I.O.R.R. Loan On Now Primary Residence

1

I have moved in my former rental property.

I have what the local community bank calls an investor owned residential real estate loan.

The rate is 4.75 % (30 yr.), I contacted the bank months ago about possibly moving in it, they said I would have to tear up that mortgage and refi at the current rate, which is now 6.5 % (30 yr.).

My inclination would be to not tell them, however every year I have to give them a financial statement which includes W.2 's, asset and liability statement and a copy of the lease.

I checked the documents but I don’t see anywhere that I would have to refi, but that might be just for those loans (IORR).

The irony of it is that in theory the bank would be at less risk in that it is now my primary residence but I would be adding years to the mortgage and a higher payment.

Just rubs against the grain.

How would you handle ?

2

I would NOT refinance to another 30 year mortgage. That just resets the clock to 30 more years. How quickly can you pay this off if you throw a bunch more money at it every month? If you can pay it off in a couple of years I would just do that. Otherwise refinance into a 15 year and get rid of this debt in half the time.

3

What can they do to you if you don’t?

4

If it’s a condition of the loan contract the lender can very likely call the loan.

5

I’m wondering what would happen if rates were lower ?

They would probably drag their feet.

Rate today is 6.375 % no points thirty year.

6

If you plan to not rent the home again, you should probably get the proper mortgage for the property. There may be some legal reasons that are not being considered and having the proper mortgage on the property could save you some hassles in the future.

Are you in a position to put money towards the house and keep the mortgage amount at a minimum?

Another consideration is insurance on the property. If it is not the proper type, the insurance company may refuse a claim or cancel the policy. Generally, insurance on an investment property has higher premiums.

Taxes are different too when you compare an investment property to a primary residence.

There is much more to focus on than the rate of a mortgage in your situation. You may want to engage a professional to advise you.

7

If you are providing this information to the lender, they have to know that your situation has changed. Lenders for a mortgage on a primary residence do not require this type of information. I would want to get it straightened out.

8

I will probably let them (the bank) know shortly.

My insurance company knows and has changed the policy to owner occupied.