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Say I want to buy a house and rent it out for 12-24 months before making it my primary residence. Would the loan be categorized as for an investment property or as a primary residence?

Any direct knowledge of the subject is appreciated.
Thanks for the responses. I’m interested in buying a house while prices seem to be a little depressed. However, I work overseas and would not be able to occupy it myself for at least 12 months after purchase. At that point, it would become my primary residence, but I would consider renting it out rather than leaving it unoccupied for that period.
I don’t plan on doing anything illegal. Not the intent of my question.

3 Thoughts on Mortgage: Investment versus Primary Residence?
  1. Reply
    Big daddy
    February 7, 2014 at 3:43 am

    If your renting it out, it most likely would be categorized as an investment. You could try to classify it as a 2nd home, but be very careful, there is a section on a mortgage application that states all the facts of the application are true to the best of your knowledge. If they catch you, it would be an issue

  2. Reply
    suzanne e
    February 7, 2014 at 4:03 am

    Good question. Would you have to tell the mortgage company about your plans to rent it out? Why not get the mortgage, then after a short time start looking for renters. I dont think the mortgage company cares where their payment comes from. The IRS is a different story. They will want part of that rental income. If you can offer someone a lower rent in exchange for them paying cash for the rent (renters cant claim their rent any way in their taxes) you wont be hit with taxes and they will enjoy a lower rent.

  3. Reply
    Cristina V
    February 7, 2014 at 4:38 am

    First, what Suzanne is suggesting is considered mortgage fraud and there is a huge crackdown on that right now because of all the funny business that went on with loans a couple of years ago.. Whatever you do, don’t say you’re going to live in it then rent it out. You could get in huge trouble over that. Additionally, when you get insurance, your insurance company will likely send someone out to inspect the property and make sure it’s being rented (if you say it is) or is your primary residence (if you say it is). Insurance premiums in my state vary depending on whether the property is rented or owner-occupied.

    In this situation, you’re looking at it as an investment property and that’s how your loan should be set up. You can probably refinance as a primary residence when you’re ready to move in to it. Try to get a loan with no prepayment penalty so that you can refinance when you’re ready.

    Tax-wise, there are advantages to having an investment property, such as repair expenses, management expenses, and possibly trips into town that you may have to take to inspect the property or deal with management issues. There could be some good deductions here. Talk to your tax consultant about that.

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