Clients who are interested in applying for an investment property or owner-occupied property home loan may approach their broker with various questions and concerts, including why investment properties are more expensive than owner-occupied properties.
Investment home loans are intended for clients who want to add a new property to their existing property portfolio by obtaining an additional real estate property. Townhouses, home, and units purchased with an investment home loan are generally purchased as rental properties. Owner-occupied home loans are intended for clients who will be living in the house they purchase, whether that be an existing home or newly built home.
So, why are investment properties more expensive than owner-occupied properties? Well, this is because most brokers view investors as higher-risk borrowers than clients who will be purchasing a home to live in. Investment home loans generally have higher loan and interest rates than owner-occupied home loans because of their high-risk status.
Investment and owner-occupied home loans do have similar charges, fees, and features, however, the loans interest rates generally vary. Interest rates may be higher for different clients applying for these home loan if they have been determined to be a high-risk borrower by their broker. High-risk borrowers and borrowing situations can result in a broker facing financial issues. High-risk clients have low credit scores, poor financial histories, high amounts of existing debt, and low home loan deposit amounts.