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.
- asked by Chakravarthi Chigurupati
All Answers:
Answer #1
If the residence is no longer be used as per themortgage contract, legally you must refinance themortgage. While you may be able to get away withrenting the residence out for a while, there isalways the chance that the bank will find out andcall the mortgage, meaning you will have verylittle time to come up with cash to settle themortgage in full. Obviously, buying a second homewith a residential mortgage makes it more likelythat the first lender will find out through creditbureau reports (the mortgage inquiry will showup).
- answered by Steve D
Answer #2
As it stands now the new home you are seeking topurchase in regard to getting a loan will be aninvestment loan: high down payment, higher ratesetc, if your income to debt ratio is high enoughto qualify for the two loans Until you resolve theissue with your current home loan , but at thispoint if you where to seek a loan on the secondhome it would be considered an investment versusprimary residence
- answered by goz1111
Answer #3
Yes, if that is a term of your contract, and it isthere when they give you a lower interest rate,you must refinance it as an investment before youcan legally rent it out.
- answered by Landlord
Answer #4
No.....If you have lived in the old property forat least a year you can rent it out. If youreceived any special tax credits or rebates fromthe government stimulus package you would have torepay that money if you haven't lived in theproperty for at least 3 years.Half the people Iknow that have rentals started out by renting outtheir own house and without refinancing. That'show I first got started decades ago. Also backthen it was OK to assume loans from the sellerwithout qualifying or permission from the lender.
- answered by Glenn S
Answer #5
Glenn S. is the only one so far who has it right. You had every intention of living in your currenthome & you did. One thing to keep in mind though,you won't be able to use rental income to qualifyto buy the 2nd home since you have to prove rentfor 2 years on tax returns before we can use it tocalculate your debt to income ratio. So you willhave to qualify based on both house payments. Also if your first loan is FHA you most likelycan't go FHA on the 2nd. Good luck!
- answered by Beverly S
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