When you're ready to purchase your first home, it's important that you understand the different types of home loans available to you. Specifically, offers for owner occupied home loans are quite different from other types of home loans, such as investment loans. Here are five ways that an owner-occupied loan is different:
- Generally Lower Interest Rates
One of the biggest benefits of an owner-occupied loan is that they generally come with lower interest rates than other types of home loans. This is because when you take out an owner-occupied loan, the bank has a lower risk because you're going to be living in the home as your primary residence.
- Shorter Loan Terms
Another difference between an owner-occupied loan and other types of home loans is the loan term. With an owner-occupied loan, you'll typically have a shorter loan term than you would with an investment loan. This is because banks perceive owner-occupied loans as being less risky.
- Lenders May Require a Higher Credit Score
When you're applying for an owner-occupied loan, the lender may require a higher credit score than they would for other types of home loans. This is because, again, the bank perceives this type of loan as being less risky and they want to make sure that you're a responsible borrower.
- Down Payment Requirements Vary
When it comes to down payments, there can be a big difference between an owner-occupied loan and other types of home loans. With an owner-occupied loan, banks typically require a smaller down payment than they would for an investment property. However, this down payment requirement will vary depending on the lender.
- Mortgage Insurance May Be Required
Lastly, another difference between these two types of home loans is that mortgage insurance may be required for an owner-occupied home loan but not for other types of home loans. Mortgage insurance is basically protection for the lender in case you default on your loan. So, if you're thinking about taking out an owner-occupied home loan, be prepared to possibly pay for mortgage insurance. Is an owner-occupied home loan the right move for your individual needs? As you can see, there are some key factors that distinguish owner-occupied home loans from other types of home loans - specifically investment loans. If you're thinking about taking out an owner-occupied home loan, keep these differences in mind so that you can be prepared and know what to expect during the application process. Good luck!