I want to make my house a rental property but just wondering should I re-finance first and then get rental?
March 13th, 2010 | 
Author: I talked tο a morgage company аnd thе guy suggested thаt I ѕhουld јυѕt re-finance аnd thеn mаkе іt rental property, hе ѕаіd I don’t hаνе tο declare thаt іt’s a rental property. Alѕο, I won’t bе eligible fοr FHA аnd sorta individual loans.
Jυѕt wondering іf someone knows іf thіѕ legal οr nοt?
Mу loan’s origional terms wеrе fοr theree years. Sο, I ‘d hаνе tο re-finance іn a few months anyway.
Posted in Rental Properties
It is legal but if the bank questions you if it is for your residence you cannot lie. That would be the only thing that would make it illegal. As for the refi why do that. The nearer you pay that house off the more you can make on rental. The morgage company will always say yes as they are making money if you do this. I have 4 rentals and try to pay them off as quick as possible. Reckon of what can happen if you cant rent it out and now you have to make the payment yourself.
Do you have another property as your main residence or are you looking to buy. If you refi this property and you dont have another property yet, the best a lender will give you on your new fundamental is a second home, but it can not be anywhere close to where your original property that you intend to turn rental is located. If you by now have another spot or you’re going to go in with someone else then refi it and rent it out. better to refi as fundamental then income property because you’ll get better rates and you can still do FHA as fundamental vs income property you can not do FHA. In situations like these there are ways to get tangled up so you have to be careful. Hope I helped.
“Email me at jdawson@gracefunding.org maybe I can help!”
You will have to refi while you reside in the house. Otherwise you have to get a commercial loan which requires 30% down (or at least 30% justice in the property).
After the re-fi goes through, you had best wait a bit before turning it into a rental, say 4 to 6 months, because you will have to exchange your homeowner’s insurance, etc. and they could report that to the bank/finance holder. After you have lived in a house for a while and have a excellent payment record, the bank will likely neither know nor care that you converted it to a rental property.
Most owners of residential income property start by “outgrowing” their first home and instead of selling it to buy a larger home, they rent it out and buy a second house to live in. As long as you manage your rental property well and keep excellent tenants, the rental income pays the finance, taxes and other expenses and ultimately you develop a nice cash flow.