Q: On your radio program one Sunday, you mentioned that you got a very low interest rate when you refinanced an investment piece of property that you owned. I believe the interest rate on the loan was in the 4 percent range. That sounds just too good to be true. Are those deals out there? And, if so, can you please help me find a mortgage lender who will offer me that kind of an interest rate for my investment properties?

A: What I was talking about was an investment condo that my husband and I own, but the financing deal isn’t structured quite the way you think.

We bought this particular investment condominium several years ago from the developer with a 10 percent down payment. We took out an 80 percent first mortgage and a 10 percent second mortgage. Our second loan was at about 7 percent. Our own home equity line of credit is now at about 3.5 percent.

The financing move we made was to trade the 7 percent loan for a 3 percent loan from our home equity line of credit (HELOC). In other words, we took out money from our primary residence’s equity line and used it to pay off the second mortgage on the investment property. That financing move will save us a few thousand bucks this year. We will use that savings to pay down the equity line. If you were to take out a primary loan for investment property today, assuming it fell within Fannie Mae conforming limits, you’d have to put down at least 25 percent in cash and you’d get an interest rate at about 6.5 percent, perhaps with some extra points or fees. So, we did a lot better than that, without incurring any financing charges or fees.

In short: The deal you thought I was talking about on the air probably doesn’t exist in this market. But there are some decent financing options for those real estate investors who want to buy and hold investment properties for long-term capital appreciation and income.

Read More: Visit our topic page on interest rates to find more information about interest rates and mortgage loan programs.

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June 4, 2009