Do I have my mortgage lender or insurance company report, if I shoot well in a rental house?

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I rent my house for about 5 years since I bought it in 2006. Recently, I spoke to a representative on the phone with my lender on the house and I said that I rent. He made a comment about how I would not, it’s like an object, but then rejected, as if he had not heard and talked about the issue I described above. I did not ask him in detail and I do something, I would not do. I do not know much about mortgages, but I know I have something that is a 80/20, so I have two separate loans on the property, a mortgage is a Home Equity Loan. Is this something to do with it or could it be from the perspective of the insurer? I have homeowners’ insurance and an additional service, repairs covering called American Home Shield. Is there an extra blanket I need to rent? All ideas are welcome, so I can avoid costly mistakes.

  1. Reply
    May 1, 2011 at 4:52 am

    Two comments…

    1.) You cannot buy a home (and finance it as an owner-occupied property) without occupying it for a year (could be argued as mortgage fraud). After that, you can do anything you want and mortgage company can’t do anything. I have two properties that I financed like this. Lived in one for 9+ years and lived in the other one for 3+ years. Converted them to rental when I moved out.

    2.) You don’t need to carry homeowner’s insurance. You need a landlord’s / fire policy. It is much cheaper, because it assumes that nothing is in the house (like furniture, etc.). That is the one change you need to make.

  2. Reply
    May 1, 2011 at 5:28 am

    Well insurance side yes i would say yes you need to let insurance no it is a rental property that is a completely different coverage than if it was your dwelling. As far as mortgage lenders they might want to know also because they have to make sure that there property is coverage correctly if for some reason you don’t provide it with the correct coverage and they have to place collateral protection on it. I would say if you are really worried about it call both and tell them and if they feel it is a prob they well change what they need to. Just hope it doesn’t change anything financial on your end.

  3. Reply
    May 1, 2011 at 6:17 am

    Your insurance is not valid. They will not pay if you try to make a claim and it is not owner occupied. You need specific insurance for non-owner occupied.

    You would have to read your mortgage documents to see if you have to live there or not. The odds are about 98% with that loan that you are NOT allowed to rent it out, it is an owner occupied loan, not an investment loan. The banks can call the loans due today based on a fraudulent loan, but honestly they are not very likely to push the legal aspects unless there are other legal things going on, like a foreclosure or you trying to modify the loan.

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