> ## Content Index > Fetch the complete content index at: https://www.mortgagemomradio.com/llms.txt > Use this file to discover other available public pages before exploring further. # Why Are Investment Property Mortgage Rates So Much Higher Than Owner-Occupied? - URL: https://www.mortgagemomradio.com/why-are-investment-property-mortgage-rates-so-much-higher-than-owner-occupied/ - Published: 2023-01-25T21:00:00.000Z - Updated: 2026-09-04T20:54:52.000Z - Description: Investment property rates aren’t high because your loan officer decided so — they’re priced by risk adjustments that stack on top of the owner-occupied rate. Debbie walks through the math with real examples, then answers the question every homeowner is asking: HELOC or refinance? - Author: Deborah Marcoux - Tags: Podcast, Mortgage Mom Radio, #episode-backfill Mortgage Mom Radio • “Mortgage Mom Radio Live” • Live show from Wednesday, January 25, 2023 • 61 minutes • Hosted by Debbie Marcoux, NMLS #237926 If you have ever asked for a quote on a rental property and nearly fallen out of your chair, this is the episode that explains why. Investment property rates are not higher because a lender decided to charge you more — they are priced with risk adjustments that come down from Fannie Mae and Freddie Mac and stack on top of the owner-occupied rate. Debbie walks through two real pricing examples, then answers the question every homeowner with a 3% first mortgage is asking right now: is a HELOC or a full refinance the cheaper way to get cash? ## Key takeaways - **Investment property pricing is an adjustment, not a different rate sheet.** The adjustments come from Fannie Mae, Freddie Mac and the investors funding the loan — they are pricing the risk they are willing to take. Your loan officer and their company don't set them and can't waive them. - **Best case still costs you.** An 800 credit score putting 30% down on a single-family investment property takes no hit for credit score — but the simple fact that it's an investment property adds **1.125 points** in cost for the exact same rate an owner-occupant would get at par. - **The adjustments stack fast.** Drop to a 760 score with 25% down and you pick up a **0.625** adjustment for the score, and the investment property adjustment is no longer 1.125 but **3.375**. Same rate, several points of cost — which is what turns a hypothetical 5.5% into something in the sevens. - **Condos, duplexes and 2-to-4 units cost more than single-family, and second homes carry adjustments too.** The logic: the first payment people stop making is on the property they don't live in. - **Multi-family is one of the best first-time buyer plays there is.** Owner-occupy one unit, rent the others, and FHA financing is available with as little as 3.5% down. Inventory is thin because owners with cheap rates won't sell — so get an agent to put you on a drip alert. - **HELOC vs. refinance is a math question, not a preference.** HELOCs are tied directly to the Fed and had climbed into the nines, tens, twelves and fifteens depending on credit score. Whether you keep your low first mortgage and add a line, or consolidate everything, depends on the balance of each. Small line behind a large low-rate first: keep it. Large line behind a modest first: the blended rate may say refinance. - **Debbie's January 2023 forecast:** rates climb through the year to roughly **7.5–8.5%** by the end of 2023, easing through 2024, and possibly back near 5% by mid-to-late 2025\. Her point: it took 15 to 17 months to climb, so don't plan on it falling in six. ## Chapters - 01:00What this show is and how to join live - 02:20Where the market stalled — and why it's moving again - 05:50Q&A: what's the multi-family market like in Los Angeles? - 07:20Why owners with cheap rates won't sell, and what that does to inventory - 10:40Who is actually on the Mortgage Mom Radio team - 16:50Why she says get off the fence and get pre-approved now - 21:00Four headlines in one week: demand jumping as rates dip - 23:00Builder confidence, and buy-downs becoming the trend - 24:40What a “normal” interest rate actually is - 25:40Q&A: is there any sign of rates dropping? - 26:50Debbie's forecast: 7.5–8.5% by year-end, then 2024 - 27:40Why rates don't fall as fast as they rose - 35:40Q&A: HELOC or refinance — which is better right now? - 38:40Blending the rates: the math that decides it - 52:00Investment property rates: where the extra cost comes from - 53:50Best case: 800 score, 30% down, single family - 56:00When the adjustments stack: 760 score, 25% down - 57:50Q&A: can you use home equity to buy an investment property? ## Questions answered on this show ### “How is the multi-family property market in LA? I don't see many new listings.” Multi-family is always desirable, and it's fantastic for a first-time buyer who wants to live in one unit and rent the others to help carry the property. For an investor it beats putting everything into a single property — if one tenant in a fourplex doesn't pay, the other three carry you. It's also easier to renovate: you vacate and remodel one unit at a time as tenants move out. FHA financing is available with as little as 3.5% down if you're going to owner-occupy. The reason you don't see listings is the same reason inventory is low everywhere: owners and investors holding very low rates don't want to give up those payments and that cash flow, so they're sitting tight. Get a real estate agent to put you on a drip alert so you hear the moment a new one hits. ### “Is there any sign of interest rates dropping?” Not this year, in Debbie's opinion — and she's careful to say it is an opinion, not advice from a financial advisor. Her read after 28 years in the business: rates continue to climb through 2023 to roughly 