[Single Track]

I need some help real quick because I have put a deposit on a Fernandina patio villa and am now dealing with Citizen First mortgage. When I mentioned to them this morning that I might have to rent it out for Dec thru Mar each year to help with expenses, they said the mtg. rate would increase from 3.75 to 4.75. I would live there for most of the rest of the year. I then said "never mind as far as you're concerned, I'm not going to rent it out". He was okay with that but he warned me that when I go to get insurance, I will need renter's insurance and that the insurance company will notify the bank and the bank will recalculate my rate back to the 4.75 or whatever it happens to be at the time. They have me over a barrel. Even in a year or two if I don't have to rent it, the rate will not go back to 3.75. It is a lifetime of paying the higher rate.

Do I really need renter's insurance? Would a property management company require that I have renter's insurance?

Please give me some of your expert advice asap.

[buggyone]

The insurance company will ask if this is your primary residence or if you will rent it out part of the year. You had better answer honestly or you will find yourself with NO coverage - and that could lead to major problems with the bank and the bank even calling your mortgage to be paid IN FULL in 30 days.

Yes, you do need insurance when you are renting it out. It does not cover the belongings of the rentee but covers you for the loss of your home when you are not in it.

If that raises your mortgage rate, you will just have to put that in the category of "cost of doing business".

[Single Track]

Buggyone,
Thank you for your quick response. I really want to do the correct thing but I don't get why the bank needs to get a cut of the action. It makes sense that the insurance company would charge more, but it makes no sense that the bank gets another percentage point. Of course the last time I purchased a home was in 1970 so I feel like I'm in a minefiled.

[mulligan]

The rate is a measure of total risk on the deal. Rental property, more risk.

[janmcn]

Check the rates at other banks, as Citizens Bank always seems to have a higher rate.

[jimbo2012]

You guys R talking like Big Brother is watching u, the insurance company has to reason to tell the bank anything, it just lists them as an additional insured.

Te insurance will pay if something happened but if investigated may thereafter cancel U, so what get another company.

Get the lower rate, your worrying about the small stuff JMHO

[asianthree]

if you have to take the higher rate just pay down the mortgage and they lose money on your mortgage

[GatorFan]

Homes that are rented are Dwelling Fire policies. Homes that are not rented are Homeowners policies. The bank knows the difference.

[thistrucksforyou]

Let me say something that may upset you but maybe you should consider....If you HAVE to rent it out to help with expenses maybe you can't afford the villa right now...Key word being have to....

[jimbo2012]

Originally Posted by GatorFan

Homes that are rented are Dwelling Fire policies. Homes that are not rented are Homeowners policies. The bank knows the difference.

Ok, so get a "Home owners policy", I think the only difference is this type covers all contents the other type does not cover the contents.

Now what does the bank know?

Rent it get the lower rate.


----

Originally Posted by thistrucksforyou

maybe you can't afford the villa right now...Key word being have to....

I assume this buyer knows what he can afford and that's his/her call

[Harleyman]

Poor advice to lie to an insurance company. They will investigate the claim, probably deny it and then cancel the policy. Then you will have a hard time to get a new carrier because you have committed fraud with the previous company. Not good advice to take the cheaper policy, you might as well go without, which you cannot do if you are getting a mortgage.

[graciegirl]

Originally Posted by jimbo2012

Ok, so get a "Home owners policy", I think the only difference is this type covers all contents the other type does not cover the contents.

Now what does the bank know?

Rent it get the lower rate.





I assume this buyer knows what he can afford and that's his/her call

----I don't understand what you are trying to say, Jimbo.

I think too that the OP would be better off to wait to buy a home when he was ready to retire and not count on the rental income.

If it will require renting it to swing it...that is VERY iffy. And more competitive each day. We don't need to encourage people to get in a tenuous financial situation. There will be plenty of homes available when he retires. We are all heading toward the door here and vacating spaces daily. Sad but true.

[rjm1cc]

Originally Posted by Single Track

I need some help real quick because I have put a deposit on a Fernandina patio villa and am now dealing with Citizen First mortgage. When I mentioned to them this morning that I might have to rent it out for Dec thru Mar each year to help with expenses, they said the mtg. rate would increase from 3.75 to 4.75. I would live there for most of the rest of the year. I then said "never mind as far as you're concerned, I'm not going to rent it out". He was okay with that but he warned me that when I go to get insurance, I will need renter's insurance and that the insurance company will notify the bank and the bank will recalculate my rate back to the 4.75 or whatever it happens to be at the time. They have me over a barrel. Even in a year or two if I don't have to rent it, the rate will not go back to 3.75. It is a lifetime of paying the higher rate.

Do I really need renter's insurance? Would a property management company require that I have renter's insurance?

Please give me some of your expert advice asap.

From the banks point of view they want to know if this is your primary residence or a second home or business property. The risk is higher on a property that is not your primary residence and thus the rate is higher.
If you are going to be living in the home more than 6 months and are making Florida your residence state then I think you shoud qualify for the lower rate so check at other mortgage co's. The insurance company will also be concerned with the number of months the home maybe vacant and they may not want to insure the property at a standard rate if it will be vacant for longe periods of time. You will need an insurance policy that provides for rentals and you proably will need someone to look after the property etc.