Mortgage Rate Locks Are Expiring in 2025: What This Means for Investors

[Luis Fajardo]

Mortgage Rate Locks Are Expiring: How Are Investors Adjusting?

Over the past few months, mortgage rate locks from five years ago have started expiring, creating a significant shift in the real estate investment landscape. Many investors who locked in historically low rates on rental properties are now facing the reality of higher market rates and tighter cash flow margins.

From 2% to 7%: A Major Shift in Cash Flow

A large number of investors purchased rental properties around 2019-2020, locking in 2% interest rates on adjustable-rate mortgages (ARMs)—especially 5/6 ARMs. These loans offered a fixed rate for five years, after which they automatically reset to market rate.

Fast forward to Q1 2025, and those same investors are seeing their interest rates jump to nearly 7%.

How Does This Impact Investors?

Let’s put this into perspective:

• 2020 Purchase Price: $300,000 rental property

• Original Rate (2%) Monthly Payment: ~$1,108

• New Adjusted Rate (7%) Monthly Payment: ~$1,996

• Increased Mortgage Cost: +$888 per month

If an investor was previously cash flowing $2,000+ per month, this shift in expenses could drop profits to a few hundred dollars—or even turn negative.

How Are Investors Responding?

With these new mortgage payments cutting into profits, I’ve noticed two major strategies investors are considering:

1.Cash-Out Refinances – Investors who have built 25-40% equity (thanks to appreciation and renovations) are considering cashing out to offset the increased costs.

2.Rate Buydowns & Fixed-Rate Loans – Some are refinancing into longer-term fixed-rate loans to lock in stability, using their home equity to buy down their new interest rate.

What’s Next?

📊 Over $2.4 trillion in ARMs were issued between 2019-2020 (Fannie Mae).

📊 Home prices have surged by nearly 40% since 2019 (CoreLogic), meaning many investors have significant equity to leverage.

📊 Refinance demand is rising fast as investors look for ways to protect their cash flow.

With these changes hitting thousands of investors, I’d love to hear what strategies people are using.

👉 Are you holding onto your existing mortgage and absorbing the higher rate?

👉 Are you refinancing, selling, or adjusting rents to compensate?

👉 Have you had to rethink your long-term strategy for your rental portfolio?