Owner-occupied vs investment property
If you are applying for a home loan, whether the house will be owner-occupied or an investment property is a key factor that will impact on the process and the kind of loan you take out.

If you are applying for a home loan, whether the house will be owner-occupied or an investment property is a key factor that will impact on the process and the kind of loan you take out.
Key points:
- Lenders generally consider investment loans to be riskier than owner-occupied loans.
- Investment loans tend to come with stricter conditions and higher interest rates.
- If you move out of your owner-occupied home and turn it into a rental property, you must inform your lender.
There are a number of reasons you might buy a property – you might be looking for a home for you and your family to live in, you might be looking for an investment that you can use to collect a rental income, or you might even be a first home buyer who is interested in exploring rentvesting.
Whatever the reason, there are different types of loans available for owner-occupied and investment properties, and it’s important to understand the difference.
What is the difference between an investment loan and an owner-occupied loan?
The terms ‘investment loan’ and ‘owner-occupied loan’ both refer to the amount of money you can borrow to purchase a property.
The key difference is the property’s purpose – owner-occupied loans are for people who wish to purchase a home to live in, while investment loans are typically for people who wish to purchase a property and rent it out to tenants, to make an income.
Another key distinction is the fact that lenders generally consider investment loans to be riskier than owner-occupied loans. This is largely because the rental market can be uncertain. There’s a risk that investment properties may sit vacant for a time, thereby not generating any income for the owner to put towards mortgage payments.
Likewise, the owner of an investment property may face extra expenses in relation to things such as property management fees and landlord insurance.
For this reason, investment loans tend to come with stricter conditions and higher interest rates than owner-occupied loans.
How do owner-occupied loans work?
When you apply for a home loan, lenders will make inquiries about your income, assets and any debts you may have in order to get a picture of your finances and determine your borrowing power, which is the amount of money they might be willing to lend you.
When you take out a home loan, you will be required to pay back the principal of the loan, along with interest. This can be charged at a fixed or variable rate, or you can choose to split between the two. You may also have the option to take out an interest-only loan.
When you take out a home loan, you will usually be required to pay a deposit. In general terms, at least 20% is preferred for a home loan deposit. If you are borrowing more than 80% of the value of the property, you will typically be required to pay lenders mortgage insurance (LMI).
How do investment loans work?
The process of applying for an investment loan is much the same as applying for an owner-occupied loan, but lenders will also consider other relevant factors that may affect your borrowing power. These include the potential rental income from the property you plan to purchase, and the likelihood of the property appreciating in value.
There are certain other key differences in terms of the features of the loan itself. Because lenders view investment loans as riskier, the interest rates attached to them can be higher and the loan to value ratio (LVR) can be lower, meaning your deposit will likely be larger.
Depending on the lender and your circumstances, you may be able to use the equity in a property you already own (your family home, for example) to fund the purchase of an investment property, instead of paying a cash deposit.
But there can be risks to this approach, so getting some financial advice before you commit could be wise, particularly if you are a novice property investor.
Interest rates
Lenders generally consider investment loans to be riskier, meaning that the interest rates attached to them tend to be higher.
When considering your application, lenders will take into account such things as your credit score, the size of the deposit you have saved, and your overall financial situation. If they consider you a secure borrower, you may be able to negotiate a lower rate.
If you’re considering purchasing an investment property, you can compare investment home loan rates with Canstar.
Loan to value ratio
Loan to value ratio is the maximum proportion of the value of your home that can be loaned out to you. For example, a bank may approve your loan for 80% of the property value, which means you will be required to pay the remaining 20% as your deposit.
Because lenders tend to view investment loans as riskier, the LVR tends to be lower, meaning the amount you will need to pay as a deposit may be higher than if you were purchasing the property to live in yourself.
Once again though, depending on the lender, it may be possible to use the equity in a property you already own to fund the purchase of an investment property, instead of paying a cash deposit.
Do you need to tell your lender if you plan to move out of your owner-occupied home and rent it out?
Yes you do. If you wish to move out of your owner-occupied home and turn it into a rental property, you will need to inform your lender that you plan to use the property as an investment.
Generally speaking, your lender will then discuss your options in terms of switching your home loan to an investment loan, which will likely have a different interest rate and features.
Failure to inform your lender that you are making this change can have potentially serious consequences.
It’s also important to note that, when borrowing money for a home loan, you must be upfront with your lender about whether you intend to be an owner-occupier or rent it out. ‘Occupancy fraud’, otherwise known as ‘mortgage fraud’, occurs when a borrower claims that their property will be owner occupied, potentially in order to get a lower interest rate, but rents the property out instead.
