First Buyer Property mixed personal + rental use

[Sean H.]

Hi all,

I've been doing a lot of research and have come down to some lingering questions that I have. For background, I live in NYC (Manhattan) in a rental and am interested in purchasing a property in East Hampton partly for personal use to escape the city and also partly to generate rental income to offset the mortgage costs. Depending on the property, the properties I am looking at can generate $20-30k/mo in rental income May-Sept (eg. $100k-$150k more or less, also depending on if I want to use the property at all during the summer months).

Now for some of my questions regarding the mortgage side of things:

1. From a mortgage perspective, I'm not sure if I'd have the ability to do a primary residence mortgage if the plan would be to live in it part of the year and rent it out the other? Do primary residence mortgages allow for you to rent it out for certain months? What are the requirements for it to be considered a "primary residence"?

2. If not, it sounds like a second home mortgage would be the way to go, even though I don't own a "first home". These mortgages allow for you to generate rental income, correct? Or does that just depend on the lender and the terms they give you? I read an article recently regarding how COVID has made city dwellers (eg. NYC, DC, etc) do exactly this, so I believe this is the right path but am unsure. 

3. Interest-only mortgages sound interesting in this scenario. I understand that they can be dangerous from the perspective of historically they were predatory and people purchased properties that they couldn't afford, getting hit hard with the intro interest-only period of 5/7/10 years expire... but I see it as a flexibility option. Meaning that I can get a grasp on the rental market for the summer months (and spring/fall/winter) while having lower interest-only payments, but also making principal payments with the EOY rental income that I end up with. I don't believe there are any restrictions on making early principal payments? While I have no plans of leaving NYC, you never know, so I'd assume that I could either sell or refi before the introductory period ends?

4. Last question -- assuming that the secondary home mortgage options are the way to go, is it possible to find I/O mortgages for these? It hasn't been super easy finding I/O mortgage lenders in general, but maybe I'm looking in the wrong places.

Thanks for your help.. been in research mode for a few months now and trying to sort some of this stuff before reaching out to any banks/mortgage lenders for insight.