Primary Residence

3 Replies

I am a new investor just started couple months ago. I always have the passion for it but just never pulled the trigger. I finally pulled the trigger in December 2014, turning my primary residence into a rental and became a landlord. However, as I learn about the laws of real estate, I never knew the rule of living in the primary residence for a year before renting it out. Initially I thought it wasn't a big issue since I bought the home in June 2011. However I forgot I refinanced the property last year in July. I am wondering if I would get in trouble for already renting out my property? How often do banks check for that? and after waiting for a year, do I need to ask my bank for permission to rent out my property?

I heard from Brandon Turner's book that the loan stays with the mortgage regardless. Do I need to ask them for permission after one year?

Not giving legal advice.

If you signed an owner-occupancy clause when you refinanced the house, and you rented the house during the owner-occupancy period, then you could find yourself in hot water with the lender. 

The risks are higher for properties that are not occupied by the owner, and the lender probably gave you more favorable terms because your stated intention was to occupy the home as your primary residence.

Do they check? I doubt they expend a great deal of energy doing that, but there are red flags that would tip them off, like changing the insurance policy to a landlord policy.

I would definitely pull out the refinancing paperwork and run this by an attorney to see what options you have.

Good luck!

http://homeguides.sfgate.com/mortgage-require-hous...

Originally posted by @Gary Wong :

I am a new investor just started couple months ago. I always have the passion for it but just never pulled the trigger. I finally pulled the trigger in December 2014, turning my primary residence into a rental and became a landlord. However, as I learn about the laws of real estate, I never knew the rule of living in the primary residence for a year before renting it out. Initially I thought it wasn't a big issue since I bought the home in June 2011. However I forgot I refinanced the property last year in July. I am wondering if I would get in trouble for already renting out my property? How often do banks check for that? and after waiting for a year, do I need to ask my bank for permission to rent out my property?

I heard from Brandon Turner's book that the loan stays with the mortgage regardless. Do I need to ask them for permission after one year?

 1) When you take out a mortgage, you have to "certify your intentions" which is where the occupancy restriction comes into play. You can certify today that you will be the primary resident and then lose your job next month and have to move for a new job...things happen

2) Have your Attorney review your Note and Mortgage documents to determine if some form of action by you is required should your residential status change...most of the time the answer is no

3) The likelihood of a bank putting you in default when they are getting paid regularly is slim though I'd be doing a dis-service if I said they couldn't do that

4) There is no "rule" as each lender's requirement is different...some are Self Certification Only, some are 6mths, some are 1yr and some are 2yrs...it just depends on the loan type and issuer...again, the exact language will be expressed in your Note and Mortgage and unless you committed fraud by saying you were going to live in the property and yet had no intentions at all, then most likely no issue exists

5) There is no asking a bank for permission in my opinion...not sure if I know of any Residential Status Change Authorization Desk... 

I wouldn't stress it (unless you committed Fraud of course)...BUT DO consult with a Mortgage or Real Estate Related Attorney for consultation so you can sleep easy at night.

Thanks for the advice!!!

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