Investment Vs Occupier Mortgage.

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DingDing

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Queried the bank recently about why there was a higher rate for an investment mortgage V's a home owner.

I was told it was because of the increased risk to the bank of this type of investment.

I would imagine that there would be less risk, because if anything went wrong, the investment property is not the family home and it should be easier for the bank to get and dispose of the asset.

Surely the risk is related to circumstances and ability to pay not what the loan is used for.
 
Re: Investment V's Occupier Mortgage.

Investment property needs rental income to pay the mortgage. And doesnt have payment protection insurance or life insurance on the owner. Much bigger risk of the bank not getting paid promptly.
 
Re: Investment V's Occupier Mortgage.

DingDing said:
I would imagine that there would be less risk, because if anything went wrong, the investment property is not the family home and it should be easier for the bank to get and dispose of the asset.
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The banks want you to keep paying the mortgage, the last resort is repossessing it and selling it. This is an expensive and time consuming process for the lenders.

Simply put, if you have a family home and an investment property but can only make payments on one, it is more than likely the investment property that will suffer hence the higher risk for the bank resulting in higher investment mortgage rates.


www.moneybackmortgages.ie
 
Re: Investment V's Occupier Mortgage.

Thanks all. clearer now.

It is based on the assumption that the investment property is funded by the rent.

If you can afford to cover the investment property from your income with out renting it, this would not apply.

If you can not afford the property without renting it, should you be given the loan in the first place.

I don't think it is fair to lump someone who can comfortably afford the repayments and using it as a means of saving with the same risk as someone who needs 100% occupancy and no problems to be able to afford it.
 
Re: Investment V's Occupier Mortgage.

It's a strange form of saving - paying the bank interest and almost nothing off the principle amount (+ stamp duty + transaction fees + annual property levy). Why not put the same amount in a high yielding savings account and get the bank to pay you interest?

The scenario you've drawn up reflects a miniscule proportion of investment properties (or at least I'd hope so). In reality what you're describing isn't investment but speculation. If you feel strongly that the price quoted doesn't reflect the risk then make that case to the bank.
 
I suppose for the difference between the rent and the mortgage over the term of the mortgage you get a property at the end.
 
DingDing said:
I suppose for the difference between the rent and the mortgage over the term of the mortgage you get a property at the end.
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What on earth are you talking about? You were describing buying a property and leaving it empty because you could afford the payments without renting it out, not comparing buying for personal use versus renting.

Maybe I've taken your posts up wrong but that's what it sounds like you were saying
 
Say you get 800 Rent.

Mortgage is 1300.

You invest 500 per month.

In 25 years you have an apartment.

The point about not renting it is that if you need to rent it to make the payments, then there is exposure to the bank. If you can afford not to rent it the bank has less exposure and risk.
 
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