Double Primary Residence Mortgages

19 Replies

I purchased a property with the intention of selling my primary residence (5/3 - suited for a family with kids; 3500 sq.ft.; ) and making the purchased property my primary residence. Due to this, I applied for a primary residence mortgage, on the purchased property.

I have put my current home up for sale and have had little activity, despite it being priced aggressively.  In researching, I found the low activity is contributed to 4 major factors:

i) start of school

ii) increased competition from new builders (priced about 10-15% higher)

iii) lack of a swimming pool (to cater to the younger ones)

iv) price point ($450k)

*There are 3 comparables that have dropped the price by $40k over the last 30-45 days, but are still remain under ACTIVE status.

I am prepared to wait till demand picks up a little or the right buyer comes along.  However, in the meantime, I would like to rent the purchased property to avoid the burden of a double mortgage.

How should I proceed from here?

Thanks in advance.

@Sam Alpha  If you rent the old primary residence (one you are trying to sell) and move into the new one, then you will be fine. DO NOT rent the new one, because you got the mortgage as a primary residence. It would be fraud. You might get away with it, but its not worth the risk it carries.

If you already purchased the new property, why don't you wait with refinancing it until your "old" property has been sold? I would not get tenants into a property you are about to sell, especially not at that price point. It is much harder to sell.

Thanks @Upen Patel  

That could have worked, but my primary residence is only 5 years old and in very good condition.  Renting it out posses the following issues:

i) rent will not cover the mortgage

ii) showing will be an issue with renters residing here

iii) tenant presence may deteriorate the condition of the property

The purchased property came at a 40% discount and needs updating.  It is habitable with no major issues and so seems the better one to put on rent.

How can I rectify this issue and how would one align themselves for the foreseeable future?

Originally posted by @Andreas W. :

If you already purchased the new property, why don't you wait with refinancing it until your "old" property has been sold? 

 I already have a mortgage set up for the purchased property (as my primary residence). The plan was to sell my current property and assume the purchased property as my primary residence.

@Sam Alpha

If I understand you correctly, you have now 2 mortgages for 2 primary residences. If that is true, make sure your new lender doesn't find out. If I remember correctly, one would have to be classified as secondary home triggering a higher level of scrutiny and potentially a higher interest rate.

Are you using a good active Real Estate Broker to market your property?

@Andreas W. that is correct (2 mortgages/2 primary res.)

It's really not about the lender finding out, but doing the right thing.  I like sleeping easy with a clear conscience.

@George Hermann myself.  I've had a couple of open houses, one brokers open and have reduced the price by $10k so far.  We have been on the market for 60 days.

Hi Sam,

You might consider an busy successful agent with a large broker. They should bring a great deal of experience to the table and focus on establishing the price that will attract one or more buyers, staging the property for maximum eye appeal, and market the property with multiple on line databases, ads, and yard signs (if applicable). The goal of most agents is to get offers within two weeks.

Good luck

@Sam Alpha  If you want to rent the new property, then the best course of action would be to refi the property as a rental. Yes, the rate would be a bit high, but at least you don't have to worry about your lender calling in the loan. And its financial fraud, which is a federal offence. You don't want that hanging over you.

Don't go to the same lender for the refi.

Upen Patel, ?Mortgage Banker
VA, FHA, Investor Loan Specialist
National Lender, Federal NMLS# 1374243 

If you would like send me a direct message with address and I will let you know how we would price as an REO that would have it under contract within two weeks.

@George Hermann

For Sale sign - ✔

Staging - ✔

Multiple online database - ✔

Paper ads - x

Price - This item is subjective and since I am the agent owner, I wanted to get the bias factor out of the equation.  I got 3 friends (agents) to do me a comp. analysis and it seems that we were priced well.  Over the last 30 days, the prices have dropped about 10% (which is a bit for a very highly sought neighborhood) and if we want to sell, than we may have to aggressively lower the price.  We got a major discount on the other property, so in the scheme of things, we can still afford to price aggressively and call it a day.

I appreciate all the advice that you've posted.  Thank you.

@Upen Patel that is one of the options we are looking at.  Alternatively, if we are willing to be aggressive, we will drop the price and move in there.  

How much would refinancing cost on a property worth $250k (all costs included)?

@Sam Alpha @Andreas W.

I don't see an issue with your having the two primary mortgages. Your only issue is having a hard time selling your previous house. So you should not worry about sleeping well at night based on fraud. You should only be restless based on the the fact that you are paying for two mortgages.

As long as you lived in the previous house for at least a year and then bought the new one as a primary residence (meaning you moved into it after close) you are fine. You are not required to sell or refi the old house as a rental or second home unless you want to. You can actually hold on to it with the current loan. Plenty of investors (me included) do this and use it to acquire rental properties (it just takes longer since you have to live there a year).

Second house status and rental property status only applies if you buy a house without any intention of moving into it after close or if you have owned the house you currently live in for less than a year (standard owner occupancy minimum in the affidavit you sign at closing). 

@Parker Detweiler to get it under contract in 2 weeks, we may have to be EXTREMELY aggressively priced.  I'm not sure if that would be the best course of action in the long run. 

Refinancing and renting is another option we have at hand.

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@Parker Detweiler thank you for the helping hand.  If we decide to sell, I will be getting in touch with you.  It sure helps getting an opinion from someone that does this day-in, day-out!

I wouldn't refi the house you want to rent just to rent it short term. Fraud is "deliberate deception to secure unfair or unlawful gain". Did you deliberately buy this 2nd house to rent? No! Circumstances are forcing you to rent in the interim till your first house is sold. 

If you're making a good faith effort to get your old house sold, and it sounds like you are, I wouldn't worry about it. Now getting that one sold, you need to do a full court press! Post ads on Craigslist every day, open houses, flyer the neighborhood (maybe someone has friends or family interested in the area), include some fun stuff  with the house that doesn't cost a bunch like big flat screen TV, etc. Lots of ways to increase your odds of a quick sale. Good luck!

Thank you all. If this didn't help the original person who posted I'm sorry but I was digging for info on "primary" homes and found it here! Thank you! 😁

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