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Is refinance a must to convert primary residence into investment property?

I am buying another home and making it my primary residence. I am planning to rent out my current primary residence, on which I have mortgage, thereby making it an investment property. Does that invalidate the mortgage terms because the mortgage was issued with the condition that the property be used as a primary residence. Do I have to necessarily refinance it by classifying it now as an investment property?

Thanks in advance for any help.
  • June 18 2010 - Evergreen
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Answers (5)

Best Answer

No you are fine. The only questionable thing is if you refinanced your current home as a primary residence in the last 12 months. The intent to occupy you signed on your last loan is only for 6 months or a year.

If you did refi in the last 12 months it is likley any new loan on the place you purchase will have to be a investment loan even though you are going to live there.


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  • June 18 2010
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You do have to be concerned, as Danny stated. But, you will have higher standards, primarily in reserves and qualifying debt-to-income, to qualify for your new purchase. .... Happy funding, Rudi
  • June 19 2010
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Profile picture for Bentley Advisors
Your current mortgage and accompanying trust deed has a clause stating the following:

6.         Occupancy.  Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower's control.

Quite frankly, your lender is too busy chasing down those that have defaulted on their loans.  As long as pymts are always current, you will likely never hear from them.
  • June 19 2010
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You can keep your current loan as long as there were no special terms or provisions in your contract.   For example, if you got any down payment assistance via a "silent second" those sorts of program will not allow you to vacate the property and convert to rental.

If you just have a regular conventional fannie mae or FHA loan currently, you can keep that loan as is and move out.
  • June 18 2010
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Technically you are supposed to change it to an investment property.  You will be fine as long as it is not a "down grade" sorta speak.  An example of a down grade is if you are moving from a two family to a one family or maybe a house to a condo.  Lenders also might want a letter of explanation if the new home is farther from work then your old home.  Basically, if the transaction makes sense that you are now going to occupy you new home as your primary residence you should be ok.

  • June 18 2010
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