Four Things To Know about Non-Owner Occupied Mortgages
Reserves are required
For the most part non-owner occupied mortgages are required by the lender to have a specific amount of money in reserve at the time of closing. The amount depends on lender guidelines and how many investment properties have a mortgage. Lenders will require a higher reserve amount the more properties that you have mortgaged. The requirement can range from two to six months of the total monthly housing expense per property.
Mortgage Tax Benefits aren’t applicable
Consult a tax professional prior to signing documents to review how tax guidelines will apply to your solutions. Often times the interest expense mortgage deduction isn’t applicable to investment properties.
Higher Interest Rates
Typically for a non-owner occupied or investment property the interest rate is usually 0.250% – 0.500% higher than the rate on an owner-occupied property. For investment property loans interest rates you should also expect to pay more in closing costs. Keep in mind that properties that vacation and second homes are owner occupied properties. Investment properties you buy to earn rental income and are considered non-owner occupied properties. Investment property loans interest rates
Expect a higher down payment
Lenders usually require that borrowers contribute a down payment of 20% – 25% for mortgages on non-owner occupied properties, which means your loan-to-value ratio is 75% – 80%. Additionally, investment properties are not eligible for most conventional or government-backed low or no down payment mortgage programs.
This post was written by Shilo Zitting, St. George’s mortgage expert. You can visit his website at www.stgeorgelender.com or call him at 435-632-6796 with any questions or needs you may have.
Shilo who is a Utah native. has nearly a decade of experience in the mortgage industry and currently holds his professional license with Vintage Lending.Shilo can offer borrower(s) a broad range of knowledge about the business, the loan process, and how to meet or exceed every borrowers mortgage needs. Combining the winning blend of an outgoing personality with a creative mind and a strong sense of integrity, Shilo is committed to helping you make the right decision on which type of mortgage plan best meets your financing needs, so that your dream of buying, building, or refinancing your home can be achieved.