Owner Occupied to Rental

[Anonymous]

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masdeocho wrote:

If a person owns a home, refinances it, and then continues to live there for somewhere between 1 - 9 months, does the person have any obligation to disclose at the time of the refi that they have intentions to rent the property at some point?

I  understand that if it becomes a rental property, it has to be reported to the local tax man and to the insurance company.

Thanks.

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If your intent at the time of the refi is to occupy the property for the foreseeable future, then you're OK.  However, if there's one shred of evidence that you planned all along, during the refi, to move out in the short term and rent the property, you could get in trouble with the lender at that point.

[Anonymous]

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masdeocho wrote:

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ShanetheMortgageMan wrote:

Most owner occupied homes have an occupancy affidavit that says you plan to occupy the home for the next 12 months.  If you have plans to move out before 12 months is up then you can't do it as owner occupied.  If you planned to live there for 12 months, and then unexpectantly had to move out for whatever reason (job, health, etc.) then that is OK too... just as long as you didn't plan on it when you were refinancing.

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Shane - Thanks for your response.  If I refi it as a rental property, what are the differences for the mortgage and refi process?  I'm assuming the APR would be higher.  What else?

Also, please look into your crystal ball and let me know exactly when interest rates will be lowest.  JK!

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Rates are higher, but often even worse, your loan-to-value is VERY limited in this market.  On an owner occupied property with "A-paper" credit, you can get 95% on a rate and term refinance (no cash back) and sometimes higher FHA or specialty products.  Cash out, you'll get 90% generally.

For an investment/rental, your max rate and term is 90%.  For cash out at closing (this includes debt consolidation even if there's no cash in hand at close) you're lucky to get 80% of the value of the property.

[Anonymous]

Joe -  Thanks very much for your responses.  The mortgage is an ARM ( ) but it doesn't reset for another 7 years, so the person will probably rent it out this year and refi later if rates go down. 

What complications are there, if any, if at the time of the refi the property has become a rental?  The property is currently worth around $500k, and the mortgage is $200k.  How much cash out are we talking??  Thanks again.

[ShanetheMortgageMan]

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masdeocho wrote:

Joe -  Thanks very much for your responses.  The mortgage is an ARM ( ) but it doesn't reset for another 7 years, so the person will probably rent it out this year and refi later if rates go down. 

What complications are there, if any, if at the time of the refi the property has become a rental?  The property is currently worth around $500k, and the mortgage is $200k.  How much cash out are we talking??  Thanks again.

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If you are planning on refinancing just what's owed (called a "rate & term" refinance) then you shouldn't have any out of pocket expenses or be required to pay down your mortgage in order to refinance.

[Anonymous]

Thanks Shane.  The more I ask, the more I ... err, the person ... get confused.

What are the types of closing costs on a "rate and term"?

[ShanetheMortgageMan]

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masdeocho wrote:

Thanks Shane.  The more I ask, the more I ... err, the person ... get confused.

What are the types of closing costs on a "rate and term"?

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LOL, too funny...

Closing costs aren't any different for doing a cash out refinance or a rate/term refinance... just your typical lender fees ($600-800), appraisal, title insurance, escrow/closing fees, misc. title fees, recording fees, and any state/county mortgage tax as well.  Anywhere from $2k on the low end, to $3-4k on the high end, then on top of that any points you want to pay to get a lower interest rate.