It doesn’t matter if you’re interested in taking out a DSCR loan or an interest-only jumbo mortgage. When purchasing an investment property, many people ask the same thing: Is rate the most important factor of financing a mortgage? This consideration is important because it helps you secure financing that makes sense for your financial situation and close on your property with ease.
Understanding how your interest rate impacts your mortgage is essential to strategic investing and choosing the right loan type from the right lender. At mbanc, we have been financing investment properties for years with competitive interest rates that position our customers for success.
Our passion is helping people like you succeed and live on their terms, and achieve their American Dream. Learn if rates are the most important factor for your home loan:
What is an Interest Rate?
A mortgage interest rate is what a lender charges you to take out a loan. Every loan has an interest rate. As you repay your mortgage, you must also pay off the interest that it accrues. Rates can be fixed or adjustable.
Fixed rates offer more security and are important to capitalize on when rates are low. Adjustable rates are often initially lower, but they adjust from time to time and may increase, meaning what you pay over the life of your loan could end up higher.
“When buying rental property that is particularly expensive, we advise taking out interest-only jumbo loans. With these loans, you make interest-only payments for a fixed period. Once this interest-only period ends, your mortgage amortizes into a 20-year or 30-year fixed mortgage without a balloon payment. This split structure gives you the financial flexibility to keep monthly payments down and maximize rental cashflow for a rental property.” explained Desh Weragoda, mbanc’s CTO.
Several things influence interest rates, some of which are out of your control (like market conditions or how interest rates are trending.) The biggest factor that impacts your rate is your credit score. The better your score, the lower the rate you qualify for.
Other factors lenders base rates on are your location, the property value of the home, and the size of your down payment. Larger down payments make it easier to secure lower rates. Essentially, the biggest contributor to your rate is the risk you pose to the lender.
Is Rate the Most Important Factor of Financing a Mortgage?
Is the rate the most important factor in financing a home loan? This topic can, admittedly, be complex to unpack.
The truth is that a lower interest rate will, ultimately, save you money over the life of your mortgage. A lower interest also means you can pay off your loan faster. Still, this is only one aspect of the total cost you will incur when borrowing money. Other factors include:
- Qualification criteria
- Your work history and income
- Ability to repay
- Your debt-to-income ratio
- The type of loan program
- Loan terms and loan amount
An interest-only jumbo loan is a great option to consider. With this loan, borrowers can pay down their principal balance at any time and the monthly payment adjusts to the principal paydown. Also, it’s important to keep in mind that cutting your mortgage rate by just a fraction of a percent can save thousands of dollars.
“At the end of the day, saying interest rates are the single most important factor in your mortgage would simply be untrue. You must consider and focus on several factors that impact your payments. However, while it is just one piece of the homebuying puzzle, it still has a far-reaching impact on how much you pay monthly and over the life of your mortgage,” said Desh.
When you work with some of the best mortgage lenders, you can rest assured you will find the right lending solution for your unique needs.
The Best DSCR Loans and Interest-Only Jumbo Mortgages
So, is rate the most important factor of financing a mortgage? The answer is not cut and dry. The truth is rate may not be the single, most important factor, but it directly impacts your monthly payments. At worst, it is one of the most important factors to consider. The priority is securing financing to easily close on your property.
A competitive rate is essential to maximizing your ROI on this investment because it offers more financial freedom, which means you can reinvest your profits faster and amplify them. At mbanc, we offer premier rates and interest-only jumbo loans that empower people like you to purchase investment properties, create generational wealth through passive income, and live the life they always dreamed of.
To learn more about how our interest-only jumbo loans can finance your short-term rental investing journey with a fast and easy approval process, talk with our team today.