Legal repercussions of renting your primary residence

[John D.]

Hi, I wanted to know what the legal repercussions are of renting a home that you bought as your primary residence. My mortgage says that if I do this I could be fined or even enprisoned for lying about the occupancy. Is this true? Does this ever happen?

[Dion DePaoli]

This depends on how long you have had the current mortgage. Typically in the occupancy clause there is a 60 day to occupy and must reside there for 1 to 2 years. If you are outside of that then you have nothing to fear.

The imprisonment would come from fraud, where you knowingly and intentionally meant to deceive the lender and take this as a primary residence when your intent all along was to use it as an investment property.

Also you don't say whether you want to live there while you rent it which would not violate the clause.

The biggest issue you will likely encounter is the lender finds you renting prior to the clause time elapse and they call the loan due and you have to refinance into a NOO loan.