rent out a 5% conventional primary after 2 months?

Question

I just wanted to see if this works.

Let say you buy a duplex with a 5% conventional loan and after 2 months you want to get out and turn it into a full time rental. Do you just approach your mortgage company and pay down 15% of the loan (now at 20% equity) and you are free and clear to use it as a rental or do you still need to wait a year?

or do you have to refinance out of that completely

Andrew Postell · Answer

@David Zheng truthfully what would happen is on your next purchase you would need to buy it as an investment property.  The idea here is that you won't get the benefit of primary financing (because the loan terms are better) over and over and over.  So if you wanted to just apply that 15% to your next purchase that would be the most effective strategy.  You could refinance your primary home now, but then you pay closing costs all over again.  You can buy an investment property with 15% down.  Hope this helps!

Andrew Postell · Answer

@David Zheng attached to this message is the picture of paragraph 6 of your "Loan Agreement Addendum".  What this is essentially saying is that you pledged to move into the property within 60 days of buying the property and living in it for at least one year unless "extenuating circumstances" exist.  What an extenuating circumstances could be is something like a job transfer.  So your job has transferred you somewhere else that requires you to move out of your "geographical commuting area" would be an extenuating circumstance.  This might cause you to have more questions so feel free to ask away here.  Thanks!

Andrew Holloway · Answer

I looked at this for a prior home I owned. In my case, the loan docs clearly stated that I must live there a full year as a primary residence. Otherwise they could call the loan and demand payment in full (leaving me in a panic to refi as quick as possible). I actually asked the lender for an exception and was met with a hard no.

Checking the loan docs is the best recommendation. Just listing for you what happened in my case.

Checking the loan docs is the best recommendation.  Just listing for you what happened in my case.

Account Closed · Answer

Read the loan documents.

They will tell you exactly what your obligations are, and the results if you fail/choose not to meet them.

It will depend on a number of factors, many of which you will not be given details on, just the rules.

Good Luck.

David Zheng · Answer

@Andrew PostellHey Andrew! I was wondering if I wanted to get out of that, I would essentially have to refinance it into a rental property with at least 20-25% correct?There's no way I could just put down an additional 15% equity in it and use it as rent?

rent out a 5% conventional primary after 2 months?

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