treasury Yield – the key benchmark for DSCR Loans, dropped from a close of 4.52% as of May 31, 2024 to 4.33% as of June 28, 2024 – the last business day of the month and quarter. This drop of 19 basis points is substantial – a greater than 4% drop, although a smaller drop than the low of the month which occurred at the mid-point, just 4.22% as of the June 14, 2024 close.
Despite the minor drop – private lenders like Easy Street Capital are improving interest rates dramatically for real estate investors – as these experienced and professional real estate flippers and property owners continue to earn a track record of trust and performance. Easy Street improved rate pricing by a whopping 1.25% (125 basis points) on our Standard Series DSCR Loan Program – equivalent to approximately 0.375% or 37.5bps in lower rates! An example would be a rate of 7.25% quoted at the beginning of June would be reduced to 6.875% to start July!
In addition, rates for Hard Money Loans (bridge loans typically used for fix and flips) improved as well, with rates lowered to starting at 9.25%, even with increased leverage (up to 90%) and lowered minimum origination fees as part of our July kickoff supporting experienced flippers!
What Causes Mortgage Rates to Change – June 2024 Recap
June 2024 was a busy month for economic data releases that caused mortgage rates to go down. However current mortgage rates in July 2024 are not down directly from May, rates when up and down throughout the month!
Here are some of the highlights that caused the biggest change in rental property mortgage rates in June 2024:
Jobs Report – Friday June 7, 2024
The first big market-moving event in June 2024 was the Jobs Report, released early in the morning on June 7, 2024. This is the report showing unemployment rate and estimated change in nonfarm payrolls. The report showed an increase in jobs of 272,000, which was well higher than the 190,000 consensus Wall Street estimate.
Because the amount of added jobs came in significantly higher than estimates, which is the most important comparison, treasury bonds and mortgage bonds moved dramatically lower, as a higher than expected jobs number indicated to market traders a lower likelihood of the Federal Reserve cutting interest rates in the next few months. The 5-year treasury yield increased significantly, moving from 4.29% up to 4.46% by close, an extremely large move upwards of 17 basis points.
CPI Report and Federal Reserve Decision – Wednesday June 12, 2024
The big increase in rates thankfully didn’t last too long as the other most important report for mortgage rates – the CPI Report, which measures consumer price inflation – was released five days later on June 12, 2024. The report showed a headline increase of 3.3%, which was below expectations of 3.4%, and a 0% month over month change.
This was a very special Wednesday in the world of investment property interest rates however, as it not only had the CPI Report release but was also the day of the June Federal Reserve Meeting and Press Conference! The Federal reserve left interest rates unchanged for the seventh straight meeting however the new “dot plot” that was released was seen as “bearish,” as it showed a consensus projection of just one rate cut in 2024 (25 basis points) versus a projected 3 cuts as of the March 2024 meeting. After interest rates had fell dramatically in the morning post-CPI release, they climbed back up a bit, but overall the market reacted favorably – moving the five year treasury yield back down 9 basis points to 4.32%.
PPI Report – Thursday June 13, 2024
The market moving news didn’t slow down in the second week of June, as Thursday June 13, 2024 saw the release of the Producer Price Index (PPI) Report. This report shows producer inflation, another key figure for the Federal Reserve to look at in determining when to cut rates. A lower-than expected PPI reading would indicate a higher change of rate cuts and thus lower treasury yields and mortgage rates, including interest rates on rental properties.
Well, there was a big surprise in the PPI Reading for May – coming in at 2.2% year over year (vs. 2.5% expected) and -0.2% (deflation) month-over-month (vs. 0.1% expected). Yes, 0.3% below expectations may be a small number in most contexts but it is big when it comes to inflation metrics like PPI. This further inspired bond traders to see signs of inflation easing and the five year treasury dropped down to a 4.24% close, another 8 basis points and a total of 17 over the two-day period that saw three massive market-moving moments in a 48-hour period.
PCE Inflation Report – Friday June 28, 2024
The second half of June didn’t have many economic releases that had significant effect on the bond market or mortgage rates for rental properties (or real estate in general), as vacation season heated up and political election news dominated headlines. The PCE Inflation Report for May came in at the last business day of the month – coming in at 2.6% year over year for the “Headline” and “Core” metrics – both exactly in line with expectations. The five year treasury bond did in fact drift up four basis points in the day and ended the month at 4.33%.
