We bought a second home, had to sign a second home rider at the final closing, never was presented until the final, stating we must use it as a second home and not rent it out…now, we closed and have the keys.
Can we refinance to a new loan as invesment property now? That would wipe the old loan away …
Owner occupied has been the hot topic around here lately, I don’t want any problems when we rent it out…
Thanks for any advice, or experiences. This home is our 1st investment, and out of state from where we live.
Re-financing would be a bad idea. What’s done is done.
Keep in mind that rates for an investment property are typically higher than those for a second home. Investment properties represent greater risk to the lender. You will almost assuredly get hit with a higher rate with the property as an investment property. Also, the bond/treasury markets shift on a daily basis which directly effects rates. So if you do refi. you may find that rates are higher now than when you went to closing. It’s very unlikely you would get a lower rate. One last note, most banks require you to put less down on a second home than for an investment poroperty. So you may not even qualify for an inv. property loan. Without knowing the specifics it’s difficult to say.
I am a mortgage banker in the state of Florida. I asked my title company a similar question. They said that if a buyer purchased a property with the INTENT to use it as a vacation home at the time of purchase, and a few months later changed their mind, then that is the buyers right to do so
Only one property can be declared as an investment property. Because you get a lower interest rate for a vacation home as opposed to an investment property, some investors play a “shell game”, constantly declaring new purchases as a second home and changing their minds later and declaring the next property as the vacation home, all the while enjoying the benefits of a lower rate. (Until the Department of Banking and Finance comes knocking at their door for fraud.)
Chances are, the only way you will have any problems is if you default on the loan. The lender and or state may ask you what happened. The homeowner boohoos and says they had a “professional renter” that lived there for 6 months without paying, so the owner could not afford to pay the mortgage. The bank (or state) scratches their head and say, “This loan is for a second home, and you were not supposed to depend on rental income.) Then the investigation starts.
Misrepresenting the intent d use of a property is a felony. A lot of people get away with it, but is your freedom worth saving 1% or less on an interest rate? Look at the fine print on page three, section 8 of your original 4 page loan application. By signing, both you and your loan officer are accountable for any misrepresentation. When that document is mailed, faxed, and funded, it allows the government to charge you with wire, mail, and bank fraud.
If you informed the loan officer of your intended use of the property, and he did the loan as a vacation home, he was not looking out for your best interest. If it gives you peace of mind, consult a real estate attorney or talk to someone in your state in the banking division. (If you contact me with your state information, I can direct you on where to go)
LICENSED MORTGAGE BANKER