Can I rent out my house after I refinance it?

Question

Hello, we bought a house a year ago and are currently going through the refinancing. My husband has handled the refinancing so I am not sure of the terms (waiting for it to be finalized to review).

Can you typically rent out a house after a refinance?

We've lived in the house for over a year and bought it as our primary residence. We fixed the house up and licensed it as an RCFE (Residential Care Facility for the Elderly) but are having a really hard time finding residents, which is why we have considered to let go of that dream and rent out the house with the intent of starting our rental portfolio. Since we have already started the refinancing process, is it too late to want to rent out?

We live in Southern California.

Any feedback helps! Thank you.

Shera Linares · Answer

Hi @Kimberly Navarro,

Have you considered using your home as a group home for veterans or another type of care home? Or maybe lease the home to an existing RCFE business who is looking to rent a property instead of purchasing one? Unless that is what you were trying to do... I live in Southern California also and am a licensed administrator for RCFEs but have stopped pursuing this path for the moment since we would need to purchase a home and renovate it.

Another option if you plan on staying in the house is to rent the individual rooms (house hack). If you don't plan on staying and want to rent the house out entirely, you will need an investment loan with 20% down as @Peter Mckernan stated. Good luck!

Brad Sneckner · Answer

I would encourage you all to look closely at your trust deed. If you are refinancing as a primary residence loan, the specific verbiage is typically that you will occupy it as your primary residence WITHIN 60 days (applicable if you not CURRENTLY living in the property), and then that you will maintain it as your primary residence for at least ONE YEAR. It is not "fair game" after 60 days. Whether or not you actually get caught renting it out right away and have the loan called due is a different question. But when you close the loan you are signing a trust deed stating specifically:

"Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing,"

(The above is literally copied and pasted from a trust deed on a Fannie Mae loan). Read carefully my friends.

Mark Coltrin · Answer

I refinanced my Condo and rented it 2.5 months later after living it.  Make sure you read your refi agreement.  Mine had a 60 day clause to live in the home as my primary residence.  after that, all bets were off.

Kimberly Navarro · Answer

@Shera Linares I have tried using placement agents. The only handful of leads I have received have cancelled their tour a day before so I never get a chance to meet them and let them get to know my team. Competition is stiff in my area. There is another RCFE three doors down from me and so many large facilities in Fullerton overall. Thank you for the great advice!

Shera Linares · Answer

@Kimberly Navarro

I forgot to mention placement agents. They’re a bit pricey but can help with getting you new residents.

Kimberly Navarro · Answer

Hi @Shera Linares

I spoke to our refinancing broker and we can rent the house after 60 days. In the meantime, I will start listing the RCFE for lease and see if anyone is interested. It took a big investment to get the house licensed since we bought a run-down home and then converted it into an RCFE so I would love someone to actually make use of the home for what it was meant to be.

If no one would like to lease the home as an RCFE I will rent it out as a house. I would like to purchase another home by the end of this year.

This has all been a learning curve.

Thank you and @Peter Mckernan for taking your time to respond !

Peter Mckernan · Answer

@Kimberly Navarro yes as long as you have a lease agreement for it and you are not refinancing 3.5% FHA down and then 3.5% FHA down. You would need to be at a 20% investment loan as you refinance to stay within rules of Fanny and Freddie. If you are refinancing stating it will still be a primary then rent it out that is not allowed, it would have to be refinanced as looking to use it as a rental, second/home, or investment.

Can I rent out my house after I refinance it?

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