You already know that getting a good mortgage deal could be the difference between positive cash flow and negative cash flow when you’re looking to buy an investment property. And even for first time home buyers, locking in the lowest mortgage rates will give you the chance to purchase your dream home at an affordable monthly rate. With a 30-year fixed mortgage rate of 3.3%, you’ll be paying $1,510 monthly for a $350,000 house with a 20% down payment. Ideally you should be paying less, if possible.
This article will show you the 10 best places to look if you’re on the hunt for the lowest mortgage rates, using current rates from two sources: ValuePenguin and Bankrate. Note that the values below are based on loans for primary residences. For conventional investment property loans, according to The Mortgage Reports, “you can expect the interest rate on your investment property loan to be at least 0.50% to 0.75% higher than the rate on your primary mortgage”. So, if you could grab a 3.25% rate for a residential property, you might have to settle on 4.00% for investment property mortgage rates.
Without further ado, here are the 10 states with the most favorable mortgage rates. For each state we show you real estate data, based on Mashvisor’s nationwide market analysis. In this way you can decide if any of these markets fits not only your budget but also your expectations and requirements as a real estate investor. For each state, you can check if long-term (traditional) or short-term (Airbnb) rental properties bring a higher rate of return.
Utah
Utah offers some of the lowest mortgage rates in the US in 2021
Utah was one of the smaller states that experienced population growth during the Covid-19 pandemic. It’s a great place to invest considering the population has grown 14.4% since the last decade, and it still has low mortgage rates. Keep in mind that 8 Utah counties have conforming loan limits above the benchmark $548,250 amount (conventional loan limit for 1-unit homes).
According to Mashvisor:
- Median property price: $670,012
- Price per sq ft: $370
- Traditional rental income: $1,528
- Traditional cash on cash return: 1.37%
- Price to rent ratio: 37
- Airbnb rental income: $2,474
- Airbnb cash on cash return: 2.13%
- Airbnb daily rate: $163
- Airbnb occupancy rate: 62%
According to ValuePenguin:
- Average 30-tear fixed rate mortgage = 3.88%
- Average 15-year mortgage rate = 3.36%
- Average 5/1 ARM rate = 3.54%
According to Bankrate:
- Average 30-Year fixed rate mortgage = 3.34%
- Average 15-Year mortgage rate = 2.53%
Hawaii
According to Mashvisor’s US real estate market analysis, current median home values in Hawaii are the highest in the US. But the state has the lowest median effective tax rate in the country and some of the lowest mortgage rates. In Hawaii, the conforming loan limit for a single unit house or apartment is $822,375. For 2-unit homes, it is $1,053,000.
According to Mashvisor:
- Median property price: $1,004,840
- Price per sq ft: $791
- Traditional rental income: $2,099
- Traditional cash on cash return: 1.97%
- Price to rent ratio: 40
- Airbnb rental income: $3,033
- Airbnb cash on cash return: 1.69%
- Airbnb daily rate: $281
- Airbnb occupancy rate: 53%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.75%
- Average 15-year mortgage rate = 3.36%
- Average 5/1 ARM rate = 3.37%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.13%
- Average 15-year mortgage rate = 2.33%
- Average 5/1 ARM rate = 2.25%
District of Columbia
DC is named the 4th most expensive city in the US. Property values in Washington, DC since 2010 have always been above the national average, and it historically had high mortgage rates. But due to the Coronavirus pandemic, mortgage rates in Washington, DC have been on a steady decline, providing a window of opportunity for property investors and first time buyers. DC had some of the lowest mortgage rates. The conforming loan limit is $822,375 for 1 unit homes. As the capital city, Washington has a strong demand for traditional rentals and thus one of the highest rates of return for this rental strategy in this list.
According to Mashvisor:
- Median property price: $651,962
- Price per sq ft: $589
- Traditional rental income: $2,316
- Traditional cash on cash return: 2.62%
- Price to rent ratio: 23
- Airbnb rental income: $2,060
- Airbnb cash on cash return: 1.08%
- Airbnb daily rate: $146
- Airbnb occupancy rate: 51%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.94%
- Average 15-year mortgage rate = 3.32%
- Average 5/1 ARM rate = 3.49%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.37%
- Average 15-year mortgage rate = 2.51%
- Average 5/1 ARM rate = 2.75%
Massachusetts
Massachusetts is another state with low mortgage rates in 2021
Home prices have risen in Massachusetts beyond the national average, but the lowest mortgage rates in the state have recently been recorded – the lowest since 2010. Seven of Massachusetts’ 14 counties have conforming loan limits above the $548,250 baseline.
According to Mashvisor:
- Median property price: $670,012
- Price per sq ft: $370
- Traditional rental income: $1,528
- Traditional cash on cash return: 1.37%
- Price to rent ratio: 37
- Airbnb rental income: $2,474
- Airbnb cash on cash return: 2.13%
- Airbnb daily rate: $163
- Airbnb occupancy rate: 62%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.81%
- Average 15-year mortgage rate = 3.33%
- Average 5/1 ARM rate = 3.45%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.29%
- Average 15-year fixed rate mortgage = 2.56%
- Average 5/1 ARM rate = 3.33%
Connecticut
Historically, Connecticut’s mortgage rates have been coming in slightly lower than the national average. Conversely, price rises here have been slightly higher than the national average. Connecticut has a standard conforming loan limit of $548,250.
