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Tina
Tina, Lawyer
Category: Real Estate Law
Satisfied Customers: 5436
Experience:  17 years of legal experience including real estate law.
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We recently closed on a second home mortgage with a second

Customer Question

Hello,We recently closed on a second home mortgage with a second home rider - language is below. This language seems to state that we cannot ever rent out the property (for the term of the 30 year mortgage). However, since closing we have decided that we would like the option to rent out our property a few weeks a year for weekly rentals.From my research it seems like we should have requested an investment mortgage instead of a second home mortgage, but we did not plan to rent originally so we did not contemplate an investment mortgage. So, if we do want the option to rent out our vacation property for a few weeks a year for weekly rentals, how should I handle this with my mortgage company?I do not want to refinance and pay all of the fees and down payment again.... please help me.Thankssecond home rider language:
"Borrower shall occupy, and shall only use the property as Borrower's second home. Borrower shall keep the property available for Borrower's exclusive use and enjoyment at all times, and shall not subject the property to any timesharing or other shared ownership arrangement or to any rental pool or agreement that requires Borrower either to rent the property or give a management firm or any other person any control over the occupancy or use of the property."
Submitted: 1 month ago.
Category: Real Estate Law
Expert:  RealEstateAnswer replied 1 month ago.
Good morning. I certainly understand the situation and your concern. How would you find renters? Would you advertise or just rent to people you know? How long before this would happen?
Customer: replied 1 month ago.
Hi, not totally sure yet, again this was not part of the originally plan. Ideally we would not have any limitations. I'm thinking we would probably advertise on a site like HomeAway or Airbnb... Not totally sure on timing either, but possibly next summer for a few weeks? thank you
Expert:  RealEstateAnswer replied 1 month ago.

Thank you for the reply. Circumstances change, so it would not be reasonable for a lender/bank to expect that a second home, would always be used as such and never rented out, long or short term. A lot also has to depend on the ability of the bank to discover this, which is why I asked where it would be advertised and if they would see it and even check to see. the key thing is your intent at the beginning, when you took the loan. It would be one thing if you started renting it immediately after closing but if you could show that circumstances changed, you can not afford the mortgage without this or there was a change which resulted in this, it should not be an issue. Moreover, a few weeks opposed to a year rental, could also make a difference and it would be at your discretion to even say anything.

Customer: replied 1 month ago.
I really want to be able to do as we please with the vacation home and not have to worry about defaulting on our loan. I read online about a mortgage company finding out a house (with a second home rider) was being rented. They found out because the bank tried to sell the mortgage to a 2nd bank, but the 2nd bank refused to buy the mortgage because they did a search online and saw that it was being rented and not being used exclusively for personal use. So the original mortgage company told borrowers they were in default on their loan.Regarding change in circumstance, it is not an issue of affordability, rather we have just decided since closing that we would like to have the option to rent a few weeks if we choose to. So I am trying to understand and get guidance on how I properly handle this with the mortgage company, to ensure we can rent if we choose to in the future. Can you please advise me on how I should handle this with the bank? thanks
Expert:  RealEstateAnswer replied 1 month ago.

A party would need to contact their lender and advise them of the change in circumstance and the situation and see if good cause can be shown. As you shared, your intent when you took the loan was to use this as a second home and not rent it out. However, if you can show a need for this or a change, the bank may allow it. As stated above, it would be at your sole discretion to even say anything. You can contact them and advise them of the same and see how they respond and if they will modify the usage of it and allow it. If not, you could try and rent it short term for those few weeks and shift the burden to them, to find out and discover it. Just because many people do it and do not say anything, does not mean it is the proper procedure, so it is up to you to decide if you want to be forward with them or let them address it with you, if and when they find out and if so, they may give you notice first, to cease it. Seeing how you are not looking to lease the home for a year at a time and just for a few weeks, it should be fairly easy to remedy this.

Expert:  RealEstateAnswer replied 1 month ago.

I just wanted to follow up and see if you had any other questions or needed me to clarify something. I am here to help, so please let me know. Thanks!

Customer: replied 1 month ago.
I am not following the part about it being at our sole discretion to even say anything to the bank... aren't we obligated to tell the bank?
Expert:  RealEstateAnswer replied 1 month ago.

You want to read the closing documents which you signed. If it says you need to disclose any change, you would need to, legally. However, if you do not say anything and rent it short term, they would have to catch you and see that this property is being for short term rentals. If it will only be for a few weeks once a year, it would be hard for them to find out unless it was perfect timing and someone from the bank happened to see this, in a search.

Expert:  RealEstateAnswer replied 1 month ago.

I just wanted to follow up and see if you had any other questions or needed me to clarify something. I am here to help, so please let me know. Thanks!