Yes, the property type affects the rate you can lock. Investment properties, second homes, and multi-unit properties typically have higher interest rates than primary residences. The property type is assessed when you apply, and the rate you lock reflects its risk category.
Here is how different property types affect your rate lock.
Primary Residence
Primary residences receive the most favorable rates because they are considered the lowest risk. If you live in the home as your main residence, you will qualify for the best available rate for your credit profile and loan type.
Second Homes
Second homes or vacation homes typically have slightly higher rates than primary residences. Lenders view them as higher risk because borrowers may prioritize their primary mortgage payment if financial difficulties arise. Expect a rate premium of around 0.25% to 0.5% for second homes.
Investment Properties
Investment properties have the highest rates among property types. Lenders consider them the riskiest category because they are not owner-occupied. Rate premiums for investment properties can range from 0.5% to 1% or more above primary residence rates.
Multi-Unit Properties
Properties with 2 to 4 units also have rate premiums, though the exact amount depends on whether you occupy one of the units. Owner-occupied multi-unit properties may have slightly better rates than non-owner-occupied ones.
Bottom Line
The property type directly affects your locked rate. Primary residences get the best rates, followed by second homes, then investment properties. Discuss your property type with your lender to understand the rate impact before locking.