Stay Tuned for July 2024 Updates
July 2024 – despite the Independence Day holiday sitting in the middle of the first week – has already seen continued ups and downs for mortgage rates – make sure you sign up for our newsletter, bookmark this page and follow the author of this piece on X to stay up to date on the cutting edge of the ups and downs of rates for rentals!
DSCR Loan Interest Rates Update June 2024 – DSCR Rate Drop!
As we head into the summer of 2024, many real estate investors that have been patiently waiting the last couple of years for DSCR Loans – often the preferred loan for rental properties – to come down. So far this year rental loan rates are relatively the same as the beginning of the year – however there have certainly been some ups and downs!
DSCR Rental Property Loan rates typically follow the US Five Year Treasury Yields – and are about 2.5% to 3% above what those government bonds are trading at in 2024 – the current year “spreads.”
All eyes continue to be on the Federal Reserve and their rate plans – whether the foreseeable future will see rates staying the same “higher for longer,” finally getting some relief “rate cuts” or the remote possibility of future increases “hikes”! Thus, the big moves in rates are generally tied to releases of economic data such as the monthly CPI Reports and monthly Jobs Reports – that provide the latest levels of inflation and unemployment. Reports that show inflation or unemployment as higher than expected tend to move DSCR loan rates up, while data showing a slowing economy or decelerating prices has the opposite effect, allowing DSCR Lenders to move mortgage rates down.
In May 2024 – the five year treasury yield dropped from 4.64% on the first of the month to 4.52% on May 31st – a decrease of 12 basis points – or approximately 1/8th of a percentage point. This is much better than the moves in April 2024, where the five year treasury yield increased by 28 basis points.
Quick Overview of the Market Moving Events of May:
- The rate drops from Aprils challenging increases started within the first week of May – as a Jobs Report released by the US Bureau of Labor Statistics on May 3rd reported much fewer new jobs than expected. The headlines showed that new nonfarm payrolls were up 175,000, much fewer than the expectation of 243,000. Many market experts believe that rate cuts will come only when the job market shows prolonged signs of stress, so traders reacted to this data by sending yields lower (and lenders in turn reduced mortgage rates, on both conventional loans and rental loans).
The first three days of May 2024 saw a big drop in yields on the benchmark 10-year US treasury bond.
- With all eyes on the continuing fight against inflation, the CPI Report on Wednesday May 15th (for April 2024) came in at a 0.3% month-over-month increase, slightly better and below the 0.4% Wall Street Expectation. Additionally, the year-over-year “headline” number came in at 3.4% (in line with expectations and below last month). This mildly below-expectation deceleration of inflation helped move rates lower
- Rates on mortgages unfortunately ticked up in the last week or so of May 2024 – not due to any distinct economic data report but more due to a confluence of other factors that affect rental loan rates – such as hawkish comments from Federal Reserve officials, weak demand at big new treasury auctions and minor economic reports showing some strength in economy and employment metrics.
However, despite the market moving only 12bps in the right direction for yields – Easy Street Capital – America’s leading DSCR Loan provider – was able to improve our rates on our most popular DSCR Loan program – our Signature Series – by the equivalent of 20 basis points – or a fifth of 1 percent! While this may seem small – it’s a pretty big drop – and active real estate investors in the space know every bit matters when working to make deals pencil!
Current Conventional Loan Interest Rates for Rental Properties
Interest rates for investment properties that use conventional loans are currently on average approximately 7.000%. Conventional Loans are loans that are underwritten based on the rules and guidance of government-sponsored agencies. These include Fannie Mae and Freddie Mac and have strict qualifying rules. They are based primarily on borrower credit and income rather than the investment property.
Conventional Loans for rental properties generally track the 10-Year Treasury Bond. Meaning, as treasury bond yields move up or down, the interest rates on conventional rental loans will follow. The “spread” refers to the difference in rates between the 10-year treasury and conventional loan mortgage rates. It is generally higher for conventional mortgage loans to reflect the higher risk of mortgages vs. government debt. Typically, the “spread” between the 10-year treasury yield is between 150 and 200 basis points (1.5% to 2.0%). However, in November 2024, the spread is elevated, currently just under 250 basis points!
