Hello- I’ve researched this topic extensively and have generally found it pretty taboo. Let me present my dillema. My fiancee and I purchased a property 2 years ago. Right before we purchased I was laid off. We continued with the closing but after I year I was unable to find work in the area. I found a job in another state and we moved. We now have tenants in the property but are taking a loss, the market crashed in the area and we can’t sell right now. We have a pretty good interest rate but its an ARM (interest only) and will eventually jump. I hate the thought that the loss we are taking could possibly increase. I’d like to refinance, start paying the principal down, and wait it out to hopefully get rid of it in a few years.
If I refinanced it with the same mortgage company, would I be asked if it was owner occupied? Is there some legitimate way around this considering the home was originally purchased and used as a primary residence (we have no other properties and currently rent).
If you are renting the property then it is an investment property. By claiming anything other than that on the 1003 you would be committing mortgage fraud.If you are living in another state you will most likely get caught by the lender and be declined immediately. Your drivers license will reflect a different address, the appraiser will research the property and will most likely speak to the tenant when they come to do the appraisal which will give you away, etc… You are better off just riding out this rough patch with your current mortgage and not risk your good name by committing fraud. You can pay on the principal now just start adding it to your payment with a note stating that you would like the extra funds to be applied to your principle. hope this helps.
What’s the difference between a refi that’s owner occupied and one that’s not? The rate?
the int. rate is higher on non-owner occupied. in todays market
you need higher fico scores than you had to have a year ago ,to get the same amount of credit. you also need to take into account
that the property most likely will appraise for less than it did a year ago. you may want to pull comps to get an idea of where you really are,for value.
What's the difference between a refi that's owner occupied and one that's not? The rate?
I agree with Christopher. Do not try to scam the mortgage company. They are really starting to clamp down on this. Continue making your payments and add a little extra to help pay down some principal.
Can you explain how various mortgages are structured so that some pay off a significant amount of principal while others hardly pay down at all? Is it primarily ARMs that don’t pay down or are there conventional ones that are different as well?
On any conventional or ARM mortgage the initial years are primarily interest. The main difference is that the ARM has a date at which the rate will adjust. For example, on a 2 year ARM the rate would be fixed for the first 2 years and then it would adjust. There would be some principal, although minimal, being paid with each payment.
With an interest only loan a payment of only the interest is paid. So if you do not pay any extra then nothing is being applied to the principal.
Here is a link to a calculator that will show you how the amortization schedule breaks out the interest/principal on a payment.
Is there a way to determine which loans pay off more principal per payment than others? Do ARMs typical pay off little interest compared to conventional loans?