Current Non-Owner Occupied Mortgage Rates and Lenders
Review current non-owner occupied mortgage rates for October 19, 2018.
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What You Should Know About Non-Owner Occupied Mortgages
Higher Interest Rate.
The interest rates for a mortgage on a non-owner occupied or investment property is usually 0.250% - 0.500% higher than the rate on an owner-occupied property. Additionally, closing costs for non-owner occupied mortgages are also usually higher. Please note that properties that you buy to earn rental income are considered non-owner occupied properties whereas second homes and vacation homes are considered owner occupied properties.
Higher Down Payment Required.
Lenders usually require that borrowers contribute a down payment of 20% - 25% for mortgages on non-owner occupied properties, which means your loan-to-value ratio is 75% - 80%. Additionally, investment properties are not eligible for most conventional or government-backed low or no down payment mortgage programs.
For non-owner occupied mortgages, lenders typically require that borrowers maintain a certain amount of money in reserve at the time your mortgage closes. Reserve requirements range from two-to-six months of total monthly housing expense per property depending on lender guidelines and the number of investment properties you own that are financed with a mortgage. The more investment properties you own (that are mortgaged), the greater the reserve requirement.
Mortgage Tax Benefit Does Not Apply.
The interest expense mortgage tax deduction does not apply to investment properties which is different than an owner-occupied mortgage. Borrowers should contact a tax specialist or accountant to review how tax guidelines apply to investment properties and non-owner occupied mortgages.
Mortgage Rates by Loan Product
Mortgage Rate ReportFriday, October 19, 2018
Mortgage rates moved higher this week as stock market volatility pushed bond yields higher. When the stock market drops, bond yields typically increase which applies upward pressure on mortgage rates, which we saw this week. Ironically, investor concerns over rising interests rates is one of the main factors that led to the equity market sell-off. Rates continue to increase following the Federal Reserve's decision to increase the Federal Funds rate 0.250% to a target range of 2.000% to 2.250% at its September meeting.
The rate hike was the Fed's third of the year as it implements a more aggressive monetary policy in response to a strong economy and labor market. The Fed also reinforced its plan to raise interest rates at least one more time before the end of 2018 and removed language that described its policy as "accommodative" from the meeting statement. The Fed's September meeting statement highlighted strong economic growth including a robust jobs market, household spending, business investment and inflation that is approaching targeted levels. These factors outweigh economic concerns previously identified by the Fed including the impact of a trade tariffs, sluggish wage growth and a slowdown in the housing market.
In implementing its interest rate strategy, it is clear that the Fed is more focused on a robust labor market and accelerating inflation than stalling home sales and prices. Supporting the Fed's outlook, the unemployment rate recently fell to its lowest level an almost five decades despite lower than expected job creation.
Although the housing market continues to be battered by a lack of affordable inventory, higher mortgage rates and a pullback in home construction -- all of which the Fed has acknowledged in recent comments -- the overall direction of the economy is offering no reason for the Fed to change its course on rates. The Fed's actions and consistently bullish signaling pushed mortgage rates to an eight-year high this week.
The interest rate for a 30 year fixed rate mortgage increased 0.125% to 4.750% and the rate for a 15 year fixed rate mortgage moved 0.125% higher to 4.250%. The interest rate on a 5/1 adjustable rate mortgage (ARM) also jumped 0.125% to 4.250%. Jumbo mortgage rates inched up 0.125% to 4.750%, inline with conforming loans. After climbing over much of the past month non-owner occupied mortgage rates reached the key 5.000% level. Providing some relief for borrowers, FHA mortgage rates and VA mortgage rates both remained steady at 4.250%, with both programs appealing to borrowers focused on low or no down payment programs, especially first-time home buyers.
The Fed had clearly communicated its plan to raise rates at its September meeting so few were surprised by the decision as well as the subsequent uptick in mortgage rates. Most signs -- including perhaps most important, the Fed's actions and words -- point to higher rates in the future, although borrowers should expect fluctuations in the near term. While interest rates are impossible to predict, prospective borrowers looking to buy a home or refinance should take advantage of any market pullbacks and may be able to lock in a lower rate by acting sooner rather than later. As lenders react differently to dynamic market conditions, we have also seen much wider variation in mortgage rate pricing, which means borrowers benefit more by shopping multiple lenders.
Because rates change constantly, we continue to actively monitor the mortgage market for new developments. Borrowers should check the FREEandCLEAR rate tables regularly to review personalized, updated mortgage rates for lenders in their area. Our rate tables are free to use and require no personal information.
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Non-owner occupied mortgages can be challenging so hit up the FREEandCLEAR Mortgage Expert with any questions. The feature is free to use plus you will receive an insightful answer within 24 hours