Occupied by a non-owner is a classification used in mortgage origination, risk-based pricing and housing statistics for investment properties of one to four units. The owner does not occupy the property. The term occupied by a non-owner is generally not used for multi-family rental buildings, such as apartment buildings.
Distribution of non-owner occupants
A mortgage on a property not occupied by the owner may have a slightly higher interest rate than a mortgage occupied by the owner, since mortgages not occupied by the owner are more likely to default. Because of the higher interest rate, some unscrupulous borrowers will try to classify an unoccupied homeowner mortgage as an owner occupied mortgage to try to save money.
How non-owner occupied properties are used in the real estate market
In many cases, properties not occupied by owners refer to condominiums and other single-family homes that are owned and rented to third parties. Properties not occupied by the owner require insurance before tenants can use them. In addition, if the property is not rented to tenants and it is intentionally vacant without occupant, another type of real estate insurance will be necessary.
Buying and renting properties for other residential occupants represents a significant part of the overall real estate market. Those who invest in these properties generally look for properties that need repairs but offer the possibility of attracting tenants if they are renovated and repositioned on the market. This could also apply to different types of vacation properties that are not the owner’s primary accommodation. There is a financing category for properties not occupied by the owner, specifically for renovation purposes. A homeowner’s home improvement loan is a type of mortgage that the borrower can use not only to acquire the property, but also to borrow funds that will be used to renovate the home. The value of such a mortgage is generally based on the value of the property after its renovation and renovation.
Although there is no minimum repair work that must be done with the funds of this type of mortgage, the renovations must be a permanent part of the residence. This could include adding a new bathroom, replacing a roof, new plumbing, or paving a new driveway. The renovations must also increase the overall value of the property on which the mortgage was taken out. Cosmetic improvements that increase the attractiveness of the property are not enough. Repairs and renovations must create a tangible improvement in the market value of housing. These mortgages can usually be used by homeowners with up to four unoccupied financed properties occupied by the owner.