What are the differences between getting a loan for a home you will reside in versus getting a loan for an investment or rental property?
The type of property you are seeking a loan for has a significant impact on the terms and availability of that mortgage loan. If you are attempting to get a home mortgage for your second home, you may not receive as favorable treatment from the lending institute as you did on your first home loan. If the home is not going to be your primary residence, the lender may consider this a negative. This is due to the fact that you may not have the same incentive not to default on the loan. If the property is not your primary living residence, a 2nd home mortgage will probably carry a higher rate.
2nd loans are also issued for investment properties. This type of a 2nd mortgage generally carries a higher interest rate than owner-occupied home mortgages. Mostly due to the fact that the borrower is not living at the property, there is not as much of an incentive to maintain the home's current condition. This may concern the lender when it comes to lending you money for the mortgage. Also if you have not been in the rental business for more than two years, you may get an even higher rate, or be forced to use an ARM (Adjustable Rate Mortgage).
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