Refinancing Primary House and Using it as a Rental

[Brett B.]

Hi all. I plan on moving to Florida at the end of this year and turning my primary residence into another rental property. When I bought this house back in 2017, I put it on a 10 year arm at 3.625%. I currently have a HELOC that I use to purchase rentals with. I am in no rush to refinance since I have until 2027 before my rate becomes variable, but I am hoping for better rates in 2024/2025.

When I move out this year, I am assuming I can no longer get a primary residence mortgage rate. Would I have to refinance with an investment property loan, or could I possibly use a 2nd home mortgage? When I was looking last year to purchase another property in NJ, my lender was trying to get me a mortgage as a 2nd home for the better rate. 

Also what will happen to my HELOC? I understand you cannot get a HELOC on a rental property, but what if it is already established? And if I refinance with an investment/2nd home mortgage, will that HELOC get called due?

[Nick Belsky]

@Brett B.

You can leave your existing primary as is.  The only thing you'd need to change is the insurance to non-owner occupied.  That is not fraud since you've lived in it for at least 12 months.  Unfortunately, 2nd homes and investments are carrying pretty close to the same rates right now.

When buying new in FL, you can most certainly apply for a primary residence again. You simply list your NJ home as retained as a second home or investment. Keep in mind, if you do not have a new lease with first month's rent and deposit in hand, the entire mortgage payment (PITIA) will count against your DTI with no income... If you do have those three items, then only 75% of the income will be counted to offset the PITIA.

Most HELOCs are stand-alone, meaning they are a second position lien not tied to the first position mortgage. You'd need to refer to your HELOC's Note about what happens if you convert the home to a NOO. You may have to cancel it or convert it. Not sure why you think you can't put a HELOC on an investment. You most certainly can. They are not easy to find, but they are out there.

I am fully licensed in FL and live in the Tampa area.  Happy to help if you'd like.

Cheers!