Non-Owner Occupied Homes

By cbgchisholm August 9, 2009 Real Estate Investing 101

Many people like to buy second homes as investment properties and rent them out for extra income. If you can afford to do so, it’s a great way to have a long-term investment as part of your assets that will continue to bring in money. After all, there are always renters looking for a place to live.

Non-Owner Occupied Home Definition

This type of investment property is called a non-owner occupied home because you will not actually be living there even though you own it. If you’re going to look for a mortgage loan to buy a non-owner occupied home, there are a few things you should know first.

Non-Owner Occupied Mortgage Rates

Non-owner occupied homes, which can also consist of second or vacation homes, tend to carry a higher mortgage rate than a first, owner-occupied home. This is because statistically, non-owner occupied homes have a higher default rate than normal mortgages.

In fact, bankers and other lenders will often scrutinize mortgages in order to make sure that the borrower is honest when she or he says that the mortgage is for an owner-occupied home: experience has taught them that some people will try to hide the fact that they’re actually buying a second home so they can qualify for the lower non-owner occupied mortgage rates instead.

As with all real estate transactions, taking out a mortgage on a second home or non-owner occupied home comes with serious considerations you should think about before securing one. In order to be sure you understand all of the risks and regulations, speak to a mortgage specialist, such as the lending officer at your local bank.