Lenders typically charge higher interest rates for investment properties than for owner-occupied ones, as they consider these types of loans to be riskier. If a borrower misrepresents themselves and commits occupancy fraud by lying about the purpose of the property, the lender might ‘call in’ the loan, which could result in a forced sale of the home.
How to get a loan to buy a house
There are a number of ways you could go about taking out a home loan, but generally speaking, you could approach a bank or lender directly and apply, or engage the services of a mortgage broker, with the expertise to recommend a lender or loan product suitable for your particular needs. Either way, when applying for a home loan, you will need to supply your bank or lender with some key information and documentation, which is likely to include:
- Identification documents
- Proof of employment
- Details of your income and assets
- Details of your debts and expenses
- Details of the property you intend to buy or build
How to get a home loan for an investment property
The process of taking out a loan for an investment property is not fundamentally all that different from taking out a loan for an owner occupied home. The main difference is that, as lenders generally consider investment properties to be riskier than owner occupied loans, you may be offered a higher interest rate or stricter conditions than if you were applying for a standard owner occupied loan.
Compare Home Loans (Refinance with variable rate only) with Canstar
If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for homeowners looking to refinance. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest to highest). Products shown are principal and interest home loans available for a loan amount of $500,000 in NSW with an LVR of 80% of the property value. Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
The comparison rate for all home loans and loans secured against real property are based on secured credit of $150,000 and a term of 25 years.
^WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Up to $2,500 when you refinance with a Greater Bank home loan. Minimum loan amounts and LVR restrictions apply. Offer available until further notice. See provider website for full details. Exclusions, terms and conditions apply.
Up to $4,000 when you take out a IMB home loan. Minimum loan amounts and LVR restrictions apply. Offer available until further notice. See provider website for full details. Exclusions, terms and conditions apply.
Canstar is an information provider and in giving you product information Canstar is not making any suggestion or recommendation about a particular product. If you decide to apply for a home loan, you will deal directly with a financial institution, not with Canstar. Rates and product information should be confirmed with the relevant financial institution. Home Loans in the table include only products that are available for somebody borrowing 80% of the total loan amount. For product information, read our detailed disclosure, important notes and additional information. *Read the comparison rate warning. The results do not include all providers and may not compare all the features available to you.
Home Loan products displayed above that are not “Sponsored or Promoted” are sorted as referenced in the introductory text followed by Star Rating, then lowest Comparison Rate, then alphabetically by company. Canstar may receive a fee for referral of leads from these products.
When you click on the button marked “Enquire” (or similar) Canstar will direct your enquiry to a third party mortgage broker. If you decide to find out more or apply for a home loan, you can provide your details to the broker. You will liaise directly with the broker and not with Canstar. When you click on a button marked “More details” (or similar), Canstar will direct your enquiry to the product provider. Canstar may earn a fee for referral of leads from the comparison table above. See How We Get Paid for further information.
Cover image source: Fizkes/Shutterstock.com
This article was reviewed by our Editor-in-Chief Nina Rinella before it was updated, as part of our fact-checking process.

Alasdair Duncan is Canstar's Content Editor, specialising in home loans, property and lifestyle topics. He has written more than 500 articles for Canstar and his work is widely referenced by other publishers and media outlets, including Yahoo Finance, The New Daily, The Motley Fool and Sky News. He has featured as a guest author for property website homely.com.au.
In his more than 15 years working in the media, Alasdair has written for a broad range of publications. Before joining Canstar, he was a News Editor at Pedestrian.TV, part of Australia’s leading youth media group. His work has also appeared on ABC News, Junkee, Rolling Stone, Kotaku, the Sydney Star Observer and The Brag. He has a Bachelor of Laws (Honours) and a Bachelor of Arts with a major in Journalism from the University of Queensland.
When he is not writing about finance for Canstar, Alasdair can probably be found at the beach with his two dogs or listening to podcasts about pop music. You can follow Alasdair on LinkedIn.
- What is the difference between an investment loan and an owner-occupied loan?
- How do owner-occupied loans work?
- How do investment loans work?
- Do you need to tell your lender if you plan to move out of your owner-occupied home and rent it out?
- How to get a loan to buy a house
- How to get a home loan for an investment property
The comparison rate for all home loans and loans secured against real property are based on secured credit of $150,000 and a term of 25 years.
^WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Try our Home Loans comparison tool to instantly compare Canstar expert rated options.
The comparison rate for all home loans and loans secured against real property are based on secured credit of $150,000 and a term of 25 years.
^WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.