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I'm curious what I would need to do about my mortgage if I moved from my current house to a larger house in five or ten years. Would I need to refinance my residential mortgage into an investment mortgage (at a higher rate)?

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    If they keep getting the mortgage payments they don't really care. Don't worry about it. However, if you intentionally deceive them and claim to be buying it as owner occupied, then just lease it out then that is fraud. – Tim Oct 8 '10 at 13:55
  • It's funny, in Australia about 20 years ago there was a difference between the residential mortgage rate and the investment mortgage rate (the investment mortgage rate being slightly higher), but these days they are exactly the same rate. You would think that with the rent coming in the investment mortgage would be less of a risk and thus have a lower rate. – Victor May 21 '12 at 7:03
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Did that twice. You don't have to do it. I was told that mortgage company expects you to live there at least a year before you can convert it to an investment. No idea how that is enforced. But i am sure if you lived there for a few years and made your payments and keep making the payments you'll be fine. All they care about is that you make your payments.

  • The trick is going to be getting a mortgage for a second home. YOu can't count rent as income yet because you still live in the first house, so you need to have enough income to cover both mortgages at first. – Vitalik Oct 8 '10 at 2:51
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    You could just get a short-term lease somewhere while you're setting that up. – user296 Oct 9 '10 at 16:09
  • We're certainly going to live here several more years, at least 5-7 barring the unforeseen of course. That's too bad about not counting rent yet, it'd be a pain to rent elsewhere for a short time. I was hoping you could just prove you have enough cash to cover a year or two of payments in case it takes that long to find renters. Well I've got a long time to think about it! – joshdoe Oct 11 '10 at 12:00
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Just personal experience, but I sure didn't refinance my loan. I did need to hire a professional property management company per my insurance company since I moved too far away. The mortgage company didn't have anything to say one way or the other.

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You may not need to refinance, but this debt will certainly affect your ability to get another mortgage for the new house. Intending to have the old house produce income is nice, but there is no guarantee that it will indeed be profitable, of that it won't spend significant amounts of time empty between tenants, or that it won't suddenly need major repairs, all of which could potentially affect your ability to pay a second mortgage.

This is certainly not impossible; many people have done it... but it may not be as easy as you expect. Get some quotes and run the numbers.

I should also note that the whole idea of a "starter house" is rather bogus. It's much more efficient to start by buying the house you really want, if you can afford it.

protected by Chris W. Rea Sep 21 '16 at 2:32

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