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Home Loans - Investor

Home Loans – Investor

When applying for a home loan applicants will be required to identify whether they will be living in that property or not. If not the loan will be classified as an Investor Home Loan.

An Investor Home loan is a home loan where the owner of the property is not occupying the property as their prime place of residence. An important example here is a holiday home that is not the prime residence of the owner but used as a casual residence throughout the year. The home loan for this holiday home will be an Investor Home Loan.

Despite the above, there are incidences recently where some lenders will allow the borrowings as Home Loan – Owner Occupied so long as the prime security is the family home, where the owner is occupying the property as their prime residence. Contact us for more details on this.

Similar to Home Loans – Owner Occupied, the number of lenders proving owner investor home loans is significant and the range of products is large. Buyers really need to shop around and look for the lender and product that best suits their needs.
Any type of home loan is usually a large debt and commitment so choosing a lender and loan that is not suited to a buyer’s needs can be a mistake and become quite costly.

Types of Investor Home Loans

The range of investor home loans are many most with different interest rates, upfront and ongoing fees and charges as well as terms and conditions.

Some investor home loan types come with special packages and include off-set accounts plus banking accounts and credit cards. However, these “packaged” home loans can come with a higher rate and annual fees close to $400.

Other basic investor home loans provide just a minimal add on service home loan, often with a lower rate.

Differentiation between Investor and Owner Occupier Home Loans.

While the products features may not vary significantly between the two types of home loans, the key variables are

  • Interest rates – most often investor loans come with higher interest rates, around 0.25%
  • Fees and charges – many lenders do not fully discount the fees and charges on investor loans as they do on owner occupied home loans
  • Maximum borrowings – lenders often will only lend to a maximum of 90% of the assessed value of the property security which requires the buyer to contribute more deposit than an owners occupier home loan.

Budget - Can You Afford the Repayments

When considering any home loan, it is absolutely essential to determine what repayments can be afforded so that the amount of maximum borrowing can be calculated.

Lenders will focus closely on a borrower’s income and expenses and then calculate themselves if the applicant can afford the loan. Experience shows us most home loan applications are declined when the lender decides the borrower cannot comfortably afford the repayments.

Investors should discuss the financial implications with their Accountant to determine any taxation advantages which will assist the lender assess the affordability of the loan.

Please contact us to help you work out your maximum borrowing capacity before you start shopping for a home.

For assistance in setting a budget, please check out ASIC's site Budget Planner.

What’s Involved – Home Loans Investor

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