If you are like many homeowners, you aren’t even aware there is a difference between owner-occupied and investment property mortgages. The former is likely what you on any real estate you live in, whether it is a primary or secondary residence. If you’ve ever thought about renting out your real estate, the restrictions of an owner-occupied mortgage may be a concern.
What’s the Big Deal?
When lenders offer a mortgage, they consider what you will use the property for. Generally, if the home is going to be your primary residence, you are more likely to be approved and may get a better rate. After all, you have a vested interest in keeping up with payments.
The most important thing to note is that mortgage fraud is a serious crime. Depending on where you got your mortgage, the restrictions may vary. For example, a private money mortgage may have fewer restrictions on renting.
However, with a conventional mortgage, you likely can’t use the property as an investment property, lease out commercial space or use it as an office without living there. Of course, life happens and sometimes you may want to rent out a property you own. Fortunately, it may be easier than you expect.
Can You Rent an Owner-Occupied Property?
Yes, you can typically rent out your owner-occupied property. However, there may be some caveats.
The law comes down to intention. If you buy a home and live in it, you can eventually rent it out because you still bought it as your residence initially. However, if you buy a home claiming it will be a residence but only plan to use it as a rental, you are likely running afoul of the law.
Most mortgages have a 12-month cutoff for rentals. If you’ve owned the home less than a year, you can’t rent it out.
What If You Need To Rent Out the Place Before 12 Months?
Sometimes people find themselves in difficult financial situations. You may need to rent out a home in order to keep up with the payments.
Typically, in this situation, you will need to contact the lender. They will often make exceptions to the renting rules if it will enable you to keep up with payments. Nonetheless, it is important to be upfront about the situation. The lender will examine your finances and make a decision.
You may be able to avoid some of these restrictions if you work with residential hard money lenders. Hard money loans are often a good choice for fix and flip and investment property purchases. If you are thinking about buying a place for renting, look into options beyond a conventional residential mortgage.
Renting can be a great way to earn extra income if you know your mortgage. If you want to avoid the restrictions of an owner-occupied mortgage, consider finding a hard money lender Los Angeles residents trust with their investment properties. This may help you get into the real estate investment world and help you to grow your financial portfolio. Learn more about this exciting world today.