Owner Occupied Loans
Owner-occupied loan is a unique type of home loan that can be taken out by people seeking loans to live in their new home.
An owner-occupied home loan is one that is made for homeowners who intend to live in the property that they are borrowing against. The owners of holiday homes that won't be rented out may qualify for owner-occupied loans, as well as those who want to build a house on a parcel of land. A home loan for owner-occupied properties can be obtained as long as they are for residential use only.
Why is this important?
A homeowner-occupied loan gives newcomers to the property market a benefit for their first home. This is a valuable way to become part of the market.
Home loans for owner-occupied properties are important as they provide more incentives to the borrower to reside in the home they purchase than traditional home loans.
The owner-occupied home loan is quite different from other home loans, such as loans for investment properties or second home mortgages. They tend to be financial investments, not residences, since these properties are not typically occupied by the owners. The lenders view investors as higher-risk borrowers than first-time homebuyers, which is why these loans carry higher fees and costs.
How do I qualify for an owner-occupied loan?
Owner-occupied loan applicants must reside in the property for at least 12 months. This requirement must be met in order to qualify for the loan, and if it is not met, you may be dealing with a fraudulent transaction.
Another definition of occupying a property is:
- 70% of the year is spent on the property
- The distance of your workplace from the property is less than 100km
- A signed statement stating that you will live at the property for the assigned period
According to the Australian Tax Office, a 'main residence' property must meet the following criteria:
- You and your family live on the property
- The property contains your belongings
- Mail is delivered to the property
- Electoral registration is carried out at the property's address
- The property is serviced by utilities
FAQ
| How do owner occupier and investor loans differ? | Essentially, the difference between owner-occupied and investor loans comes down to the type of property and its purpose. Homeowners who plan to reside in the property can apply for an owner-occupied loan. Investors use investor loans to purchase rental properties and not for their own use. |
| Could I rent out my house if I am moving out of it? | If you don’t have a 20 per cent deposit, you will generally be required to pay for lenders mortgage insurance (LMI). Lenders mortgage insurance provides protection to the lending institution in the event that you default on your home loan. it is a one-off charge that gets included in your loan amount or is required to be paid upfront. A guarantor can also volunteer their home equity as security for your loan. In the event that you default on your loan, your guarantor would wear the responsibility of paying off the loan. |
| Am I eligible for another mortgage? | You can typically get another mortgage as a general rule. You should consult your mortgage broker for more information about the second mortgage, as it may be subject to restrictions. In addition to your current financial situation, the conditions may differ based on whether you have already paid off some of your current mortgage or whether you have other financial assets available for borrowing. |