7.5–8.5% by year end, start coming back down through 2024, and possibly approach 5% again around mid-to-late 2025\. The reasoning is the timeline, not a hunch: rates started climbing at the end of 2020 and were on an escalator all through 2022\. However long it took to get to the top is roughly how long it takes to come back down — plus a stretch in the middle where they neutralize and hold. So the plan of “I'll buy now and refinance in six months” is not one she'd build around. ### “I've been contemplating a HELOC versus a refinance. Which is the better option right now?” It depends entirely on the two balances, and it's a real calculation, not a preference. The instinct is to protect a first mortgage in the twos or threes, and that instinct is valid. But home equity lines are tied directly to the Federal Reserve's rate, so a line that priced at five and a half, six and a half or even seven percent in early 2022 had climbed into the nines, tens, twelves and fifteens by this show, depending on credit score. So: what do you owe on the first, what's the rate, how much cash do you need, what's your score, what's your home worth, what's the loan-to-value? Price the line, then blend the rates. Owe $200,000 at 4% and want $100,000 at a high line rate, and a full refinance may well be cheaper. Owe $600,000 at a low rate and want $100,000, and the line is probably your cheapest money. Debbie's team has no preference between the two products — the only goal is the one that fits. ### “Can you use home equity to buy a second home or an investment property, and what are the risks?” Yes, but you have to actually take the cash out — either a line of credit or a cash-out refinance. Equity can't be transferred from one property to another on paper; the money has to come into your hands to be used as a down payment. The risk is exactly what it sounds like: you're adding debt to the home you live in. Can you afford it? And if the investment goes sideways, you now owe more on your primary residence. It's done all the time and it's a genuine way to start a real estate portfolio — it's a question of whether you're ready to carry that risk. ### Run your own numbers with someone who'll tell you to do nothing Call [844-935-3634](tel:8449353634) (844-WE-LEND-4), [start an application](https://www.mortgagemomradio.com/apply/), or use the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rate rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/). Full transcript (lightly edited for clarity) *Auto-generated captions cleaned for readability. Commercial breaks, licensing recitations, promotional segments and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page.* ### Where the market stalled, and why it's moving again Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, I'm the Mortgage Mom, and this is our live show every Wednesday, broadcast on YouTube, Facebook and Twitch. This show exists to give you the education and information you need about all things real estate and mortgage. A couple of weeks back I talked about what I thought 2023 would bring — where interest rates go by year end, where property values go, and whether you should be getting off the fence and into the application process. The answer was yes, yes, and yes. What I could see from all the articles and analytics is that we went through a sleeper mode. Everybody calmed down. Interest rates more than doubled in one year, and buyers said forget it, I'm not buying right now. Sellers said forget it, it would be more expensive to sell and then go try to move. Everything came to a stalemate. And we are starting to see things move. I want you to try to get started before the tides turn. ### Q&A: the multi-family market Alberto asks: *“How's the multi-family property market in LA? I don't see many new listings.”* Multi-family properties are always very desirable. They're fantastic for first-time buyers who want to live in one unit and rent out the others to help with the cost of the property — it keeps their own housing cost down. They're also great for investors, instead of having all of your money in one property where if that tenant doesn't pay you, you're just out. With a fourplex, if one person doesn't pay, you have the other three units carrying you. It's also great when you renovate: as one tenant moves out you remodel that unit, then the next, and so on. And they offer FHA financing for an owner-occupied property — you could get in with as little as three and a half percent down if you're going to occupy. Why can't you find them? Same reason I mentioned in my last couple of shows. A lot of homeowners and investors who own property right now have very, very low interest rates, and it just doesn't make sense for them to sell and move their money into something bigger or better. So they're holding tight, they're not listing, and inventory stays low. Something as desirable as units, you're going to see even less of. If you're interested in buying one, make sure you have a real estate agent who has you on a drip system alerting you every single time a new one comes available, so you can get on it as fast as possible. ### The team behind the show I want to remind everybody: even though I'm the one doing the show, I'm still very in touch with everything happening in the office. We are a small group — it's me, Heather, Heidi, Carrie and Jenny, with Manny also helping, Mikey doing the production of the show, and Drew who edits it. That's the entire team. So if a loan comes through the door, whether or not you've talked to me, I know who you are, I know your file. If you call our office, we are taking care of you. This show is my way of doing marketing. I'm not going to get on the radio and spit out interest rates that don't exist and yell “call now.” I want to educate you so you're in a better place when you're ready to buy, or when you need to do that refinance or cash-out. Our goal is that you're educated, knowledgeable and ready — and that in turn you feel confident working with us. *\[Debbie also recapped the promotional offer she and Heather had detailed on the previous week's show, and pointed listeners back to that episode for the full terms. Because that offer was specific to early 2023, it is not reproduced here.