Owner Occupied Vs Investment Property Loans - Nfinity Financials

Owner Occupied Vs Investment Property Loans – Nfinity Financials

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The majority of people are aware that there are various kinds of home loans, each with unique requirements including adjustable interest rates. Are you planning to move into your investment property or convert your owner-occupied property to an investment? See how to do it below.

It’s safe to conclude that a large percentage of Australians own investment properties, making housing quite popular there. A significant number of people are also considering investing in real estate.

You most likely can’t move into your investment or start renting it out without notifying anyone if your property has a home loan associated with it!

The distinction between owner-occupied homes and investment properties is, as their names suggest, based on the purpose you have for them. An owner-occupied property is one that you purchase with the intention of living there. It is seen as an investment if you want to rent it to tenants.

Investment loan vs home loan

The distinction between owner-occupied homes and investment properties is, as their names suggest, based on your intended use. An owner-occupied property is one that you purchase with the intention of relocating there. People see it as an investment if you want to flip it or rent it out to tenants.

When circumstances demand it or their finances allow it, people may decide to reside in one place for a while before renting it out and relocating somewhere else. Some might buy a building and first lease it to tenants with the intention of moving in themselves later. If you choose this option and wish to Refinance your mortgage as an owner-occupier home loan, you might have to wait a certain amount of time to be able to make the switch.

What happens if you buy a house that has multiple apartments or flats? As long as one of the units is occupied by you, a property with four or fewer units is usually classified as owner-occupier.

What it means for your home loan

What makes it important? You must indicate whether you are looking for an investor loan or an owner-occupier loan when you apply for home loans to cover the purchase of a home or to refinance an investment property. The difference, whether you choose construction finance, variable rates, offset mortgages, or fixed house loans, will probably affect the investment property interest rate you pay.

When it comes to investment property interest rates and other closing fees like the appraisal fee, investment loans are usually more costly than other loans. For instance, an owner-occupier could be able to get a variable rate house loan at 3.39 percent interest. If you’re seeking the best deal on an investment property home loan, reach out to Nfinity Financials.

Moreover, a greater down payment may be required for an investment house loan, which may result in a higher maximum loan-to-value ratio (LVR). A number of significant Australian banks and other lenders have lately increased interest rates and decreased the maximum loan-to-value ratio for investor home loans due to worries that the lending rate for this kind of mortgage is rising too quickly.

How to get a loan to buy a house

You must submit an application for a home loan in order to buy a house. The application will require details about your income, assets, and liabilities, such as debt that you currently owe. In addition to your credit history, lenders will assess these facts in relation to the kind of loan you’re searching for and the amount you plan to borrow.

Before choosing a specific loan type, weigh your options and compare rates offered by different lenders.  In order to select the option that best fits your financial circumstances and objectives, you should also use a Loan calculator to evaluate the financial effects of various interest rates, terms, and payment schedules. If you require assistance in assessing your options, consult Nfinity financials, our experts guide you in every step of your financial journey.

The lender will get in touch with you to go over your options, your eligibility, and any other information you need to supply once you submit your mortgage application. For example, you would need to provide documentation of your present assets and liabilities, pay slips, tax records, verification of the sale of your property, and financial statements from the last few years.

How to obtain a home loan for an investment property

Lenders and banks have tightened their standards on stress tests and other requirements for investor house loans, so the requirements can be a little stricter. You will need to provide proof that you have a specific amount of money set aside for mortgage management. If you currently have a first-time home loan, the amount of money that must be put aside may be greater for an investment loan. Usually, lenders evaluate this in terms of how many months each property needs for mortgage repayments.

Investment loans may also take into account the amount of rental income you expect to earn, as this revenue may allow you to pay for other obligations such as your Investment property mortgage. This implies that your debt-to-income ratio—the portion of your monthly income allocated to mortgage repayment—may not truly decrease as a result of the investment, which is a determining element in the loan approval procedure. Lenders for mortgages also take into account the possibility of property appreciation during the term of the loan. 

Lenders for mortgages also take into account the possibility of property growth during the term of the loan. It would be beneficial for both of you to analyze data regarding trends in home prices as well as vacancy rates for the area or property. These will be taken into consideration when you have your property evaluated.

How to live in your investment property

It’s not uncommon for people to desire to stay in their investment home after a while for a variety of reasons, including changing lifestyles or children moving out. But, you probably won’t be able to move in right away; you’ll have to notify your lender first.

The benefit is that interest rates for owner-occupier loans are frequently lower than those for investment loans. Additionally, you can be overpaying if you haven’t checked your house loan rate in a long time. Transferring to an owner-occupier loan is typically rather simple, particularly if you’re working with the same lender as they are familiar with your credit history and identity.

If you choose this option and wish to refinance your mortgage as an owner-occupier home loan, you might have to wait a certain amount of time to be able to make the switch.

How to convert your home into an investment property

When circumstances demand it or their finances allow it, people may decide to reside in one place for a while before renting it out and relocating somewhere else. But before you refinance to an investment loan, there are a few things you should be aware of.

Usually, investment loans are the more costly option. Find lenders who don’t charge excessive closing and ongoing fees if you’re searching for the best investment house loan. Moreover, a greater down payment may be required for an investment home loan, which will result in a lower maximum loan-to-value ratio (LVR).

When considering investment loans, the amount of rental income you anticipate receiving can also be taken into account. This is because a property that is “positively geared” may allow you to use the revenue to pay off other debts in addition to your investment property mortgage.

Conversely, interest-only payments are typical for investment loans. Interest-only loans are common because they let investors save money while starting out and, in some situations, offset the interest against their revenue if they’re losing money on their rental—a process known as “negative gearing.”

Compared to owner-occupied properties, investment properties may require a number of additional considerations. You may need to prepare to conduct some additional market research, which could involve examining vacancy rates in the area or the property, analyzing trends in home prices, and calculating average rental yields.

Choosing the right home loan for your goals

When submitting an application for a house loan, it’s crucial to be honest about your goals for the property. It may be alluring to try to get an owner-occupier mortgage because of the variations in rates, but mortgage brokers have the knowledge to determine whether their clients are engaging in “occupancy fraud.”

The degree of risk associated with each type of house loan is what determines the rate differences. Among other things, there is typically a greater chance of default with investment properties, which exposes the lender to increased risk.

If you’re buying an investment property, there are better ways to make sure you’re getting the best rates available for your mortgage. 
Speak with one of our experts today to discuss refinancing whether you’re ready to move into your investment property or transform your house into an asset. Book a Consultation Call with Nfinity Financials at 1300 GET LOAN to kickstart your journey towards your first home. You can also visit our related articles here.

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