Posted on: 22nd Oct, 2010 12:50 pm
This is a bit of a lengthy question, so I apologize in advance...
I am wondering what exactly a rental/lease agreement is? I ask because I am currently in the initial stages of purchasing a second home. That is to say I have qualified for a second home loan, but before I can proceed with the loan I have to line up a renter for my current property. While I do have a trustworthy tenant in mind, sh1t happens. That said, what would happen to me if the renter were to flake out a few months in and leave the property? Would it violate the rental/lease agreement? If so, would that negatively affect me or my new loan? If I had to foreclose on that property because of such an event, would THAT negatively affect my new loan?
Also, are there any funds that need to be in place when the rental/lease agreement is signed (ie. funds in my account showing I can make "x" amount of payments on the rental property, etc.)? I am an Arizona resident if that makes a difference.
Sorry if those are remedial questions, I'm just very curious and concerned about this.
I am wondering what exactly a rental/lease agreement is? I ask because I am currently in the initial stages of purchasing a second home. That is to say I have qualified for a second home loan, but before I can proceed with the loan I have to line up a renter for my current property. While I do have a trustworthy tenant in mind, sh1t happens. That said, what would happen to me if the renter were to flake out a few months in and leave the property? Would it violate the rental/lease agreement? If so, would that negatively affect me or my new loan? If I had to foreclose on that property because of such an event, would THAT negatively affect my new loan?
Also, are there any funds that need to be in place when the rental/lease agreement is signed (ie. funds in my account showing I can make "x" amount of payments on the rental property, etc.)? I am an Arizona resident if that makes a difference.
Sorry if those are remedial questions, I'm just very curious and concerned about this.
Guest, if your tenant "flakes out" you'll have to remedy that situation with an eviction, which will, of course, eliminate all rental income from that home, as you no doubt realize. Now if you don't get a new tenant, the possibility exists that, yes, the lender you owe for that property might foreclose.
That's not what anyone wants, of course, but should it happen, it won't have any impact on your current, new loan; the only negative effect that is clear at this time would be a difficulty for you to make the payments on this new loan.
You won't necessarily need any sort of reserve fund, but if you feel it necessary for yourself, then it's worth it all.
That's not what anyone wants, of course, but should it happen, it won't have any impact on your current, new loan; the only negative effect that is clear at this time would be a difficulty for you to make the payments on this new loan.
You won't necessarily need any sort of reserve fund, but if you feel it necessary for yourself, then it's worth it all.
Gmakerley,
Thanks for your swift response... So if my renter were to stop paying and I removed them from the property, the only possible negative impact it would have on me is a foreclosure. However, my second home loan would remain unchanged, correct?
And if the above were to happen (god forbid) because I live in a non recluse state AZ the lender of my rental property would not be able to pursue any fees in the event on of a foreclosure, correct?
Would anything happen to the renter other than me evicting them?
Thanks for your swift response... So if my renter were to stop paying and I removed them from the property, the only possible negative impact it would have on me is a foreclosure. However, my second home loan would remain unchanged, correct?
And if the above were to happen (god forbid) because I live in a non recluse state AZ the lender of my rental property would not be able to pursue any fees in the event on of a foreclosure, correct?
Would anything happen to the renter other than me evicting them?
*recourse
I can't comment on a what effect non-recourse would have on you - I have no expertise in that area.
But if you put your tenant out and fail to pay the mortgage on that property, then you will, undoubtedly, face a foreclosure. Your other lender ought not to have any difficulty dealing with you, particularly since they have no interest in that property. As long as you maintain your payments with them, I'm sure they'll be happy to continue to accept them.
As for your tenant, he'll deny himself the possibility of a good reference from you, and if you go to court and win a suit against him, that could appear on his credit report as a derogatory item. Other than that, he'll just move on and payment rent somewhere else.
But if you put your tenant out and fail to pay the mortgage on that property, then you will, undoubtedly, face a foreclosure. Your other lender ought not to have any difficulty dealing with you, particularly since they have no interest in that property. As long as you maintain your payments with them, I'm sure they'll be happy to continue to accept them.
As for your tenant, he'll deny himself the possibility of a good reference from you, and if you go to court and win a suit against him, that could appear on his credit report as a derogatory item. Other than that, he'll just move on and payment rent somewhere else.