\]* ### Why I keep saying get off the fence I watch the articles come through my email every day, and since just last Wednesday I've already received four articles from four different places, all with headlines that make the same point. Here's one from NBC: weekly mortgage demand jumps 7% as interest rates drop to the lowest level since September 2022\. So think about what that means. Right now, if you're a first-time buyer with a low down payment trying to get into a home that's been sitting on the market 90 or 100 days with no offers on it, you have a lot more opportunity to get your offer accepted — and to get the seller to pay some closing costs and help you buy that rate down. As soon as the market decides things have turned and it's time to jump back in, you're in a competitive environment where another offer comes in with 20% down, 30% down, or all cash, and they're not looking at you anymore. Another came from SoFi: analysts say this is a turning point for the housing market. It gets into home builder confidence — builders starting to pull permits again, getting ready to build. “Change is gonna come” is exactly how they wrote it. And in that same article: mortgage buy-downs, the latest real estate trend. We've been talking about buy-downs on this show for a year, maybe a year and a half — we started before it was popular, so I'm going to take some credit for that. Here's the thing about the current market: if a home is listed for sale, it's because the seller needs to sell. Nobody is listing right now who doesn't need to. So if it's for sale, it needs to go — and a home that's been sitting 30, 60, 90, 100 days gives you a real chance at closing cost credits and a good deal, while rates are under the peak we hit in September 2022. And remember what the analysts have been saying: they anticipate rates anywhere between seven and a half and eight and a half percent by year end. So if a seller helps you, and we help you, and we get you into the fives — those are fantastic, normal average interest rates. I want you to hear that. We've all grown accustomed to three percent and four percent. Those aren't normal. Over a 30-year history, normal is closer to seven percent. If we can get you into the five percent range, that's absolutely fantastic. ### Q&A: any sign of rates dropping? Cole asks: *“Is there any sign of interest rates dropping?”* I'm not going to speak for the analysts and I'm not a financial advisor, but my opinion, having done this now for about 28 years — I started in 1995 — is that interest rates are going to continue to climb. I think we got a nice quick drop we weren't anticipating, and it's a fantastic time to lock in a rate before they go higher. If you ask what the Mortgage Mom Radio crystal ball says, and it is not 100% accurate by any means: I'd anticipate seven and a half to eight and a half percent by the end of 2023, and then rates starting to come back down through 2024. A lot of people have it in their mind: I'll get into a house right now and refinance later, and it'll only take about six months. It's like losing weight. However long it took you to put it on is about how long it takes to get it off — sometimes longer. Rates started climbing at the end of 2020 and were on that escalator all through 2022\. I think that upward motion runs through 2023\. Maybe we get lucky and things slow in the last quarter of 2023, but then they need to neutralize and sit for a minute before they actually start coming down. You're talking about 15, 16, 17 months that it took to get there. So if you think rates are coming down super fast, I don't think that's going to happen. Maybe 2024, end of 2025, mid-2025, we see something around the five percent mark with no points. Again — I don't have a crystal ball. Nobody does. That's the best opinion I can give you from years of experience. ### Q&A: HELOC or refinance? Claudia asks: *“I've been contemplating applying for a HELOC versus refinancing. Which is a better option right now?”* Great question, and one a lot of homeowners are stuck on. It's tempting to protect the rate on your current home, which is probably somewhere in the threes, maybe 2.9, maybe even two and a half depending on when you got it — and it's hard to feel good about a refinance that doubles your rate. That's a valid feeling. What many consumers don't realize is that home equity lines of credit are tied directly to the Federal Reserve's rate. They're adjustable. If you'd called me in early 2022 and I'd offered you a line at five and a half, six and a half, even seven percent, that was a great rate then. But as the Fed keeps bumping that rate, we're seeing equity lines anywhere in the nines, tens, twelves, fifteens depending on your credit score. Those are getting really high. So what determines the answer is the balance you owe on your current mortgage and the amount you're pulling from the line. I can't answer it without the details, and we can do it quickly over the phone or by email: how much do you owe, what's your current rate, how much are you looking for, what's your credit score, what's the house worth, what's your loan-to-value. Then we price the line and blend the two rates together. Say your score is 640, you want $100,000, your loan-to-value with that money is 80%, and the