New to Real Estate · Palm Springs, CA · Member since 2022 · 4 posts · 0 votes
Hello, I have owned my property for 14 months. I bought it as a primary residence. Now, I want to convert it to a rental property, would I have to change my mortgage status from a primary residence to an investment property? I am also thinking of doing a cash out refi, but am unsure, because of how high the rates are.
Lender · PA · Member since 2019 · 533 posts · 461 votes
4y
Hi Marseille as long as you have passed the seasoning requirements for a FHA/VA than you can rent the property out without fear of a current mortgage default. On the other hand if you want to take cash out you could refinance or HELOC the property while you are still living there and than rent it out. A cash out refinance would be better as owner occupied as an investor cash out will require the property be occupied at the time of application with proof of a written lease. Either way you have numerous options. I wish you well on your real estate journey. May the wind be at your back!!!!
Homeowner · Orrville, OH · Member since 2021 · 71 posts · 31 votes
4y
If you are still living in the property then The loan status would not change. FHA requires owner occupancy for 12 months. So if you don't refi into FHA you should be good. And refinance would depend on how much you owe now, how much you can pull out, will market rents cover your expenses with higher mortgage payments. And the kind of return you can expect to get from the monies you pull from the property. Figure out your return on Equity, would it be better for you to sell than refi?.
New to Real Estate · Palm Springs, CA · Member since 2022 · 4 posts · 0 votes
4y
So, if I were to move out of the property, I would have to change the status of the loan, then start renting it out? Or Can I just start renting it out, without changing the loan status? Thank you for the reply.
Lender · PA · Member since 2019 · 533 posts · 461 votes
4y
Hi Marseille as long as you have passed the seasoning requirements for a FHA/VA than you can rent the property out without fear of a current mortgage default. On the other hand if you want to take cash out you could refinance or HELOC the property while you are still living there and than rent it out. A cash out refinance would be better as owner occupied as an investor cash out will require the property be occupied at the time of application with proof of a written lease. Either way you have numerous options. I wish you well on your real estate journey. May the wind be at your back!!!!
If you are still living in the property then The loan status would not change. FHA requires owner occupancy for 12 months. So if you don't refi into FHA you should be good. And refinance would depend on how much you owe now, how much you can pull out, will market rents cover your expenses with higher mortgage payments. And the kind of return you can expect to get from the monies you pull from the property. Figure out your return on Equity, would it be better for you to sell than refi?.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
4y
@Marseille Agriam yeah, you can certainly move out and rent the property. 12 months is what most "primary loans" require you to occupy the property for. Once you have lived in the property for 12 months, you can move out and purchase another primary home with a loan. Now, the cash out refinance thing is a different question - I would bet that your current rate is rock bottom. So you might be a little shocked to see what you might get now. So get prequalified with a lender and that will tell you what you need to know on that step. Thanks for posting!
Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
4y
@Marseille Agriam I agree with Andrew. Take a look with a lender that you like, see where rates and pricing is at (it was a lot better 3 weeks ago compared to today, so take todays rates worth a grain of salt) and see how the numbers look. Depending on your current loan terms , PMI if applicable, etc - it may or may not make sense. It depends on your future buying goals and how much capital you need.
@Marseille Agriam yeah, you can certainly move out and rent the property. 12 months is what most "primary loans" require you to occupy the property for. Once you have lived in the property for 12 months, you can move out and purchase another primary home with a loan. Now, the cash out refinance thing is a different question - I would bet that your current rate is rock bottom. So you might be a little shocked to see what you might get now. So get prequalified with a lender and that will tell you what you need to know on that step. Thanks for posting!
I have been inquiring and the rates were at least 5%, which would add 600 more on my mortgage, so I don’t think the numbers make sense. But say I do cash out and refi, would I have to refinance it as a rental property? And in that case the rate would be at least 1-2% higher right? However, can I refinance again after 6 months? What’s the limit? Thank you!
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
4y
@Marseille Agriam yeah, if you were to refinance and you could not meet the requirements of living in the property for another 12 months then it would be an investment property interest rate. Most of the loans we are talking about here don't have a prepayment penalty (a few types do) so you can refinance as much as you like but keep in mind you pay closing costs each time...so we do want to limit how many types you refinance because of those costs. Hope all of that makes sense.
Hello, I have owned my property for 14 months. I bought it as a primary residence. Now, I want to convert it to a rental property, would I have to change my mortgage status from a primary residence to an investment property? I am also thinking of doing a cash out refi, but am unsure, because of how high the rates are.
Hey Marseille! I wouldn't cash out because then you would either need to qualify it as an investment loan which is typically a higher interest rate. I would try and get another low down loan and move into the next house as your primary residence.