If you are looking into investing in a home, congratulations! This is an exciting time. Before you can find a property that you love, you need to figure out your budget and what kinds of funding options are available. This article can help you start.
Investor Home Ownership Types in Australia
When you start looking at investor home lending options, you will see one choice being an owner occupied home loan and the other being an investment home loan. In Australia, you can invest in residential real estate under two conditions: to occupy part of the home while renting other units of the property out to others, or to invest in a property without residing there.
For individuals who choose to live in the property they invest in, the law considers their property to be “owner occupied.” Otherwise, it is an “investment” property. Learning more about both can help you decide which kind will work best for your plans.
Owner Occupied Home Loans
In general, an owner occupied home loan is a loan that homebuyers can apply for to receive financial assistance for a property they intend to live in. While at first glance it may seem like this is only an option for individuals in the non-investor market, this is not always the case. In fact, it is not uncommon for investors to qualify for owner occupied home loans as well.
In order to take out an owner occupied loan for an investment property, the law requires you to make part of the property your full-time residence. For some homes, this is not possible, but it is a common practice among investors who own apartment buildings and condominiums.
Benefits of Owner Occupied Home Loans
One first thought, the idea of living in your investment property may not be your initial plan, but there can be benefits to doing so. For one, it can be a notably cheaper option. In addition to the up-front costs of your loan, however, you will also benefit from always knowing what kind of condition your investment is in.
Think about it: When tenants know that the owner lives on their property, they are more likely to care for it. Also, if something ever goes wrong, tenants have the added reassurance of knowing you live close by. For some renters, having an accessible landlord is priceless.
Investment Home Loans
If you are unable to qualify for an owner occupied loan for investment property because you do not plan on living in the home yourself, you may be eligible for an investment home loan. With this lending program, you can receive a loan for a home you are purchasing without the requirement of living there.
With investment loans, there are some points to keep in mind. For one thing, these types of loans can be harder to find. In addition, they may usually come with higher interest rates.
Benefits of Investment Home Loans
Although it might sound like the best option is to live in whatever you decide to invest in, that is not necessarily the case. At the end of the day, it comes down to what will work best for you and whatever you plan to do with the property. Plus, you should not let the higher rates alone push you away from investment loans. Often, they come with their own kind of benefits.
For example, in many cases, investment home loans come with discounts that are not available with owner occupied home loans. Additionally, it is worth thinking about the potential of investment loans for expanding your reach. As your investments grow, you can continue investing until your net worth increases enough to pay off the loans. If you have big plans for your property investment, it might be worth looking into this latter type of home loan.
To figure out which route you want to go with your future home investment, ask yourself if you like the idea of living on the property your purchase. If it pros outweigh the cons, then an owner occupied loan may be best for you. On the other hand, if you do not like the thought of living there, an investment home loan can also have its perks.