Question about refinancing - owner occupied vs non occupied

[Tidybuoy]

I got a horrible rate on my last mortgage. 7.9% on an investment property.

If I were to refinance as "owner occupied" - I've actually been living there for a year as I am remodeling, I should be able to lower my rate quite a bit. When I initially financed, I had to pay 1 full percentage higher since it was non-owner occupied. I also had to pay $50k more in down payment. The investment property is 6 blocks from my regular home, and I am virtually at both properties 7 days a week.

My question: what happens to my primary home mortgage as it is at 2.7%, financed about 6 years ago. Will treating my new property as my primary residence change the status of my current primary residence and affect the mortgage.

I guess the real question: what happens to any mortgage that is financed as a primary residence and then changed to a rental down the road.

[look 171]

Nothing. Do it all the time. Most of mine are under owner occupancy. Buy them out right, remodel them, ask for a loan as if its my primary home. Rent it later. no one knows and no one cares. Just don't get caught like Donald Trump lying about his real estate worth. Stay outta jail

[Dantilla]

A friend played hop scotch buying homes near a college campus.
Move in with owner-occupied financing, then carve the basement into more bedrooms, rent to college students, go buy another house with big basement.

Once the loan is in place, there is no requirement to continue as your residence.
Just the requirement to keep paying the mortgage every month.

[dad911]

How do you deal with Insurance? MTG co wants a copy, and you need landlord/tenant insurance instead of a homeowner policy.

[id10t]

IIRC from my last refi there was wording about "primary residence for at least the next year", otherwise, rock on

[Dantilla]

Originally Posted by dad911

How do you deal with Insurance? MTG co wants a copy, and you need landlord/tenant insurance instead of a homeowner policy.

Simple. Give them a copy of your policy.
Building is covered, so mortgage company is happy.
There is no clause in the loan docs stating if the building is no longer the borrower's primary residence, the loan is called due.

The mortgage company was happy to keep loaning more to my friend.
Good payment history, several mortgages, let's keep loaning him money.

He's also building equity, so lender's position is safe in case of default.

[RANDY P]

Nothing will happen, but getting approved for the investment as primary may be an issue.

1- What is proof the former home is NOO now? is there a renter present with a contract and proof of payment received? How long has it been rental? Have you declared rental income on tax return?

2.- Is the investment a nicer home than your other home? It would NOT make sense to say you live in a smaller house, the original house not being a rental, and no proof you have been living there.

3- Where are the bills sent? Investment or your existing home???

The new house is too close to the existing primary unless you can meet those requirements.

[MBAtarga]

The only "exception" that I am aware of related to occupancy/rental - you can only claim one primary residence for a property tax exemption. That is should you live in a state/county that offers that reduction.

[Rick Lee]

As long as you don't default, they'll never check. Go into foreclosure and the mortgage app will likely get audited. As long as you're a nobody and keep the mortgage current, nothing will likely happen. But ....

[LWJ]

If your mailing address is at house B and you live there, then that is your residence. The fact that you used to live at house A is not relevant.

Done. Nothing more.

Go refinance quickly.

[nesposito]

If you are truly living there no reason not to refi as a primary. It will require that you remain there at least 12 months and loan servicers DO check. I've had loans called due that were financed as a primary because the servicer noticed there was a phone line going to the property being billed to someone other than the owner. They will make sure all bills remain in your name or you are at risk of the note being called due. If you are on the up and up and plan on being there 12 months you should have no issues.

[Tidybuoy]

Originally Posted by RANDY P

Nothing will happen, but getting approved for the investment as primary may be an issue.

1- What is proof the former home is NOO now? is there a renter present with a contract and proof of payment received? How long has it been rental? Have you declared rental income on tax return? I won't be refinancing the former home - it is currently at 2.75% - I've lived there 28 years. Yes, I declare rental income on my tax return as I have 3 rental properties (this new one is the 3rd)

2.- Is the investment a nicer home than your other home? I don't think that matters here. My primary is 2000sqft and the new rental is 2500 sqft. Both are suitable for me to live in. It would NOT make sense to say you live in a smaller house, the original house not being a rental, and no proof you have been living there. The investment property is larger than my current home. It cost 5 times as much and the current mortgage is 7.9% - this is the property that I will eventually refinance.

