Investment Property Mortgage Calculator
Enter the property price, down payment, interest rate, and loan term to calculate your monthly mortgage payment, total interest, and first-year principal vs. interest breakdown. Designed for investment property purchases where typical down payments are 20-25%.
Results are estimates for informational purposes only. Not financial advice. Full disclaimer.
What is Investment Property Mortgage?
A mortgage payment consists of principal (paying down the loan balance) and interest (the cost of borrowing). For investment properties, mortgage terms differ from primary residences: down payments are typically 20-25% (vs. 3-20% for primary homes), interest rates are usually 0.25-0.75% higher, and lender requirements are stricter. The Loan-to-Value (LTV) ratio shows what percentage of the property value is financed. An LTV of 80% means you borrowed 80% and put 20% down. Most investment property lenders require LTV of 75-80% or lower. DSCR lenders may go to 80% LTV if the property's income supports it. In the early years of a mortgage, most of your payment goes to interest rather than principal. On a $240,000 loan at 7%, approximately $16,700 of the first year's $19,100 in payments goes to interest — only $2,400 reduces the loan balance. This ratio shifts gradually over the life of the loan, with more going to principal each year. The total interest paid over the full loan term is often surprising. A $240,000 loan at 7% for 30 years costs approximately $335,000 in total interest — more than the original loan amount. This is why many investors consider shorter loan terms (15 or 20 years) or plan to refinance when rates are favorable. For rental property investors, the monthly payment is the key input for cash flow analysis. It flows directly into your cash flow, cash-on-cash return, and DSCR calculations. The principal portion of each payment builds equity, while the interest portion is generally considered a tax-deductible expense — consult a tax professional for specifics.
How to Calculate
- Enter the property's purchase price
- Enter your down payment amount (typically 20-25% for investment properties)
- Enter the interest rate (check current rates with your lender)
- Select the loan term (30 years is most common; 15 and 20 years are also available)
- Review the monthly payment, LTV ratio, total interest, and first-year breakdown
Formula
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1] Where: P = loan amount, r = monthly interest rate (annual rate ÷ 12), n = total number of payments (years × 12) Loan Amount = Property Price − Down Payment LTV Ratio = Loan Amount ÷ Property Price × 100 Total Interest = (Monthly Payment × Total Payments) − Loan Amount First Year Split: calculated by amortizing 12 payments and summing interest vs. principal portions
Example Calculation
For a $300,000 property with $60,000 down payment (20%) at 7% for 30 years: Loan Amount = $300,000 − $60,000 = $240,000 LTV = $240,000 ÷ $300,000 × 100 = 80% Monthly Payment = $240,000 × [0.00583 × 1.00583^360] / [1.00583^360 − 1] = $1,596.73 Total Cost = $1,596.73 × 360 = $574,822 Total Interest = $574,822 − $240,000 = $334,822 First Year: approximately $2,400 principal / $16,761 interest
Frequently Asked Questions
What is a typical down payment for an investment property?
Most conventional lenders require 20-25% down for investment properties. DSCR lenders typically require 20-25% as well. FHA loans (3.5% down) and VA loans (0% down) are generally only available for primary residences, though house hacking with a multi-unit property (2-4 units, owner-occupied) can qualify for FHA financing.
Are investment property mortgage rates higher than primary home rates?
Generally yes, by 0.25-0.75 percentage points. Lenders charge more because investment properties carry higher default risk — borrowers are statistically more likely to walk away from an investment property than their home. The exact premium depends on your credit score, LTV, and lender.
Should I choose a 15-year or 30-year mortgage for a rental property?
A 30-year mortgage has lower monthly payments, which improves monthly cash flow. A 15-year mortgage has higher payments but lower total interest and faster equity buildup. Most rental property investors choose 30 years to maximize cash flow, then make extra principal payments when cash flow allows. The right choice depends on whether you prioritize cash flow or equity buildup.
Does this calculator include property taxes and insurance?
No — this calculates principal and interest (P&I) only. Your total monthly housing cost also includes property taxes (typically escrowed monthly), homeowner's insurance, and potentially PMI or HOA dues. Use the Cash Flow Calculator to see total costs including all expenses.
What is the difference between principal and interest?
Principal is the portion of your payment that reduces the loan balance — it builds your equity. Interest is the cost of borrowing — it goes to the lender. In early years, most of your payment is interest. Over time, the ratio shifts as the balance decreases. Only principal payments build wealth; interest is a cost.
How does LTV affect my loan terms?
Lower LTV (larger down payment) generally means: better interest rates, lower monthly payments, no PMI requirement, and easier loan approval. Most investment lenders want LTV at 75-80% or below. Putting 25% down instead of 20% can meaningfully improve your rate — often saving 0.125-0.25% on the interest rate.