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Home Equity Line, Property becoming a rental - LoanUniverse Community

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Home Equity Line, Property becoming a rental


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#1 Guest_Suzlizanne_*

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Posted 15 October 2004 - 11:42 AM

I have a general question. I recently obtained a home equity line to do repairs on my home. Since then, I have decided to move out of this house and purchase another home, and turn my old home into a rental property. This has all transpired within a few weeks of closing the original equity line. I have to contact my insurance carrier on the old home and convert the policy to a landlord's policy. Will my insurance carrier be obligated to inform the equity line bank of the policy change? Once they have, can I loose this line of credit because it will no longer be my primary residence? I saw nothing in the equity line paperwork that would indicate this. I was going to use the line of credit to make the necessary updates to get the property in good rental condition. Has anyone ever run into this, and has it been a problem?

#2 loanuniverse

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Posted 15 October 2004 - 02:22 PM

The question is far from general, and the answer depends on what your loan agreement and even the application that you filled out for the home equity loan says.

” Will my insurance carrier be obligated to inform the equity line bank of the policy change? Once they have, can I loose this line of credit because it will no longer be my primary residence?..” Being that I am not at the person in charge of HELOCs at this bank, I can only guess that getting the line canceled is a possibility. The insurance company is probably going to send the bank a certificate if they have been added as a “loss payee” in the policy. Then again, this is also another educated guess.

” I saw nothing in the equity line paperwork that would indicate this.” You sure? Is there an occupancy clause? I would double check and might even run it through someone in loan documentation. On the other hand, you don’t work at a bank so a lawyer is your best choice.

On the other hand, the managing of an existing portfolio of loans can get pretty lax, and things like this can slip through the cracks even if they are expressly prohibited in the loan agreement.





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