3- Where are the bills sent? Investment or your existing home???
I just installed an exterior locking mailbox and I was considering having my mail delivered there. There should not be any tenant mail as this will be rented short-term to nurses and execs.

The new house is too close to the existing primary unless you can meet those requirements.

All of this is my own research as I need interest rates to drop further before I refi. I'm currently just doing my homework.

[dad911]

Originally Posted by Dantilla

Simple. Give them a copy of your policy.
Building is covered, so mortgage company is happy.
There is no clause in the loan docs stating if the building is no longer the borrower's primary residence, the loan is called due.

The mortgage company was happy to keep loaning more to my friend.
Good payment history, several mortgages, let's keep loaning him money.

He's also building equity, so lender's position is safe in case of default.

I suspect a homeowner policy will not cover damage on a landlord/tenancy. Insurance companies always looking for a way out. Mtg co will know when the owner/tenant policy is submitted. I'd be more concerned with coverage on a catastrophic claim, than saving a few percent bucks on financing.

[Tidybuoy]

Originally Posted by nesposito

If you are truly living there no reason not to refi as a primary. It will require that you remain there at least 12 months and loan servicers DO check. I've had loans called due that were financed as a primary because the servicer noticed there was a phone line going to the property being billed to someone other than the owner. They will make sure all bills remain in your name or you are at risk of the note being called due. If you are on the up and up and plan on being there 12 months you should have no issues.

I will read my current mortgage docs. The current primary residence is financed thru my credit union. They won't finance my new rental property and so the mortgage went thru a regular mortgage company. I've had the new rental for 12 months now and I've been remodeling the entire time. I pretty much qualify as owner occupied at this time.

[Tidybuoy]

Originally Posted by LWJ

If your mailing address is at house B and you live there, then that is your residence. The fact that you used to live at house A is not relevant.

Done. Nothing more.

Go refinance quickly.

I think my real question is: if I claim the new property to be primary, will I have any issues with the current primary, which I've lived in for 28 years. The mortgage on the current primary is 6 years old and a 15yr loan.

[Tidybuoy]

Originally Posted by dad911

I suspect a homeowner policy will not cover damage on a landlord/tenancy. Insurance companies always looking for a way out. Mtg co will know when the owner/tenant policy is submitted. I'd be more concerned with coverage on a catastrophic claim, than saving a few percent bucks on financing.

I will keep that in mind. My policy is currently a policy that is for Airbnb. At renewal, I may switch to owner occupied+Airbnb, but I will discuss with my insurance broker. I'm hoping to save more than "a few bucks" as my mortgage is $3500/month. Dropping just 2% would drop that to $2500

[RANDY P]

Give it shot. Worst they can say is no at this point- if there is no manipulation they can prove, you should be OK I only speak from a Conventional lending (Fannie/Freddie) standpoint. Local lenders may be more lenient.

rjp

[RANDY P]

"I'm moving in....nicer house, gonna rent out the other"

If the income supports both mortgages on current primary and new primary, go for it. It'll be rental later.

[BK911]

Originally Posted by Tidybuoy

I think my real question is: if I claim the new property to be primary, will I have any issues with the current primary, which I've lived in for 28 years. The mortgage on the current primary is 6 years old and a 15yr loan.

No.

[LWJ]

[QUOTE]I think my real question is: if I claim the new property to be primary, will I have any issues with the current primary, which I've lived in for 28 years. The mortgage on the current primary is 6 years old and a 15yr loan./QUOTE]

Not at all. People house hop all the time. Buy a house with a primary mortgage. Do some fix up. Decide to rent it. Rent it. Buy another with an owner occupied mortgage.

This is a big loop hole.

It would be VERY hard for a mortgage company to say "Tidybuoy was intending to rent this out two years after buying."

As for the insurance question, this is my career. If you legitimately live at a location, you then it is your residence. You can have multiple residences.

When you ultimately rent it out, inform your agent who will flip a couple switches and make it a Landlord appropriate policy.