Is refinance a must to convert my primary residence into an investment property?
I am buying another home and making it my primary residence. I am planning to rent out my current primary residence, on which I have mortgage, thereby making it an investment property. Does that invalidate the mortgage terms because the mortgage was issued with the condition that the property be used as a primary residence. Do I have to necessarily refinance it by classifying it now as an investment property?
Thanks in advance for any help.
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Answer by Steve D
If the residence is no longer be used as per the mortgage contract, legally you must refinance the mortgage. While you may be able to get away with renting the residence out for a while, there is always the chance that the bank will find out and call the mortgage, meaning you will have very little time to come up with cash to settle the mortgage in full. Obviously, buying a second home with a residential mortgage makes it more likely that the first lender will find out through credit bureau reports (the mortgage inquiry will show up).
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2013-05-16 Russell Investments Center
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2013-05-16 Russell Investments Center
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