Taking out a long-term mortgage on a house is quite a challenge, both for your budget and your patience. But sometimes a house is bought not in order to live in it “here and now”, but for the future. This is where the logical question arises – how viable and legal is the idea of renting out your mortgage?
Consider the following tips to help you legally assess the feasibility of renting out your home.
1. Check the restrictions on your loan. Find out what obstacles may follow based on the type of loan you have, for example, the USDA doesn’t always allow borrowers to rent out even spare bedrooms for extra income. If you purchased your home recently, find out if there are regulations to occupancy that must be met before you can start renting it out.
2. Read your mortgage agreement. Sometimes the idea of renting out a house you bought with a mortgage may not be understood by your lender. This does not happen very often. Basically, when approving or disapproving a mortgage loan they look at the basic income that is already there, that is, income from a permanent job, the possibility of renting goes more like a bonus. Each mortgage agreement specifies whether it is possible to rent the house you buy. The most common clause in a mortgage agreement is that the borrower must notify the lender if the property can be rented out.
3. Get advice from a mortgage broker. After reviewing the mortgage agreement, contact an authorized representative of the mortgage broker to discuss plans for renting out the property you purchased. Even if there are no apparent restrictions on the agreement, there may be nuances to the lease, such as renter’s insurance. In addition, you should notify your mortgage broker of any change of address if you are moving, to avoid losing important letters and notices of monthly mortgage payments.
4. Discuss with HOA the rules for renting the home. Homeowner’s associations sometimes impose their own restrictions on landlords when renting, such as requiring prospective tenants to go through their approval process before signing a lease, and they will charge you a fine if you violate this rule. It is better to know about such restrictions in advance in order to ease the life of both you and future tenants.
5. Study the legislation on landlords and tenants. Before you commit to being a landlord, make sure that you do not violate any rules about discriminating against potential future tenants in your home, or unknowingly fail to provide livable living quarters, when choosing a tenant.
6. Contact a lawyer to draw up a lease agreement. Protect yourself from possible future disputes from tenants and have the lease agreement and deed of transfer of the property drawn up correctly with lawyers, with details on the mortgage.
LBC Mortgage is always here to help and navigate you in this tough route of renting out your home with a mortgage and answer your questions!
Give us a call.