Primary, Second and Investment Properties: What Are the Differences?
This article we describe the differences in these 3 standard property types which a consumer could secure a mortgage loan for.
It is not so much the type of house or property which matters in this situation but rather the intended use of the property. The effect or differences between them would be the risk and the mortgage rate and terms a borrower will be offered and secure.
A primary property is one the homeowner plans to live in from day to day and hence, will have the least amount of risk and the best terms.
A second home is where a borrower plans to utilize the property only occasionally as a summer or vacation home. Because the homeowner doesn’t need to live there day to day it is more risky as the they could stop making payments at any time and ‘walk away’ from the property. Typically, rates and terms are slightly higher than those on a primary home.
An investment property is when a borrower is planning on generating rental income. The borrower may or may not intend on occupying the property depending on how many units are associated with the property. Most mortgage lenders see these properties as having the most amount of risk and normally have material increased costs and rates associated with it along with stricter credit requirements.
As always, it is best for you to consult with a trusted mortgage advisor