Basic Terminology: Occupancy Type

Another term that is used quite often in the mortgage industry is Occupancy Type or Usage Type. In general there are three ways in which a subject property may be classified based on how the owner intends to use the property: Primary Residence, Second Home and Investment. If the borrower lives in the house on a daily basis it is their primary residence, while if they live there less than a given number of days each year than it is considered a second home. If the borrower intends to rent the property it is considered an investment. Rental income is normally more important than whether the borrower spends any time at the property, so a vacation home that is occasionally rented out will probably be considered an investment property. Second homes and investment properties are somewhat more risky to lend on than primary residences, so rate increases for these property types are common.