According to Mashvisor:
- Median property price: $527,099
- Price per sq ft: $244
- Traditional rental income: $2,146
- Traditional cash on cash return: 2.33%
- Price to rent ratio: 20
- Airbnb rental income: $3,885
- Airbnb cash on cash return: 3.58%
- Airbnb daily rate: $202
- Airbnb occupancy rate: 63%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.79%
- Average 15-year mortgage rate = 3.28%
- Average 5/1 ARM rate = 3.37%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.32%
- Average 15-year mortgage rate = 2.56%
- Average 5/1 ARM rate = 3.09%
Rhode Island
Known as the “Ocean State”, Rhode Island is the smallest state in the US with a variety of beachfront cities and suburban communities. That’s what makes it a popular destination for short-term visitors and an ideal location for an Airbnb investment property. The conforming loan limit in every Rhode Island county is $548,250, the current benchmark. The FHA has set the limit for each county to $506,000, and this is higher than the standard $356,362 limit.
According to Mashvisor:
- Median property price: $598,751
- Price per sq ft: $322
- Traditional rental income: $1,814
- Traditional cash on cash return: 1.73%
- Price to rent ratio: 28
- Airbnb rental income: $3,540
- Airbnb cash on cash return: 3.32%
- Airbnb daily rate: $224
- Airbnb occupancy rate: 60%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.80%
- Average 15-year mortgage rate = 3.29%
- Average 5/1 ARM rate = 3.42%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.37%
- Average 15-year mortgage rate = 2.55%
Delaware
Average mortgage rates in Delaware are close to the national averages. Median home prices follow suit. Delaware has one of the highest homeownership rates in the country at 71%. The conforming loan limit for its 3 counties is $548,250. It’s important to note that the average return on investment on short-term rental properties is strong in the Delaware real estate market.
According to Mashvisor:
- Median property price: $435,102
- Price per sq ft: $211
- Traditional rental income: $1,564
- Traditional cash on cash return: 2.70%
- Price to rent ratio: 23
- Airbnb rental income: $2,452
- Airbnb cash on cash return: 3.24%
- Airbnb daily rate: $261
- Airbnb occupancy rate: 53%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.87%
- Average 15-year mortgage rate = 3.33%
- Average 5/1 ARM rate = 3.67%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.37%
- Average 15-year mortgage rate = 2.54%
New Hampshire
New Hampshire is a New England state known for its quaint towns, mountains, and wilderness expanses. Mortgage rates in New Hampshire have historically been at or below national averages. The conforming loan limit for its counties (except Rockingham and Strafford) is set at $548,250
According to Mashvisor:
- Median property price: $503,203
- Price per sq ft: $249
- Traditional rental income: $1,871
- Traditional cash on cash return: 1.78%
- Price to rent ratio: 22
- Airbnb rental income: $3,339
- Airbnb cash on cash return: 3.28%
- Airbnb daily rate: $226
- Airbnb occupancy rate: 61%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.84%
- Average 15-year mortgage rate = 3.35%
- Average 5/1 ARM rate = 3.42%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.34%
- Average 15-year mortgage rate = 2.57%
New Jersey
New Jersey is the state with the 11th largest population in the US. It also has one of the highest property taxes. In specific, the average property tax bill is $8,432, the highest in the country. The conforming loan limit for many of New Jersey’s counties is $822,375.
According to Mashvisor:
- Median property price: $489,764
- Price per sq ft: $640
- Traditional rental income: $2,153
- Traditional cash on cash return: 2.53%
- Price to rent ratio: 19
- Airbnb rental income: $2,751
- Airbnb cash on cash return: 1.94%
- Airbnb daily rate: $221
- Airbnb occupancy rate: 56%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.86%
- Average 15-year mortgage rate = 3.35%
- Average 5/1 ARM rate = 3.57%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.27%
- Average 15-year mortgage rate = 2.53%
- Average 5/1 ARM rate = 3.14%
Idaho
Idaho’s home values have increased in recent years. But the average effective property tax rate in Idaho is below the US average. Also, Idaho has historically been one of the states with the lowest mortgage rates. The conforming loan limit for Idaho’s counties (except Teton, Lincoln, and Camas) is set at $548,250
According to Mashvisor:
- Median property price: $723,904
- Price per sq ft: $332
- Traditional rental income: $1,472
- Traditional cash on cash return: 1.50%
- Price to rent ratio: 41
- Airbnb rental income: $2,622
- Airbnb cash on cash return: 2.36%
- Airbnb daily rate: $168
- Airbnb occupancy rate: 56%
According to ValuePenguin:
- Average 30-year fixed rate mortgage = 3.89%
- Average 15-year mortgage rate = 3.4%
- Average 5/1 ARM rate = 3.57%
According to Bankrate:
- Average 30-year fixed rate mortgage = 3.38%
- Average 15-year mortgage rate = 2.57%
10 States with the Lowest Mortgage Rates in 2021: Conclusion
Please note that these rates vary weekly. But as of May 2021, these 10 states currently have the lowest mortgage rates, and some of them are among the best states to invest in real estate.
Keep in mind that even though your location determines your current mortgage rates to an extent, your personal financials matter do that to a greater extent, i.e., your credit score, DTI (debt to income), LTV (loan to value), and the amount of down payment you can afford.
Combine good financials with the right location and you can greatly improve your mortgage terms. As an investor, apart from grabbing the lowest mortgage rates, there are other potential expenditures you’ll need to factor in. You should add these all up in Mashvisor’s investment property calculator to determine the profitability of your potential rental property.