Why Your Mortgage Rate Might Not Match Your Friend’s (And Why That’s Okay)
I got an email recently from someone looking to refinance a rental property. They had already been to their current bank, who offered them a specific rate, and wanted to know what kind of rates I might have access to. Totally fair question — asking about rates is one of the most common things people want to know. But what really caught their attention was how different their rate was compared to others they knew. Their family member, a first-time homebuyer, had secured a much lower rate. And their friend, who just renewed their mortgage, also got something far more competitive.
So they asked the big question: “Why is my rate so much higher?”
And honestly? It’s a great question. Because on the surface, mortgage rates seem simple — you see a low number on an ad or hear what someone else got, and naturally, you want the same. But the reality is that mortgage rates are anything but one-size-fits-all.
Here’s where things get interesting. When someone buys their first home with less than 20% down, they’re required to get mortgage default insurance. Now, insurance might sound like an extra cost — and it is — but it also reduces the risk for the lender. If that person defaults on their mortgage, the insurance covers the lender’s losses. So from a lender’s point of view, those insured mortgages are basically gold — I like to call them the “golden goose” of mortgages. Low risk. Super secure. Because of that, they qualify for the lowest rates available. Even better? If that person decides to switch lenders or renew their mortgage later on, the insurance stays with the mortgage. So it’s still considered low risk, and they still get those competitive rates.
But refinancing is a totally different situation. When you refinance, you're applying for a brand-new mortgage — and that new loan doesn’t come with any default insurance. Lenders see that as higher risk, and they’re also required to hold more money in reserve to balance out that risk. That extra risk and cost? It gets passed down to you in the form of a higher rate.
Now, add in the fact that this refinance was on a rental property, and the picture shifts even more. Rental and investment properties can’t be insured, and historically, they’ve been riskier to lenders. If someone’s finances get tight, they’re far more likely to walk away from a rental property than their primary residence — and lenders know that. So rental property mortgages almost always come with a slightly higher rate, and if you’re refinancing one? That stacks the odds even further. In this situation— no mortgage insurance, more risk for the lender, and extra money the bank has to set aside. Put all that together, and yep… the rate goes up.
So, back to my client. After talking through all of this, I laid it out as plainly as I could. With the refinance, we’d need an appraisal and there would be legal fees — altogether, about $2,000+ in extra costs. Unless we could find a significantly better rate to offset those expenses, it honestly made more sense for them to stay with their current bank at the rate they had discussed.
And I’ll be honest — that probably meant I talked myself out of doing the deal. But I’m okay with that. Because my goal is never just to “close a file.” It’s to make sure people are making smart, informed choices that suit their situation — even if it means walking away from a potential deal.
So if you’re out there wondering why your rate looks different than your friend’s, just know: there’s probably a very good reason. Mortgage rates aren’t just about credit scores or who you know — they’re about the whole picture. Every lender is different. Every file is different. Every borrower is different.
And when you're trying to compare, well... it's a little like comparing apples to oranges.
If you're curious about your options or just want someone to break it down in plain English, I’m always happy to chat — no pressure, no obligation, just real advice to help you figure out what makes the most sense for you.