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Say I go to a bank and they pre approve me for 97% LTV Personal living property and 3 months later i rent it out. I dont live in it but I make all the payments.
Do the banks care?
I want to use household debt as a hedge against inflation, and should a deflation recession occur, I would want to continue to pay off the mortgage without forcelosing on home, which will happen if i burn all my cash reserves on 20% down payment.
Not only is that shady...but unless you have not owned property for the past 3 years; I don't believe you would qualify for such a loan. It is generally only applicable to first-time homebuyers
Say I go to a bank and they pre approve me for 97% LTV Personal living property and 3 months later i rent it out. I dont live in it but I make all the payments.
Do the banks care?
I want to use household debt as a hedge against inflation, and should a deflation recession occur, I would want to continue to pay off the mortgage without forcelosing on home, which will happen if i burn all my cash reserves on 20% down payment.
The occupancy form that we have borrowers sign states that mortgage fraud is punishable by up to a $1,000,000 fine and/or up to 30 years in Federal prison.
Say I go to a bank and they pre approve me for 97% LTV Personal living property and 3 months later i rent it out. I dont live in it but I make all the payments.
Do the banks care?
I want to use household debt as a hedge against inflation, and should a deflation recession occur, I would want to continue to pay off the mortgage without forcelosing on home, which will happen if i burn all my cash reserves on 20% down payment.
The banks care because the interest rate on loans is usually higher for second homes or rental homes, and the mortgage often has a rider. They could probably invalidate the loan if they find out.
Don't know what state it is, but it may also has a huge affect on the cost and terms of homeowner's insurance. If it is a homestead state--and you are not living in it but benefiting from the Homestead classification, you can be fined. You also need to check the tenant/landlord laws in your state--you would probably be breaking them if you do it that way--all it would take is a disgruntled tenant to turn you in. And if one of your tenant's friends is injured on your property--you could get sued and that would kind of spill the beans. Many individuals who plan to rent their homes put the deeds in the name of an LLC.
Last edited by Enigma777; 08-02-2019 at 11:09 AM..
Although it was many years ago, I knew someone who did just that: she bought the house and lived in it for 6 months, decided to rent it out and moved in with a friend. Funny thing happened - bank foreclosed and didn't give her any options. This was in the late 70s/early 80s and I don't remember all the details. I only know about this because it was just a few blocks from my home and because I had done the title search on the property.
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