Change Primary Residence To Rental Financing
I just purchased a new home and will be renting my previous primary residence. Will I run into any problems with the loan conditions on the original primary residence by changing to a rental? I had a first and a low second HELOC. 
The change in status will result in the loss of future interest write off on both your First and your HELOC. If you have been in the home less than one year or refinanced using the benefit of owner occupied rates you might run into issues with your primary lender. If you have owned the home for 5 years or more and have accrued a large amount of equity you may also lose the tax benefit of the accrued equity. Otherwise the interest loss is the primary issue.
[addsig]
You're right that the person would lose the sched A itemized deductions interest writeoff as a personal residence, however, they would still be able to write off the interest as a rental expense (as in sched E).
So, that's no problem at all. It's really even better that way since your sched A itemized deductions, to be valuable to you, need to be above your standard deduction. On the other hand, interest as a rental expense gets taken right off of the rental income.
One thing that could be a problem with your lender is if you haven't had the loan for more than a year yet. Many lenders will have in the mortgage/note that the home needs to remain your owner-occupied home for a year.
There is no problem. I'm actually fairly sure that the bank wouldn't have legal grounds to accelerate the note if you turn it in to a rental property. As long as you were using it as your primary residence and then later decide to rent it, no problem.
This also brings the issue that a bank is unlikely to call a performing note due.
Quick question; Who is going to tell the lender that the property is now a rental..?
clear2close
[addsig]
As clear2close and myfrogger said, there should be no issues what so ever! Rent it, make it a nice investment home!
BAMZ
Hey! I've converted a residence to a rental several times - altho without a HELOC - not problem. The lender doesn't want to hear that it is my INTENT is to buy a property, live in it for a while, and convert it to a rental. no problem. Nine months later I went back to the same lender with another owner-occ purchase, and the underwriters wanted to know why, since the property that I had under contract was very similar to my 1st purchase. I had to submit a letter that stated that my real estate broker had found a very good property at a very good price, and that I liked the floor plan neighborhood better than my current residence. no problem. So now I make it a point to have 2 or 3 loan officers to work with. no problem!
best of luck
Quote:Quick question; Who is going to tell the lender that the property is now a rental..?KatieB will when she converts her homeowners policy to a landlord/rental policy and names the lender as a loss payee.
Exactly DaveT! ...the landlord policy.
This is one of the ways a lender can get clued into the owner moving out.....but not necessarily that they're selling, right?
The whole strategy with this subject to approach is that you're telling the lender that you are placing the prop into trust and not selling it but are going to be renting it out.
This is why some gurus have a form in their course that you have the seller sign which tells the lender that they've hired a managment company. So, the lender shouldn't mind that the seller has simply decided to rent their home out.