we rent a house and just found out that the owner is on an interest only loan, he just bought it and we are concerned that he has illegally rented it to us. Should we be? and what happens if the loan company finds out, where does that put us?
2006-09-11 04:51:59 · 12 answers · asked by k h 1 in Business & Finance ➔ Renting & Real Estate
Sure if you have gone through the proper channels to rent it.
2006-09-11 04:54:00 · answer #1 · answered by thesweetestthings24 5 · 0⤊ 1⤋
The source of the owner's financing has nothing to do with your rental agreement with the owner -- nor is it any of your business or concern. The loan company could care less as long as they get their money.
If you have a lease you nothing to worry about even if the property went into foreclosure. The lender would be obligated to honor your lease.
While occupancy statements signed at the time the loan is closed are legal and enforceable, the courts generally do not hold them enforceable for long periods of time. People do legitimately decide to move or are forced by circumstances to move, i.e., job transfer, etc. And sometimes this happens very shortly after closing on a loan. As long as the owner entered into the transaction in good faith at the time the agreement was executed there is nothing to say that he can't change his mind even a week after closing. I did an FHA re-fi on a loan back in 1994 and about 3 days after we closed I got a short-notice job move. Neither the lender nor HUD had a problem with converting the property to a rental just a couple of weeks after closing.
2006-09-11 12:16:32 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
No, that isn't illegal. The only homes that you aren't supposed to "rent out" is a HUD home that the owner buys and it is limited to owner occupancy. That means only the owner can live in that residence with his family. An interest only loan is usually a conventional loan. Most of the time the reason the buyer gets an interest only mortgage is because the can qualify for more home but there will likely be a time when he owes a balloon payment (bug lump sum of money). Don't worry you don't have to stressing over staying in that house.
2006-09-11 11:57:36 · answer #3 · answered by noneofyourbizwax 3 · 0⤊ 1⤋
"He can do whatever he wants, as long as he is making his payments. The creative ways he finances his house has nothing to do with your rental agreement."
That is incorrect.
If he signed an occupancy affidavit at the closing, he is committing loan fraud and the lender can call his entire loan due and payable because of this.
On the bright side, the chances of the lender finding out are slim to none.
The fact that the loan is interest only is not the problem. If he obtained the loan under the pretense that the house was to be his primary residence when in fact it was to be investment property, he has committed fraud and lenders take this very seriously. Investment property carries a higher risk, and usually a higher interest rate as well.
2006-09-11 11:58:52 · answer #4 · answered by BoomChikkaBoom 6 · 0⤊ 0⤋
The type of loan that a person has is not the indicator on whether or not he is able to rent or sublet his property. If you are a tenant of his, you should have a contract. It will state the terms and more likely than not, tell you that you can not sublet.
The loan company wants a check every month. As long as he is doing that, then they won't bother either of you, and have no right to bother you unless they are foreclosing on the property.
2006-09-11 12:20:22 · answer #5 · answered by Wise ol' owl 6 · 0⤊ 0⤋
The fact that it's an interest-only loan doesn't matter. Most mortgages have a Demand Feature, which means the mortgage company can make it come due at any time. The question is did he finance it as an investment property or a primary residence...
2006-09-11 13:59:10 · answer #6 · answered by KL 5 · 0⤊ 0⤋
It's legal, but legally, he is responsible for everythign the tenants do, and should he not be paying the loan, the bank can take the house from you with 30 days notice. You are not liable in the case of his renting you the house. If there is a contract that states that he is not to rent the house, then he is in violation, but again you aren't liable. You just might have to move out. I would contact the bank he uses and ask them questions, not using names or addresses.
2006-09-11 11:56:04 · answer #7 · answered by Rockstar 6 · 0⤊ 1⤋
Unless the loan requires that he live in it, there shouldn't be an issue. There is really no way for you to find that information out. If you were to be thrown out for that reason, I would sue him, if I were you. If you are that worried about it, move.
2006-09-11 11:54:17 · answer #8 · answered by Blunt Honesty 7 · 0⤊ 0⤋
He can do whatever he wants, as long as he is making his payments. The creative ways he finances his house has nothing to do with your rental agreement.
2006-09-11 11:54:57 · answer #9 · answered by dik 3 · 0⤊ 1⤋
It's his house. It doesn't matter what he does or doesn't owe,he's entitled to rent it out for whatever amount he wants.
2006-09-11 11:56:44 · answer #10 · answered by Lisa 2 · 0⤊ 1⤋