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Investment Property Mortgage Rates Continue to Drop

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Now is an excellent time to buy or refinance investment properties for more reasons than one, not the least of which is that investment property mortgage rates are continuing to drop like a stone.  Freddie Mac released its most recent survey of mortgage rates on 6/2/2011, and rates fell for the seventh week in a row.

Based on the latest survey, the average rate for a 30-year fixed loan dropped from 4.60% to 4.55% (with 0.6 pts) and the average 15-year mortgage moved to 3.74% (with 0.7 pts) from 3.78%.  Last year at this time, averages were 4.79% and 4.20%, respectively.  Of course keep in mind that Freddie’s survey rates are for residential, owner-occupied properties; for an investment property mortgage, add about 0.25%.  Interestingly, the decline is only attributable to fixed rate mortgages; adjustable rates were either flat or up.

The reason for the continuing slide in fixed mortgage rates is the unstable state of the economy.  For example, consumer spending in the 1Q 2011 was just revised downward by 0.5% (down to 2.2%), and manufacturing slowed down in May for the 3rd straight month.  Additionally, average home prices have actually declined approximately 5% from the 1Q 2010 to the 1Q 2011 (according to the Case-Shiller National Home Price Index), which is the biggest year-over-year decline since the 3Q 2009!  Adding to the economic misery is all the damage from the natural disasters that have occurred recently, such as the massive tornadoes in the Carolinas and Midwest, and the earthquake and tsunami in Japan.

The good news is that investment properties have not been impacted nearly as much as the residential home market, and in fact rental properties continue to be one of the best long term investment strategies today.  And if you can refinance now to put more money in your pocket, all the better!

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