We recommend visiting sites such as MortgageNewsDaily.com to track conventional loan mortgage rates.
Current DSCR Loan Interest Rates for Rental Properties
Interest rates for rental properties that use DSCR loans are currently on average approximately 7.750%. DSCR Loans are loans from private lenders that are based primarily on the investment property rather than personal credit. While the current average rate is around 7%, there is a larger range for DSCR loan rates. DSCR Lenders are originating loans as with rates as low as 5.50% and some as high as 10.00%.
DSCR Loan mortgage rates generally track to the 5-Year Treasury Bond. Similar to conventional loans, there will be a spread which reflects the higher risk of rental property mortgages. Since DSCR Loans are not subsidized by government-sponsored entities, this spread is generally higher than for conventional loans. Typically, the spread for DSCR Loan rates is between 250 and 300 basis points (2.5% to 3.0%).
However, there are multiple ways that borrowers can get the lowest DSCR Loan rates. The three biggest factors that determine DSCR loan mortgage rates are LTV, DSCR and Credit Score.
LTV refers to “Loan-To-Value” Ratio. It is the ratio of loan amount to the value of the rental property. Generally, the lower the LTV ratio, the lower the interest rate will be.
DSCR refers to “Debt-Service-Coverage-Ratio.” It is the ratio of rental income to expenses. The higher the DSCR, the lower the mortgage rate will be. To get the best DSCR loan rates in November 2024, the investment property should have a DSCR ratio over 1.25x.
Credit Score is also important in determining the interest rate on DSCR loans. Good credit can lower your DSCR Loan interest rate drastically. Someone with a credit score over 760 for example will likely have an interest rate 2-3% lower than someone with a 620 credit score!
In addition to LTV, DSCR and Credit Score, additional factors determine investment property interest rates when using a DSCR Loan. These additional factors include prepayment penalty provisions, loan purpose and interest-only structure options.
Generally, DSCR loans with higher and longer “prepayment penalties” will have lower rates. A classic DSCR loan prepayment structure is “5/4/3/2/1.”
5/4/3/2/1 refers to a 5% penalty if prepaid in year 1, 4% if prepaid in year 2, 3% if prepaid in year 3, 2% if prepaid in year 4 and 1% if prepaid in year 5. Then, assuming it’s a 30-year mortgage loan, any prepayment made in the last 25 years of the term would have no associated penalty. Typically, a loan with such a prepayment structure will be over 100bp lower in interest rate than an equivalent loan with no penalties!
DSCR Loan Buy Downs
A final method of getting the lowest interest rate on rental property with a DSCR Loan is to “buy down” the rate. This refers to paying additional fees at closing. This is a one-time cost that results in a lower interest rate over a 30-year term. These fees care also called “Closing Fees” or “Points.” Generally, for every additional “point” (1% fee) paid at closing, lowers the DSCR loan mortgage rate by 0.50%!
We recommend contacting a DSCR Loan specialist directly to track DSCR loan interest rates!
Current Hard Money Interest Rates for BRRRR and Fix and Flip Investors
Hard Money Loans are loans used for properties in need of a quick renovation. Typically, investors will take a hard money loan when embarking on a fix and flip project or when doing the BRRRR strategy. While these loans have higher interest rates, they are typically interest-only and have short duration (generally 3 to 9 months). Interest rates for investment properties with hard money loans are on average 10.900%.
While mortgage rates for rental properties secured by conventional or DSCR loans generally follow treasury yields plus a spread, this doesn’t apply to hard money loans. Hard Money Loans have more stable interest rates and don’t move as much. Hard Money rates are typically based on the lender offering the loans and the borrower’s experience.
Additionally, Hard Money lenders with nationwide platforms and long track records can generally offer the lowest interest rates. In contrast, hard money lenders with less of a track record and reputation can have hard money investment property rates as high as 18%.
Additionally, for highly experienced borrowers with a sterling track record of BRRRR or fix and flip deals get the lowest hard money loan rates. Current hard money loan interest rates for the most experienced flippers are as low as 8.9%!
We recommend contacting a Hard Money Loan specialist directly to track Hard Money loan interest rates!
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