Do Investment and Second Home Properties Get Higher Mortgage Rates?
Yes. Loans on a second home or an investment property usually cost more than the same loan on the home you live in, and they need a bigger down payment. Investment properties cost the most: their rates usually run about 0.5 to 1 percentage point above a primary residence. Second homes generally land in between.
Last updated September 29, 2026Why do these properties cost more to finance?
Lenders see more risk in a home you don't live in. When money gets tight, people tend to keep paying on the house they live in first. That risk is built into pricing through loan-level price adjustments, which raise the rate or fees on second homes and investment properties compared with an otherwise identical loan on a primary residence.
How much higher is the rate?
For an investment property, rates usually run about 0.5 to 1 percentage point above a comparable primary-residence loan, and a bit more on a two-to-four-unit building. A second home is generally priced above a primary residence but below an investment property. Your own gap depends on your credit, your down payment and the lender.
Equity lines and home equity loans on investment properties are a separate case. Fewer lenders offer them, and they're usually priced higher than the same product on a home you live in.
What about down payment and loan-to-value limits?
Those are stricter too. Under Fannie Mae's guidelines, a primary residence can be bought with as little as 3% down. A second home needs about 10% down. A one-unit investment property needs 15% down, and a two-to-four-unit investment property needs 25%. Putting more down usually gets you a better rate.
It depends on your situation:
- A place your family uses part of the year versus a rental: they're priced and underwritten differently, so tell the lender how you'll actually use the property.
- Buying or doing a rate-and-term refinance: expect the investment premium on top of current market rates.
- Taking cash out of an investment property: a cash-out refinance and a home equity line are both possible, but either costs more than the same loan on a home you live in.
- A bigger down payment: on an investment property, more down generally means a lower rate.
| Primary residence | As low as 3% |
|---|---|
| Second home | About 10% |
| Investment, one unit | 15% |
| Investment, two to four units | 25% |
Related questions
Sources
- https://singlefamily.fanniemae.com/media/9391/display
- https://selling-guide.fanniemae.com/sel/b2-3-01/general-property-eligibility
- https://www.investopedia.com/loan-level-price-adjustment-llpa-definition-7498880
- https://sf.freddiemac.com/general/maximum-ltv-tltv-htltv-ratio-requirements-for-conforming-and-super-conforming-mortgages
- https://singlefamily.fanniemae.com/media/20786/display
- https://themortgagereports.com/27698/investment-property-mortgage-rates-how-much-more-will-you-pay
- https://www.rocketmortgage.com/learn/investment-property-vs-second-home
- https://www.lendingtree.com/home/mortgage/down-payment-for-rental-property
- https://www.refiguide.org/heloc-on-investment-property
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.