You currently have a house, but you want to rent it out. Will your mortgage lender allow you to? Here’s what you need to know.
So, you want to get into the rental property business. You already have a home, but you don’t know the ins and outs of converting it into an investment property by renting it out. After all, you have a mortgage, meaning you haven’t paid it off yet. Is it technically yours to rent out? Do you have to get permission? We asked an expert: Can I rent out my house without telling my mortgage lender? Here’s what he said.
Can I Rent Out My House Without Telling My Mortgage Lender?
The one-year mark is a pivotal moment because that’s when you can convert your home from your primary residence into an investment property. Once you hit the one-year minimum primary occupancy, you don’t need to inform your mortgage lender that you’re renting it out.
“While it may be a good idea to call your mortgage lender servicing department and ask them if there are any specific requirements or restrictions on your specific mortgage, most mortgage types allow for you to convert your primary residence into an investment property after the one-year primary occupancy term. Typically, there is no requirement to notify your mortgage lender after the one year of primary residence occupancy has passed,” says Ken Sisson, realtor and licensed real estate broker Coldwell Banker Realty.
Rules and Regulations for Renting Out Your Home
Another key part of renting out your home is that you, the homeowner, must occupy it for at least one year, meaning it’s not just sitting there waiting for the time to be up. Only then can you convert it into an investment property. Also, generally, mortgage lenders only let someone obtain one primary home mortgage in 12 months.
“With mortgage guidelines it is possible to have an exception made due to extenuating circumstances however the nature of exceptions is that there’s no guarantee,” says Sisson. “Extenuating circumstances may be something like having to move for a job relocation only a couple of months after purchasing a home, etc.”
How to Let Your Lender Know About Your Rental Plans
Once that year has passed, you don’t need to let your mortgage lender know about your rental plans. However, you’ll want to ask them to send your billing statements and other correspondences to your new address.
The Bottom Line
Before you move to rent out your house, you need to make sure one year has passed with you living in the home. From there, you can do what you’d like. However, you’ll want to let your mortgage lender know about your change of address so there isn’t a mix-up with your correspondences. Plus, it’s never a bad idea to cover your bases by asking them if you need any information now that you’re renting out the property.
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Caitlyn Fitzpatrick, the author of this article, has been an editor and writer since 2014. Her background is in commerce journalism, so she’s passionate about helping shoppers make smart decisions. For this story, we spoke with Ken Sisson, realtor and licensed real estate broker Coldwell Banker Realty. He explored what homeowners need to know about renting out their house.
FAQ
Will the bank find out if I rent my house?
They certainly could. If you file for a change of address for your bills because you’re now living elsewhere, that could tip them off. Or if you change your insurance coverage (which you should if you’re renting out your house) for investment property coverage, that’ll clue them in.
“As a ‘loss-payee’ on your homeowner insurance policy, the mortgage lender will usually be informed of changes in coverage by the insurance company,” says Sisson. “If the mortgage lender suspects occupancy fraud, they may even send a representative to show up at your door.”
Can I rent out my home with a conventional mortgage?
Yes, the occupancy rules we mentioned earlier apply to a conventional mortgage. “So, if you have a conventional loan type, you can rest well-assured that once you’ve passed the minimum one-year occupancy requirement that there’s no need to inform your mortgage lender about converting the home to a rental from your primary residence,” says Sisson.
Can you rent out a house you're still paying a mortgage on?
Yes, but the key here is that you’re paying and up to date on your mortgage. “If you’re not paying your mortgage, however, that can be problematic in a multitude of ways if you’re collecting rents on the home,” says Sisson. “Besides, by not paying your mortgage you’re putting yourself at risk of the lender starting the process of a foreclosure.”
Sources
- Ken Sisson, realtor and licensed real estate broker Coldwell Banker Realty
About Caitlyn Fitzpatrick
Caitlyn Fitzpatrick has been a professional writer and editor since 2014 and entered the commerce journalism world in 2017. She’s passionate about helping readers make smart buying decisions by using data insights and interviewing experts. Most recently, Fitzpatrick was the Senior Shopping Editor at Trusted Media Brands, where she led affiliate content on Reader’s Digest. In addition to Benzinga, Fitzpatrick’s work can be found in a range of publications, including U.S. News & World Report’s 360 Reviews, Today’s Parent, Betches, WhatToWatch.com, PS (formerly Popsugar), and more.
