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Can they cancel my mortgage?

I recently bought a house and the lender has already paid the amount in full. I was thinking to buy it for myself and that's what i stated too, but recently i changed my mind and decided to rent it and now i have tenants living. I changed my insurance to cover the tenants living in property, hence the previous insurance provider sent the cancellation notice to my lender. And i received letter from lender asking them to send the policy of my new insurance. I would be happy to send the that but on new insurance policy it states number of tanants and says application for tenant insurance in big letters. Due to this can the cancel my mortgage since now i am renting the house? by mihirgoswami1396885 from , . 20 days ago Reply


Joe Metzler (JoeMetzler)
#19 ranked lender in Minnesota - 3,852 contributions

There are two basic type of home loans. Owner occupied, and investment/rental. Owner occupied have lower interest rates,and lower down payment options. Investment homes, because of the added risk, have higher rates, and bigger down payment requirements. Because of this difference, occupancy fraud is rampant. People are always misrepresenting their situation to get the better deal of an owner occupied property for their rental. If you knew at the time of the loan that you were going to turn it into a rental, it is a crime. It's mortgage fraud. You also signed paperwork at closing that says you will owner occupy the home for at least the first year - after which the lender allows you to turn it into a rental. If they determine you misrepresented and committed fraud, they can call the loan due immediately. On the other hand, if it really truly was owner occupied, and for some very legitimate reason, you turned it into a rental right away, no lender is going to do anything. Without more information, this does NOT pass the smell test. Good luck!

20 days ago
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RJ Hartnett (RJHartnett)
#837 ranked lender in California - 7 contributions

How long has it been since you closed the loan? Your loan documents would have that info rgarding occupancy. If it has been 6 months to a year, you should be fine. If you make the payment on time, then there won't be any problems. If you default for some reason, you might run into trouble. Otherwise you should be fine. Send the insurance to them quickly because they will get their own policy and make you pay it if you don't get it to them. Good luck,

20 days ago
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,558 contributions

What you did is considered loan fraud. You represented a purchase application stating you were going to live in the property, and instead, you are now renting it out. What you did is the number one area of loan fraud.. misrepresenting occupancy. and lenders watch for this. When you buy to live in the home, you are only required to put 3% to 5% down.. but if you are purchasing as an investor, you are required to put 20% or more down. So, on a $300K home, you could potentially put $50K less down by saying you are going to live in the home vs. renting it out. The trigger is when you changed your insurance policy.. a copy of the policy is forwarded to the lender.. and they would see it right away.. Also, certain states (like Arizona), require you to register your rentals.. this becomes part of the public record and the lender would find out even if you didn't change your insurance. So to answer your question.. YES.. the lender will call the note due and payable.. They will do this without any court action and it would be valid. They will give you 90 days to pay the full loan off. (you can refinance if you wish).. but you would need to refinance as "Investment", not owner occupied. Another option would be to evict the tenants, move back into the home and update your insurance policy. The lender will require that you prove you have moved, so be prepared to show bank statements, pay stubs, drivers license, utility bills.. all showing the property address as your residence. If either of those will not work, then you can always sell the home.. but since it was a recent purchase, it's likely you will lose some money.. As Joe said, you signed multiple documents stating you would live in the home for at least 12 months.. If you have a legitimate reason for renting it out vs. moving in, it's possible the lender will allow it.. but you would need to prove it. Example:. You bought a 2 story home, but you just broke your hip and cannot climb stairs. Example: you were just notified that your employer is moving you to a different location miles and miles away.. and your required to move. Again, regardless of the reason, you need to prove what you state, and it would be up to the lender to see if they would allow it. I'm a preferred Lender with California and Arizona being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / LendUS, NMLS 1938/ AZMB0121893

18 days ago
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