rate we'd quote on the line is high — and you owe $200,000 on your mortgage at 4%. When we blend those together, there's a very good chance a brand new refinance is the lower option. But say you owe $600,000 on your mortgage and you want $100,000 out — then the equity line is probably your cheapest way to get your money. I'm throwing out examples, not quoting you. We don't care whether you do a line or a full refinance. We want the product that fits you best, and the only way to know is to run your particular scenario. ### Investment property rates: where the extra cost comes from I promised at the beginning of the show I'd talk about investment property interest rates, so let's get into it. Rates are higher on investment properties, and most of you know that. What you may not know is that it's not any particular lender's decision. It's not that you come to me and I decide to charge you more because it's an investment. It comes down to us from Fannie Mae, from Freddie Mac, and from the investors we're using to write those loans. They determine the risk they're willing to accept for an investment property purchase or refinance. It can get very pricey, which is why you might fall over when you get a rate quote — you weren't expecting the rate to be that high, and it isn't similar to what you'd get on your own owner-occupied purchase. So I want you to understand how those rates change. ### Best case: 800 score, 30% down Take a really good borrower: an 800 credit score, 30% down, buying a single-family residence — not a condo, not a duplex, not a three or four unit. What adjustments come down from Fannie and Freddie to pass on to the borrower? For credit score, in that scenario, no adjustment over what the owner-occupied rate would be. But at the very best-case loan-to-value with 30% or more down, the simple fact that it's an investment property adds **1.125 to the pricing**. That does not mean the interest rate goes up 1.125\. It means the pricing — what it *costs* to get that particular interest rate. So let's say the going rate is five and a half, with no points, for an 800 score owner-occupant with 30% down on a single family. That same exact rate for the same borrower buying that same property as an investment costs 1.125 points. On a typical loan amount that's thousands of dollars in cost for the identical rate. And if we're quoting off a rate sheet with no points instead of passing along that fee, that cost is what takes five and a half up to something like six and a half, six and three eighths, six and three quarters. The rate moves because the cost has to go somewhere. ### When the adjustments stack Where it gets really costly is when you don't have an 800 score, don't have 30% down, and aren't buying a single family — you're buying a condo, a duplex, or multiple units. Then the adjustments start to add up. For example: if your credit score is 760 and you're putting 25% down, there's a **0.625 adjustment just for the credit score**. And the investment property adjustment at 25% down with a 760 score is no longer 1.125 — it's **3.375 points**. So that's 3.375 plus 0.625\. That is a lot of cost for the same exact rate the owner-occupied borrower gets at zero points. What does it do to the rate? It takes that five and a half up to seven and a half, seven and three quarters. It skyrockets. I don't want to steer you away from buying investment properties — I still think they're fantastic. I want you in tune with the kind of rate you should expect before you go down that road. And I want you to understand it is not the loan officer you're calling who's making that rate crazy, and it's not the mortgage company they work for. It's passed down from the top, and they are risk adjustments for the fact that these are not owner-occupied. The first thing people let go of when they can't make a payment is something they don't live in. That goes the same for investments and for second homes. ### Q&A: using home equity to buy another property Michael asks: *“Can you use home equity to buy a second home or an investment property, and what are the risks?”* You absolutely can use home equity, but you have to get the cash out. Whether you pull a line of credit or do a cash-out refinance, you have to actually get the cash in hand. It's not as though we can say he's got this much equity in this property so we'll transfer it to that one. You have to do the refinance or get the line of credit to have the money to go buy the other one. The risks: you're putting more debt on the home you live in and own. Can you afford it? Are you willing to take that risk? What if you lose that other property — now you owe more on the home you currently live in. We do this all the time. It's a great way to get the cash you need to become an investor and start the real estate portfolio a lot of people wish they had for retirement. It's just a matter of whether you're ready to do it. ### Wrap-up If you want to know when I go live, text the word MOM to 844-935-3634 — that's 844-WE-LEND-4\. One text message a week, no spam, with the link to join on YouTube. That's the same number to call the office, and you can book a consultation right on the website at mortgagemomradio.com. If you'd rather write it out, email me — sit down when you've got a quiet minute and send me every question you have in one list, and I'll answer them. One note: if you don't hear back within 24 hours, check your junk or spam folder, because a first email from a company address often gets filtered. Then call the office. We do not miss a response. We're at our hour — I'll be back next week at one o'clock. Talk to y'all real soon. Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of January 25, 2023, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.