5-Year Rule

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  • #76699
    nacaforums2021
    Participant

    Hello Everyone,

    I am very confused regarding the 5 Year Rule.

    At which point does NACA remove the lien they put on my home as a result of the 5 Year Rule.

    After the 5 Years are completed, do I have the ability to now use the property to my desire (renting the property)?

    What do I have to do in order to retain ownership of this home without any further NACA liens?

    Please help.

    #76808
    TTrumble
    Member

    Hello nacaforums2021,

    The “5 Year Rule” is enforced by the same $25,000 lien that enforces the owner occupancy requirement of the NACA mortgage. You are required to live in the home for the entire time you have the NACA mortgage and may not use it as a rental property. The lien is removed when the loan is paid off or refinanced, or if the home is sold after the five year restriction. This is clearly explained in the Home Buyer’s Workshop and in the Home Buyer’s Workbook.

    Tim Trumble
    Online Operations, NACA

    #76851
    nacaforums2021
    Participant

    Thank you for your response.

    So, in the event that there is a plan to purchase a new home, and maintain this home as rental property, what would be the consequences at this stage?

    What are the legal ramifications for not following this specific rule with NACA. Do you have the ability to remove me from my home? Or take the home from me?

    I understand that the $25K cannot be bought out, but what other options exist in the event a family is trying to move into a new home, but maintain the NACA home, and rent it out?

    What if there are plans to rent the property to a family member, and still maintain occupancy in this manner.

    Of course, I would really like more options other than not buying a new bigger home for a growing family, and being told I would have to sell the property.

    It should be stated that the intent is not to break the law, but to do things lawfully and within the rules of NACA. I am really hoping for some good advice regarding my options so I can make a good informed decision.

    Thanks.

    #76888
    TTrumble
    Member

    Hello nacaforums2021,

    You can buy another property whenever you like. However, you must continue to live in the home you bought through NACA for the entire time you have the NACA loan and may not use it as a rental property under any circumstances.

    If you use the second property as a rental, that is something over which we have no control. But the NACA property must be your primary place of residence.

    The terms of your membership agreement and mortgage specify that we can collect the $25,000 and, if necessary, foreclose to enforce this requirement.

    All that having been said, your simplest solution is to refinance the NACA loan. You will have then replaced the NACA loan with an entirely new one and would therefore no longer be subject to the terms of the NACA loan.

    In short, either make the second property the rental and continue to live in the NACA home or do a re-fi on the NACA home so you are free of the requirements.

    Tim Trumble
    Online Operations, NACA

    #76936
    nacaforums2021
    Participant

    Thank you so much Mr. Trumble for your feedback, its greatly appreciated.

    With that being said, what options would I have to place a family member in my home, such as my mother, or brother, or even a cousin?

    Would I be able to continue satisfying the residence requirement by having a close family member continue to live in my home, rent free?

    Please let me know, thanks.

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