Cash out refinance primary residence to use as rental property?

Question

Hello! I have a question on using a cash out refinance with primary residences in relation to rental property

Here's my situation: I have a property that I have lived in for 2+ years in which I have a significant amount of equity due to appreciation that I am interested in turning into a rental property. What I would like to do is cash out refinance this current property, and then take that cash and use it as the down payment on a new primary residence, while turning the property that I just cashed out into a rental.

Here's the problem / where I'm confused: I know there's a period (6mo - 12mo) after you buy a primary residence that you can't use it as a rental (otherwise it's mortgage fraud). But I don't know whether that clock resets when you refinance that property

Here's my question: When I cash out refinance my primary residence using primary residence rates, does that reset that 6-12 month clock OR, because I've already lived in this property for 2+ years, can I refinance with primary residence rates and then immediately start using that property as a rental.

Thanks all, really appreciate the help!

--Niko

Riaz Gillani · Answer

@Niko Duffy You'll want to be careful with the stated and agreed on purposes of the cash out of your primary. If you are turning it into a rental property and therefore get a Non-Owner Occupied loan, you would be unable to use the cash out proceeds for a down payment on a new primary. They would have to be used for investment purposes.

Daniel Hennek · Answer

In a short summary, mortgage fraud is a misrepresentation that induces a lender to give you a loan, or terms they would otherwise not give you if the misrepresentation was not made. So if you say something that is false and that gets you a better rate than you would get if you stated the truth, that would be mortgage fraud.

When you apply for a mortgage you are going to be asked about the occupancy of the property. People often times want to state it's a primary residence or second home because they know they'll get a lower rate than if they say its an investment property. They think it's not a big deal. However, it is a very big deal when you're talking about the risk associated with that mortgage and that's why lenders ask who will be occupying the property. It's a question that is asked and you should answer honestly. Answer the questions asked of you honestly and you shouldn't worry about committing fraud as fraud is at it's heart a deception of some kind.

Account Closed · Answer

@Niko Duffy from my understanding- when you refinance it’s basically a Brand new mortgage. If you’re refinancing getting primary residence rates then it will say in your mortgage papers how long you intend to stay there. Generally 1 year. If you moved before refinancing it would be investment property rates. Roughly a percent higher, I hear.

Cash out refinance primary residence to use as rental property?

Cash out refinance primary residence to use as rental property?

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