I recently attempted to take advantage of the low rates and refinance a home as a second home - it was my primary residence before I transferred and I was hoping for orders that would allow me to occupy it again soon. I knew I couldn't refinance it as a primary residence if I wasn't living there and didn't think it qualified as investment property since I planned on living there again.
As I was signing the closing paperwork, I came across something called a SECOND HOME RIDER that stated in part: "Borrower shall occupy, and shall only use, the Property as Borrower's second home. Borrower ... 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."
This was the first I had heard of a second home rider so I called the bank and requested some info. They confirmed that this rider was in effect for the full length of the mortgage. I would be in default if I ever occupied the home as my primary residence or if it was ever rented out. The loan would not go through if I didn't accept the rider. As I couldn't accept these limitations, I chose to stop the refinance process.
Does anyone have any experience with these second home riders? I've since read that some are only in effect for a short period of time (one year). Do I have to refinance the home as investment property no matter what or is this just something required by certain banks?
Thanks for any input or advice. I'm hoping someone will have some experience and information that will answer my questions and give some insight to others that may be thinking of refinancing a second home.
It's pretty simple really. If you refinance the home as a second home then turn around and rent it out then that's mortgage fraud. If you are not going to be renting it out at all in any way, the utilities stay in your name, and it is available for your use anytime then it is a second home. Interest rates and fees are higher on Investment properties becuase the lender is taking the same investment risk that you are with it so they charge more as well as require greater liquid asset, credit, and debt to income requirements.
MortgageGuru, thanks for the confirmation. I got the simple part figured out - that's why I chose to stop the refinance process. Apparently it is mortgage fraud if I ever wanted to use the home as my primary residence too. Well maybe not fraud, but I would be in default. This was in effect for the full 30 years!
Are there different time limitations on these riders (through different lenders)? If I refinance as an investment property, is there some kind of "investment property rider" that won't allow the home to be used as a primary residence in the future?
Thanks for your insight. I checked your profile for your contact info but haven't figured out the new improved system yet.
To turn a second home into a primary residence later down the road is not an issue. I have never seen a loan get called because of that. Personally, I could see some people getting fired for trying something that dumb.
A rider to the note is anything that is applicable to the loan itself that needs special identification. Investment properties, second homes, planned unit developments, manufactured homes, pre-payment penalties, etc. They are all factors that have a direct relationship with the lenders underwriting guidelines and their funding of the loan.
If the property is truly a second home then you have no worries. if it is or will be rented out then it needs to be done as an investment property.
Paul See my profile for contact information...and check your messages
I appreciate the information and I did get your message and contact info. I'll give you a call if I run into something that can't be answered here. Thanks for the friend invite but I don't add friends - nothing against you.
The bank made it sound like there wouldn't be a big problem with occupying the home as a primary residence in the future but that is a direct contradiction to the legalese in the contract. I'll keep an eye on the rates and try to refinance as an investment property so I have the option to rent it out.
Just one more question - in your experience, when (if at all) would a second home loan applicant normally be advised of said Second Home Rider?
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This message has been edited. Last edited by: Mrsjvb,
Originally posted by scorpdet: I will discuss some benefits of renting instead of buying and vice versa. I will also provide you with tips for buy a house so that you are not taken advantage of while trying to achieve your American dream.
No need to provide "tips for buy a house." Your offer has no relevance to the subject at hand.
Apparently it is mortgage fraud if I ever wanted to use the home as my primary residence too. Well maybe not fraud, but I would be in default. This was in effect for the full 30 years! 
