Investment Financing
Real Estate Investment Financing
Hard money, DSCR, conventional — find the right loan for your strategy and compare rates before you commit.
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Types of Investment Property Loans
Hard Money Loan
Best for: Fix & Flip, short-term acquisitions
Term
6–18 months
Max LTV
65–80% of ARV
Typical Rate
9–14%
Close Speed
5–10 days
Pros
- ✓Fastest close — fund in days, not weeks
- ✓Qualifies on property value, not income
- ✓100% of rehab costs funded in draws
- ✓No prepayment penalty on most
Cons
- ✗Higher interest rates (9–14%)
- ✗Short terms require a clear exit strategy
- ✗2–4 origination points typical
DSCR Loan
Best for: Buy & Hold, BRRRR refinances, rentals
Term
30 years (fixed or ARM)
Max LTV
Up to 80%
Typical Rate
7–10%
Close Speed
2–4 weeks
Pros
- ✓Qualifies on rental income, not W-2
- ✓No limit on number of properties
- ✓Works for LLCs and entities
- ✓Cash-out refinance available
Cons
- ✗Slightly higher rates than conventional
- ✗Minimum DSCR of 1.0–1.25 required
- ✗20–25% down payment typically required
Conventional Investment Loan
Best for: 1–4 unit rentals, strong W-2 borrowers
Term
15 or 30 years (fixed)
Max LTV
Up to 75–80%
Typical Rate
6.5–8.5%
Close Speed
3–6 weeks
Pros
- ✓Lowest rates of any investment loan type
- ✓Best for long-term hold and cash flow
- ✓Fannie/Freddie backed — widely available
Cons
- ✗Requires personal income qualification (DTI)
- ✗Limited to ~10 financed properties
- ✗Longer underwriting timeline
Bridge Loan
Best for: Acquisition before permanent financing is secured
Term
3–24 months
Max LTV
65–75%
Typical Rate
8–12%
Close Speed
1–2 weeks
Pros
- ✓Bridges the gap to permanent financing
- ✓Flexible exit — sell or refinance
- ✓Interest-only payments during term
Cons
- ✗Higher cost than permanent financing
- ✗Requires clear refinance or sale exit
How to Compare Investment Loan Rates
Rates vary significantly across lenders — even 0.5% on a $300,000 loan is $1,500/year. Here's how to shop effectively:
- 1Get at least 3 quotes: Never accept the first offer. Even on hard money loans, lenders compete on rates, points, and terms.
- 2Compare APR, not just rate: APR includes origination fees and points. A loan with a lower rate but 3 points may be more expensive than one at a higher rate with 1 point.
- 3Ask about prepayment penalties: Common on DSCR and hard money loans. If you plan to sell or refi within 3–5 years, negotiate this out or choose a lender without them.
- 4Lock your rate: Once you have a purchase under contract, lock the rate immediately. Rate float can add $200–$400/month if markets move against you.
Down Payment Requirements
Investment properties require larger down payments than primary residences. Plan accordingly:
| Loan Type | Min. Down Payment | Notes |
|---|---|---|
| Hard Money | 20–35% | Based on ARV — rehab costs funded separately |
| DSCR | 20–25% | 20% common for SFR; 25% for 2–4 units |
| Conventional (1 unit) | 15–20% | 15% available with strong credit; 20% for better rates |
| Conventional (2–4 unit) | 25% | Fannie/Freddie minimum for investment multi-family |
| Commercial (5+ units) | 25–35% | Based on NOI and DSCR of the property |
When to Refinance Your Investment Property
Refinancing at the right time can dramatically improve your returns. Consider refinancing when:
- →Rates have dropped 0.75%+ below your current rate and you plan to hold for 2+ more years
- →Your property has appreciated significantly and you want to pull out equity (cash-out refi) to fund new acquisitions
- →You're exiting a hard money or bridge loan and stabilizing into long-term debt
- →You want to remove a partner from the title and loan
- →You need to free up a Fannie/Freddie slot by moving to a DSCR or portfolio loan
Break-even tip: Divide your closing costs by your monthly savings to find the break-even point. If closing costs are $4,000 and you save $200/month, you break even in 20 months. Only refinance if you plan to hold longer than that.
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