Mortgage & Insurance Question

[wenger7446]

I wasn’t sure where to ask this so here it goes.

Story Behind The Question: I would like to rent out my current house and move into a new house. I am wondering of the “financial logistics” of this move.

Question: If I want to rent out my current house, I would need to refinance because my home is not longer owner-occupied. Correct? Also, what type of insurance does a landlord need to have?

 

[Dune]

Not correct but for capital gains, you may wish you were still living in it if you were to sell it.

 

[fossil]

If your current lender insists as a condition of the existing loan that the dwelling be owner-occupied, then yes, you'd have to either renegotiate the loan with them, or refinance without that condition. As a landlord, you need to keep insurance on the structure, and liability insurance on the property (insurers are totally conversant in this). The tenant is responsible for insuring the contents belonging to the tenant. As soon as you convert the property into a rental, you have to begin treating it as such on your tax returns, and depreciating it each year. This is fine while you're renting it out...but some day when you sell it, you may have a larger gain on which you owe taxes. The law may have changed, but the last time I was in this situation (selling a rental that I once occupied), the law stated that so long as I had lived in it as my principal residence for at least two of the previous five years, then I could treat the sale as the sale of my principal residence, rather than the sale of an investment property. Owning rental property adds some complications to your life, beyond just the extra effort in doing your taxes. I've been a landlord twice. Never again. Rick

 

[gzecc]

Wenger, Talk to your accountant about the above issues. The biggest being the capital gain/investment property issue. Screw the bank with regards to owner occupied, they would screw you if possible.