I just recently purchased my house, April of '06. there is nothing wrong with it, but I am currently in a relationship, wasn't at the time of purchase, and we spend all of our time at his house. We have four kids so my place just isn't big enough. Under my mortgage the house has to be "Owner Occupied". However I was wondering if there is any option of being able to rent it and not get into trouble. My credit is not the greatest so I can't refinance, plus haven't had it long enough. Any suggestions?
2007-05-24 05:09:56 · 9 answers · asked by karakalkel 1 in Business & Finance ➔ Renting & Real Estate
Just rent it. It had to be owner occupied when you bought it...but you aren't committed to keep it that way. Of course circumstances change.
2007-05-24 09:35:28 · answer #1 · answered by gcbtrading 7 · 0⤊ 0⤋
1) Most lenders aren't going to care if you rent it out, as long as you continue to make payments on time. You haven't perpetrated any fraud - your initial intent was to live there, and that's what you've done, for over a year. In fact, you can go back and review your documents - these probably define "owner occupied" as using the place as a primary residence for at least one year. So I wouldn't worry about "getting in trouble" by renting the place. If you can get enough from rent to cover the payments, that's a really good option you should explore.
2) Assuming no appreciation (i.e., the property is now worth the same value as what you paid for it), you'd take a pretty big hit by selling it at this point. With a 6% sales commission, it would cost you $6,000 for every $100,000 of value. If renting turns out to not be a viable option, you'll have to consider how much of a hit you'd be willing to take to sell the place.
3) Let's say renting the place will cost you $200/month. Weigh this loss against how much you'd stand to lose by selling the place. Do a breakeven analysis for comparison. For example, if you'd lose $9,000 by selling, as compared to $200/month by renting, then it would take you 45 months (or nearly 4 years) before renting would lose you as much as selling. Also consider that in that 4 years, the value of the place could go up.
Generally, if you can rent, then you should. Good luck.
2007-05-24 05:26:54 · answer #2 · answered by Marko 6 · 0⤊ 0⤋
The requirement for the property to be owner occupied generally applies to your intent and actions when you first got the mortgage. The courts have held almost universally that lenders cannot hold the borrower to that indefinitely and cannot accelerate the loan based upon occupancy unless they can substantiate that at the time you took out the loan your intent was to never occupy the home in the first place. Of course, that only applies as long as all payments are current.
While in the military over a 21 year period I acquired several properties with various types of funding including GI Bill loans, FHA loans and conventional loans. When I left the area due to military orders, I converted the properties to rentals and let my tenants pay off the mortgages for me. In all cases the lenders knew that the property was rented and never raised any issue at all, including the GI Bill loans and the FHA loans.
Assuming that you will have a small positive cash flow or can at least afford to "feed the alligator", there won't be any issue with converting your home to a rental property as long as you keep up the mortgage payments. Set aside a couple of months worth of mortgage payments to cover you when you are between tenants as well as a few thousand for repairs and you shouldn't have any serious issues at all.
You might want to seriously consider turning the property over to a professional property manager. You'll generally pay 10% of gross rents for their services but from personal experience I can tell you that a good property manager is worth their weight in gold. The first time the water heater blows up on Christmas Eve or if a tenant stops paying rent, you'll wish you had a pro handling it for you.
With a bit of luck you should be able to work out a small positive cash flow (save it for future repairs!) and a nice tax write-off while someone else pays off your mortgage for you.
2007-05-24 05:26:02 · answer #3 · answered by Bostonian In MO 7 · 1⤊ 0⤋
I would rent it, just in case you need it if the relationship sours. I agree that it is unlikely that your mortgage company would find out.
Make sure you bank enough money for emergency repairs, to pay your own mortgage if the tenant doesn't, and for general maintenance of the property.
2007-05-24 10:11:46 · answer #4 · answered by godged 7 · 0⤊ 0⤋
You do not say why it has to be owner occupied. Did you get special financing? If it is just a stipulation in the mortgage it is unlikely they will know or care if you rent it.
2007-05-24 05:12:45 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Go back to the lender. Occasionally they will permit a modification or even what is called an "asignment of rents and leases" and allow you to rent out the property under strict conditions.
2007-05-24 05:12:57 · answer #6 · answered by wizjp 7 · 1⤊ 1⤋
Check to see what the time restraints were. For the most part just continue sending your mail there and using the address they rarely investigate.
2007-05-24 05:13:45 · answer #7 · answered by simply-remember 5 · 0⤊ 1⤋
Why would you move four children into the house of your boyfriend??? And why not just sell it if you do?
2007-05-24 05:14:48 · answer #8 · answered by SvetlanaFunGirl 4 · 2⤊ 1⤋
I predict trouble ahead for you.
2007-05-24 05:17:18 · answer #9 · answered by Anonymous · 0⤊ 1⤋