So we bought our house in 2019 with the intention of turning it into a rental – But..

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  • #85985 Reply
    Will

      We have an interest rate of 2.875 currently. I have been told that you need to refinance if you turn your place into a rental but rates right now are at 8%.

      Several people have told me not to refi and just make it a rental anyway. I’m worried about the legal implications of keeping the same rate.

      As of right now, we will have a lower monthly payment for 30 year if we refi but we will pay way more in interest.

      What should we do?

      P.S.1: We got our loan from a credit union and they do not allow rentals for mortgages.

      P.S.2: I have already spoken with the credit union about turning it into a rental and was told they do not do loans for rentals. I was unaware of this when I got the mortgage. My insurance payments are also through my credit union so they will know as much as my credit union knows and vice versa.

      #85986 Reply
      Champ

        Live in it for a year.

        After that you are 100% legit. Don’t refinance.

        #85987 Reply
        Jordan

          Sounds like you got some bad advice, no need to refi!

          #85988 Reply
          Serena

            If your intentions when you purchased was to move there, and you did, you are not committing loan fraud when your life changes and you turn it into a rental. You do not need to refinance.

            At the time of purchase you were honest that it was a primary home, you moved in, and life changed. That happens all the time.

            Don’t miss: I would like to keep our house as a rental property

            #85989 Reply
            Dion

              You do not need to refinance.

              If you purchased it as a primary residence the requirement to live in the property was for 12 months (almost all lenders set this at a year)

              If you used FHA and want to use FHA again, you’ll need to refinance because you can only have one fha loan at a time. But fha is not the best option for most people. (It’s designed for people with bad credit and bad debt to income. Not for first time home buyers like a lot of people think).

              When you move out your home owners insurance will also go down. Since you are no longer insuring your personal items.

              Please feel free to reach out if you have any questions. I’m happy to help if I’m able.

              #85990 Reply
              Stacey

                Why the heck do you need to refi? Time to chat with someone that knows what the hell they are talking about. We have several rentals and none of them are refi’ed.

                #85991 Reply
                Eric

                  No idea why you’d need to refinance when renting.

                  Did you find any supporting information on that or just word of mouth? House hacking would be a lot harder if so.

                  #85992 Reply
                  Timothy

                    Those several people are all wrong, find new people.

                    #85993 Reply
                    Dillon

                      The only correct answer is speak to your lender.

                      If your contract (which I assume you’ve read) says it cannot be a rental per your edit… you would not want to breach your contract.

                      If your intention was always to turn it into a rental, why would you knowingly get a mortgage that had terms explicitly against it?

                      #85994 Reply
                      Stacy

                        That’s so weird. We’ve purchased 4 homes over the years. Each mortgage was with a credit union. And 3 of the house were turned into rentals after living in them for years. Never had to refi any of them!

                        #85995 Reply
                        Rosemarie

                          READ your mortgage. It was undoubtedly originally an owner occupied loan but they can only hold you to that requirement for X number of years as written in the contract, usually 2-3 years.

                          Once the owner occupied time is up you can do anything you want with the house, including renting it.

                          Join the Choose-FI Real Eatate group and BiggerPockets group for more detailed info on being a landlord.

                          (I have 5 loans on rentals that were all once owner occupied.)

                          Suggested: Anybody have any experience with house hacking a multi family building, saving, then keeping it as a rental?

                          #85996 Reply
                          Chris

                            If you live in the house for at least one year as a primary residence, you can then move out and turn it into a rental while keeping the current loan and interest rate.

                            No need to refi.

                            #85997 Reply
                            Wendy

                              Check your loan docs. Your legally binding loan agreement/covenant may state that the mortgage is contingent on the home being your primary residence.

                              Read everything carefully or have an attorney review. If you are in violation of the contract, the lender can call your loan (demand immediate repayment), so be careful.

                              #85998 Reply
                              Paola

                                The bottom line is you need to find the documents you signed when you purchased your house and read them, that is where you will find your answer.

                                The document where you state the purpose of the loan for the property has usually a jurat section where you swear or affirm in front of a notary that what the document says it’s true and then you sign.

                                It is usually called “Occupancy statement” but it may have other similar names.

                                Good luck.

                                #85999 Reply
                                Tamera

                                  Don’t take advice from that person anymore because they have zero idea what they are talking about. Your intent to live there for 1 year was there, yes? Then that’s all you need.

                                  Rent it out, read the laws, treat people decent, remove emotions, change your insurance to rental or landlord insurance, good luck!

                                  Don’t forget to take a look at: Debating about buying a house or condo where I rent instead of renting

                                  #86000 Reply
                                  Dan

                                    First, you don’t need to refinance to turn your home into a rental property. Perhaps you heard something about the BRRRR method or something or someone else confused that. But you may rent it out as is.

                                    Here are some considerations:

                                    The biggest thing to do is decide whether or not you actually want to be a landlord. If yes, then continue. If no, you are likely eligible to sell your home and pay $0 taxes if you meet the criteria for section 121 exclusion.

                                    If you become a landlord, be sure to inform your insurance company. I would increase the liability coverage and perhaps take out an umbrella policy (PLUP).

                                    You should read up on it as well. I recommend staying with Brandon Turners “The Book on Rental property Investing” as a starting place and join the Bigger Pockets Facebook group.

                                    Best of luck!

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