When you buy a home whether it is classified as owner-occupied or investment depends on your intentions behind buying the property. If you are planning to sell the property for a profit on what you originally bought it for or rent it out, then it would be an investment property. If you were planning to live in the home, you bought then it would be an owner-occupied home loan. It’s straightforward but each classification has important implications for applying for your home loan.
Each type of home loan has varying level of interest rates with investment loans usually being the more expensive of the two. Additionally, investment loans also have higher closing and ongoing fees. So overall, they tend to be the more expensive home loan choice.
Banks are becoming more reluctant with approving investment loans, so the requirements are often stricter when applying for one. The most important thing is to be able to show you have enough funds set aside to pay off the mortgage. How much you’ll need depends on a few factors such as the number of repayments, the amount you’ll receive from rent, your debt to income ratio and the potential appreciation of your property.
Because of the increased expenses and requirements with applying for an investment loan, it can be tempting to try and get an owner-occupier loan even if you aren’t planning to live in the property. Unfortunately, because of the higher risk involved for the lender, loan agents are well trained to determine if you’re committing occupancy fraud so it’s not worth the risk.
It’s important to understand what your intentions are when you purchase a home, so you know which loan to apply for and the differences between the two.
If you’d like to learn more about your home loan, get in touch with us today.