Reply to Just refinanced ... but now want to buy and convert to investment property!

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[quote=Anonymous][quote=Anonymous][b]A lot of bad advice above.[/b]

The bank [b]has the right to call the mortgage due [/b]in full upon learning that the property is no longer owner occupied. Moving out so soon may violate the terms of your loan. Call a lawyer and start an LLC. Get a commercial insurance policy.

You will need to work with the commercial lending department at the bank and the terms they offer will be less favorable than what you are used to. You will need to prove enough income to cover you DTI and may not be able to use future rental income without a signed lease. HOA expenses can screw up your projected cash flow. Get an environmental company to certify your condo as lead free.

Many investors like to say that an LLC is not necessary as long as you buy an umbrella policy. I like to run a tighter ship and my insurance agent didn’t recommend an umbrella policy in lieu of an LLC and neither does my attorney. 
[/quote]

Wow, aren't we high and mighty...and wrong. You cannot say that the bank "has the right to call the mortgage". At best that is true in some VERY limited circumstances, although this is very rare in residential mortgages. Owner occupied is usually only a requirement in a reverse mortgage situation. Also, you sound like a 1L or someone who heard their mother talking about business things and heard the words but don't actually understand what they mean (see, LLC, umbrella policy, tighter ship, in lieu, attorney). What in the bloody hell does an LLC have to do with either OP's query or the this situation? Or a commercial insurance policy? Almost all residential policies can have a rental rider attached for a small surcharge. That covers the house without changing policies and the insurer knows you have a tenant. This has nothing to do with commercial insurance. And starting an LLC doesn't do anything unless the house is transferred into the name of the LLC...which of course will cause the mortgage to be called (and incur transfer fees, etc.)

OP: Assuming you didn't commit insurance fraud when you signed the refi paperwork (and it sounds like you didn't because when you refi'd you intended to continue to occupy), and unless your mortgage has a residency requirement for a period of time after closing (very unlikely) you do not need to tell the mortgage company anything. And if they find out, who cares? You did nothing wrong and the loan stays in place. Go apply for a new loan and have two mortgages. Definitely contact your insurer and get a rental rider for the policy (else they could refuse coverage if they can claim it wasn't owner occupied) and require all tenants to carry and provide proof of rental insurance (you want that primary to your policy).

Not a big deal. Do not stress over this. (And for heaven's sake, please don't let people like PP worry you). [/quote]

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