Long-Term

 Non Owner-Occupied Long Term Mortgage Loans

If you’re looking at making a long-term real estate investment, a non-owner-occupied mortgage is a finance option worth exploring. NOO loans function differently from owner-occupied loans and knowing the difference as well as the ins and outs of a non-owner-occupied home loan will help optimize your investment.

What Is a Non-Owner-Occupied Mortgage?

A non-owner-occupied loan is a loan designed for properties purchased as an investment. If you are looking to purchase a property that you do not intend to live in, you’ll need a non-owner-occupied mortgage. Financing with an owner-occupied mortgage instead could result in an occupancy fraud charge.

A non-owner-occupied investment mortgage is considered riskier than a residential mortgage as lenders take the view that you’ll be more likely to choose to pay for your home over a rental investment should you run into financial trouble. Accordingly, this affects several key factors, including:

• Rates. Because lenders see non-owner-occupied investment mortgages as riskier than owner-occupied mortgages, rates are higher. Your credit score, the size of your down payment and the number of units you are purchasing may also affect your interest rate. For example, if you have a high credit score and can pay a significant down payment, your lender may offer lower non-owner-occupied mortgage rates.

• Down Payment. Typically, all investment property purchases will require a larger down payment than a property you are purchasing as your primary residence. The exact percentage will vary from lender to lender, but you can expect to need a down payment somewhere between 20 and 30%.

• Term Lengths. Non-owner-occupied mortgages are available with shorter term lengths than owner-occupied mortgages. However, some lenders – like Rehab Lend – can offer long-term non-owner-occupied loans, including 30-year non-owner-occupied mortgages. If you intend to buy, renovate, and sell an investment property quickly, a fix-and-flip loan may be a better option for you.

What Can You Use a Non-Owner-Occupied Investment Mortgage For?

A non-owner-occupied investment mortgage can be used to purchase a residential property of one to four units, which you do not intend to live in. You could purchase a small block of four units, for example, however, you cannot use a non-owner-occupied mortgage to finance a large apartment building. That will require a different loan structure altogether, such as a commercial real estate loan.

Renovating a Non-Owner-Occupied Investment Property

Specific loans also exist for non-owner-occupied renovations. A non-owner-occupied renovation loan is a non-owner-occupied mortgage that can be used to purchase and renovate a property you do not intend to live in. For example, if you are purchasing a property in need of rehabilitation that you plan to rent out as an investment, you can secure a non-owner-occupied renovation loan to cover the costs of both purchasing and rehabilitating the property. However, these renovations must be more substantial than just cosmetic updates designed to increase the property’s appeal. Any updates must be a permanent part of the new property and intended to increase its market value. For example, your renovations could include adding new rooms, replacing the roof or the plumbing, or building a new driveway.

Generally, the value of a non-owner-occupied renovation loan will be based on the property after it has been renovated.

How to Qualify for a Non-Owner-Occupied Loan

Qualifying for a non-owner-occupied loan is typically more difficult than for other loan types. Eligibility requirements will vary between non-owner-occupied mortgage lenders; however, you should expect to be required to pay a higher down payment and have a good credit score, low debt-to-income ratio, and significant cash reserves at hand.

Ready to Get Started?

If you’re ready to make a move on an investment property or want to find out more about our flexible non-owner-occupied loan options, get in touch with Rehab Lend today. As a non-owner-occupied mortgage lender, we have flexible solutions that can be tailored to you, your proposed purchase, and your investment goals. We can also talk you through our competitive non-owner-occupied mortgage rates today. Contact us now, and one of our loan experts will be in touch as soon as possible.