I am in the process of purchasing my home to rent…and I have a question…I just got on the phone with Farmers Insurance to get “Rental Dwelling Insurance”. She asked me if I have notified my lender that I was going to rent my house. I have not. She said I must notify my lender and that the interet rates will be higher. Is this true? Do I have to diclose this info to the lender? I do not want to pay higher rates. ~Virginia Beach
just tell the insurance agent that you have notified your lender.
Unless you have a clause in your note and mortgage that states that the property shall be owner-occupied (like in a HUD/VA/FHA loan), I can’t see how it is any concern of the lender’s what you do with the property as long as you pay them, keep it up, and pay the taxes…
I would ask what page THAT verbiage is found on!
Keith
Well, I always tell my insurance broker that the property will not be owner-occupied. They already know I can’t live in two places at once and insurance is such a touchy thing these days with respect to the companies and them carrying you. I find in this business it is always best to be honest and upfront – with everything. It’s a nightmare right now for me to find unoccupied-property insurance for the renovation process, and they cover about nothing, but I don’t want to be caught without it, should something they may cover happen.
I have a property that just flooded with all the rains from Cindy and Dennis <sigh 14 inches in 10 days>. The carpet was only six weeks old but I had to have the living room torn out. Frankly I didn’t need it torn out, but the “restoration specialists” who are charging high dollars to get water up in light of this disaster, stood there giving me itemized amounts (in front of my tenant) added to more “required” amounts until I finally said, “Tear it out.” From the look on his face (and my tenant), I’m sure that is not what he wanted to hear, but I don’t care. Now my tenants will have new carpet (again) and I won’t have to worry that they will be calling me due to mold or a stench in the carpet/padding/both. Doing the room over was way cheaper. I didn’t bother to turn this into my insurance. Two reasons: To save money on the premium, I have a $1,000 deductible (carpet and new drainage system, that won’t be needed for 100 years, will be just over this) and, I don’t want to take a hit for what I consider to be a minor claim which will haunt me in the future. I’ve learned that insurance if truly only for MAJOR claims.
FYI I raised the deductible on my own home and saved $300 a year.
Take care all!
Tami,
The point was not notifying the insurer (Dememav did that), the point was that the insurer stated that the owner has to inform the mortgage holder that it’s now a rental so they can jack up the mortgage interest rate!
As if…!!!
Keith
FYI I realize my first answer didn’t answer your orignal question, but any lender worth their salt will be talking to your insurance company get their insurance bill paid in escrow and to insure adequate coverage. This is insurance on THEIR investment too.
It is definitely the lender’s concern – if you don’t live in the property it’s an investment. In my experience, all investment property is treated differently from a lender standpoint. You are now playing with the big boys and will be paying the costs associated with this.
Welcome 
Hi Keith!
I must have been typing as you were And yes the lender will jack up the price of their money. They screw investors.
Lying in this business is a no-win game. The insurer will tell the lender it’s a rental before they close. To me, it’s not worth the fraud.
I’ve dealt with inept brokers where I’ve been on my way to the signing table only to find out that the lender discovered it was an investment property (I wasn’t hiding this) and the loan was pulled on the spot.
Ahso, I misread the original post…I thought he owned it and was turning it into a rental…the statement “I am in the process of purchasing my home to rent” is a bit awkward!
My lender charges me only a tad more for my properties – if I put 30% down (which I won’t), the rate is the same as an owner-occupied (ain’t great credit sweet???). I just did a cashout refi on a property that I bought outright and rehabbed and got 5.75% fixed/no points. The appraisal came in good on it too…I’ll only be out-of-pocket about $4K for everything, including the $3,500 in rehab materials!
Keith
Keith
Sweet deal Keith!
I’m not as savvy with the mortgage people as most here – I tend to get very frustrated with the run around and what appears to be lack of knowledge and organization. Anyone have a decent investment mortgage broker? We’re on our third (Hmmm, perhaps we’re the problem, I get mad when I’m asked for something for the thrid time LOL!)
Find an Independent Insurance Broker to deal with and the heck with Farmer’s Insurance!
I insure over 277 landlord’s and I DON"T CARE what they tell the bank - frankly it is none of my business! But when they tell me they need a homeowner policy even though they don’t plan on occupying it - well that COULD BE (not saying it is) insurance fraud, as it is misrepresentation.
What I tell my clients is - the Insurance Binder that I give them for the bank, says Insurance Binder across the top, has a place for amount of coverages, name of insurance company and how much the premium is. It does NOT say whether this is a Homeowner Polciy or Landlord policy, so the bank will not know.
I’ve done this time & time again for my clients. What they tell the bank in obtaining the loan is none of my business and shouldn’t be Farmer’s either. Find a new company.
Tom
Thank you all so much for the info…but, here is the real situation. My husband and I are buying a home for a great price…which we HAD every intention on living in until a job op. came to my husband and he now has to move to NY…I may live in the house for a month OR LESS and then I too am off to NY…we want to keep the house and decided to rent it…everything is in motion…now what do we do?..Do I have to tell the lender that now, since my husband’s job will be in NY that we have to rent it…or do I keep things in motion, not say a word and rent it as soon as I want? Also, Farmers said we can take out a Home Owners Policy for now and then change it as soon as we decide to rent it?..
Take the HO policy as if you were going to live there and worry about changing it later to a landlord policy. If you don’t switch to a landlord policy foro 2-3-4 months, nobody will argue or hold your feet to the fire.
It is when you let a policy go for too long, misrepresenting what the company is insuring, is when you get into trouble. So relax, insure it as an owner occupied and change it when youy get settled in NY with your husband.