Consumption and Real Estate
Is refinance a must to convert my primary residence into an investment property?
Question : Is refinance a must to convert my primary residence into an investment property?
I am buying another home and making it my primary residence. I am planning to rent out my current primary residence, on which I have mortgage, thereby making it an investment property. Does that invalidate the mortgage terms because the mortgage was issued with the condition that the property be used as a primary residence. Do I have to necessarily refinance it by classifying it now as an investment property?
Thanks in advance for any help.
refinance
Best answer:
Answer by Steve D
If the residence is no longer be used as per the mortgage contract, legally you must refinance the mortgage. While you may be able to get away with renting the residence out for a while, there is always the chance that the bank will find out and call the mortgage, meaning you will have very little time to come up with cash to settle the mortgage in full. Obviously, buying a second home with a residential mortgage makes it more likely that the first lender will find out through credit bureau reports (the mortgage inquiry will show up).
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#2 written by Glenn S 1 year ago
No…..If you have lived in the old property for at least a year you can rent it out. If you received any special tax credits or rebates from the government stimulus package you would have to repay that money if you haven’t lived in the property for at least 3 years.
Half the people I know that have rentals started out by renting out their own house and without refinancing. That’s how I first got started decades ago. Also back then it was OK to assume loans from the seller without qualifying or permission from the lender.
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#4 written by goz1111 1 year ago
As it stands now the new home you are seeking to purchase in regard to getting a loan will be an investment loan: high down payment, higher rates etc, if your income to debt ratio is high enough to qualify for the two loans
Until you resolve the issue with your current home loan , but at this point if you where to seek a loan on the second home it would be considered an investment versus primary residence
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Glenn S. is the only one so far who has it right. You had every intention of living in your current home & you did. One thing to keep in mind though, you won’t be able to use rental income to qualify to buy the 2nd home since you have to prove rent for 2 years on tax returns before we can use it to calculate your debt to income ratio. So you will have to qualify based on both house payments. Also if your first loan is FHA you most likely can’t go FHA on the 2nd. Good luck!