Are you buying to live in or rent out?

Are you buying a property to live in or to rent out? The purpose of your house purchase is vital to narrowing down your mortgage options when hunting for the most suitable home loan for your situation.

If you plan to live in the property you’re purchasing, you’re buying as an owner-occupier. But if you plan to rent out your purchase to tenants, then you’re buying as a property investor. Home loans for owner-occupiers are different to home loans for investors, with each option offering a different set of features and benefits to better suit their intended borrower.

Owner-occupier home loans often offer lower interest rates than their counterparts for investors. This is because mortgage lenders often consider owner-occupiers to be less likely to default on their mortgage repayments, as this would mean risking losing the roof over their head.

Investor home loans may charge higher interest rates and have stricter eligibility criteria than similar home loans for owner occupiers. This is because there are risks to consider in property investment, such as whether the property could go untenanted for some time. Property investors may also have extra expenses to manage in relation to maintaining the property. This means there could be a higher risk of a property investor defaulting on their mortgage repayments.   

Different home loan features and benefits may appeal to owner-occupiers or to investors, as these features may be able to help these borrowers achieve their personal and financial goals.

For example, some owner-occupiers may prefer home loans that offer the option to make extra repayments, as this can help them to grow their equity, shrink their interest charges, and get closer to owning the home outright. Meanwhile, some investors may prefer a mortgage with the option to make interest-only repayments for a limited time, as this can help to minimise their costs.

If your personal and financial goals change over time, you may find that you want to move into your former investment property, or move out of your home and start renting it to tenants. In cases like these, you’ll likely need to contact your lender, and may need to refinance to a different type of home loan, as you may no longer be fulfilling the terms of your original mortgage contract.

When you start comparing home loans, it’s important to look at mortgage offers suited to your plans for the property. Remember to not only compare the interest rates, but the fees, features and other benefits before making your decision. If you’re not sure which home loan deal may best suit your needs as an owner-occupier or as an investor, consider contacting a mortgage broker for more advice.

Compare home loans in Australia