What is the difference between a mortgage for an owner occupied property and an investment property?

The mortgage products offered for an owner occupied property and investment property are very similar.  The key differences are the qualification requirements and the interest rates.  Since an investment property is just that, an investment, the lending industry perceives this type of loan as having greater risk than on an owner occupied home.  There is greater likelihood the owner will default on an investment property.  To compensate for the added risk the interest rates and points charged will be higher on investment property loans.  Qualifying for these loans will also be more restrictive.  Down payment requirements are higher, and the credit profiles of the borrower will have a higher standard than those of owner occupied loans.  These attributes of investment property loans are important when using mortgage payment calculators.  The interest rate applied in the mortgage calculator should accurately reflect the current market rates for investment property loans and the down payment and loan to value should not exceed that required to gain approval for this type of loan.

This entry was posted on Wednesday, December 10th, 2008 at 8:52 pm and is filed under Mortgage FAQs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.