no-renting clause on mortgage?

[Anonymous]

I've heard that sometimes lenders include a condition that you can't rent your house out. This seems unacceptable to me. Has anyone here had that clause in their mortgage?

[Anonymous]

It was in my mortgage contract -and I assume pretty standard.

The risk associated with a mortgage is different if it is an investment property or a primary residence. If you want a mortgage for an investment property, usually the LTV ratio is different as well as the rates.

[Anonymous]

Mine has that. I rent my house out anyway. I am going on the assumption that Bank of America has bigger fish to fry at the moment that my renting out my house.

[Anonymous]

I thought that meant you had no plans to rent it out (and would live in it as a primary residence for at least a year), not that you couldn't ever rent it out.

[Anonymous]

Anonymous wrote:I thought that meant you had no plans to rent it out (and would live in it as a primary residence for at least a year), not that you couldn't ever rent it out.

+1

[Anonymous]

OP here - I would be ok with a clause that stated I had no immediate plans to rent it out. But I can't agree to NEVER rent it out -- what if we need to move for schools, or if we just want to leave DC, or if we lose a job?

If anyone has this clause, would they be willing to copy & paste an example here?

[Anonymous]

Getting a loan on a rental property is totally different. They need to look at your experience as a landlord, and get an assessment of the rental market monthly rate. So since you're not taking a mortgage for that purpose, they're not allowing it in there.

In reality, if it's a few years later and you just rent out your place, no one will notice and you'll be fine as long as you pay your mortgage on time. I do this with a condo in DC that I moved out of when I got married.

[Anonymous]

This is usually a representation you make at the time you sign, meaning when you take out the loan you are stating that it is your primary residence. Most lenders don't care what happens 1-29 years into your loan - heck, by about 30 days after you close, Fannie probably owns or insures your mortgage anyway, so they especially don't care.

[Anonymous]

When you apply for a mortgage, one of the questions asked is if this will be a primary residence. That's because the risks are greater for investment properties, so the mortgage rates are going to be higher.

If you end up renting it out several years later, your mortgage company probably isn't going to follow up--however, your insurance rates may increase as a rental property.

[Anonymous]

Your property taxes will increase as well when it no longer becomes your primary residence.

[Anonymous]

Another potential, is if this is in a condo building, coop, or other association that has a minimum required number of owner-occupants. I know on one local community that includes SFH that is a coop and has certain government, tax, and liability restrictions that require a certain percentage of owner-occupants. If the level of renters is high enough, they put that clause in the mortgage agreements (you have to use one of the coop's approved mortgage lenders) in order to ensure that they don't lose some of the liability coverage and tax status. You should talk with the mortgage lender to find out why the clause it there and if it can be removed. I have also heard this frequently with certain condo associations. You really don't want to buy, rent out your unit against your mortgage documents and find out you are the reason why your HOA or Condo association loses its liability insurance or that suddenly taxes for the whole community goes up because you were in some sort of affordable rate housing development that had tax guarantees based on owner-occupency.