Flipper/Rehabber · Laurel, MD · Member since 2016 · 139 posts · 109 votes
Hi, I recently decided to refinance my primary residence in an effort to lower the mortgage payment to then rent it out and in this way increase my cashflow from it. I was working with a loan breaker and when the loan was completed I notice that he ran the refinance as if the house was still going to be my primary residence instead of investment property. So now my question here is what to do with the insurance, I'm afraid of going to the bank and explain the situation (basically explain that the property is now a rental) because I dont know what can they say about the loan itself. So my question is, can I just add renter insurance on top of house insurance? should I just go back to the bank, explain the issue and deal with the consecuences? I'm looking for some recommendations. Many thanks
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
6y
You need to get in contact with your broker ASAP. If this is an owner occupant refinance (either because you didn't mention the rental part or they processed it wrong) you may have signed a clause that states that you intend to live in the current property for at least one year. If you move out now, that's mortgage fraud.
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
6y
You need to get in contact with your broker ASAP. If this is an owner occupant refinance (either because you didn't mention the rental part or they processed it wrong) you may have signed a clause that states that you intend to live in the current property for at least one year. If you move out now, that's mortgage fraud.
CA & NV · Member since 2019 · 215 posts · 378 votes
6y
I agree with @Andrew B. There are different underwriting rules for owner-occupied. I would contact the loan broker to correct because this is a big deal. If they say there is nothing to worry about, GET IT IN WRITING!
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
6y
@Jonathan Tavarez, mortgage insurance is a different sort of animal. That is typically for primary residence purchases where the buyer is putting down less than 20%. The insurance is insuring the lender for the difference between 20% down and what they actually put down.
Homeowners insurance is to insure the property, contents, etc.
The broker processing you with a loan for a primary residence is mainly an issue because you will be asked to attest to the fact that you plan to live there for 1 year and you do not. Talk to the mortgage broker, I'm sure they can switch you to an appropriate loan product.