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I think the confusion is that you don't understand that this is a meaningless distinction. It's still fraud. Any time you enter into a contractual agreement with someone, and you withhold a relevant piece of information because you feel that you'll benefit, that's fraud.

The occupancy clause from my current mortgage:

Borrower shall occupy, establish and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as the Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond the borrower's control.

I.e. as far as my mortgage is concerned, since I occupied the place as my primary residence within 60 days of the mortgage agreement and have occupied it for more than one year, I'm free to move out and rent it without notifying the bank. It ain't fraud. It ain't unethical.

The OP should either read his own mortgage documents end-to-end or have a trusted lawyer do so to ensure that his contract does not contain a more strict occupancy clause. But, barring one, I see no reason why the OP could not rent under his current financing situation.

Of course, the real issue is with the new financing the OP is considering. The OP will be in violation if he states that he will use the home as his personal residence, yet intends to move and rent out the place. Also, the new financing may have a residency clause like the above one, in which case, the OP would be in violation if he were to move out and rent less than a year after obtaining the new financing.

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