Can You Rent Out Your House If You Still Have a Mortgage?


Owning your own home lays the foundation of the American Dream. Previous generations saw it as a way to generate personal wealth through building equity. But what happens when—for a variety of reasons—you can’t actually live in it anymore?

That same house may earn its owner more by renting it out to someone else. But before you put out the FOR RENT sign, you have to find out if you have any hurdles legally. For example, can you rent out your house if you still have a mortgage?

Why Shouldn’t You Just Sell? 

Jobs relocate. Families outgrow their current space. Nests empty. Income situations change. Tons of life events can happen to make your current home no longer a good fit for your American Dream. The first instinct may be to sell. But instead of just taking a quick lump sum from a sale, owners may have other options

The new American Dream no longer means working hard at the same job for 30+ years until you retire. Now, thanks to the FIRE movement, people look to generate enough passive income to retire by 50 or much younger. 

What if the house could continue to feed your American Dream by generating passive income? At the very least that additional income could start to provide lifestyle options you wouldn’t have had otherwise. 

Okay, Then Why Can’t I Just Rent Out My House? 

For starters, some neighborhoods, HOAs and other zoning laws will not permit renters. Period. We’ll assume that you’ve done your homework there by reading regulations and contacting appropriate agencies to confirm.

Even if you can continue to pay the current mortgage without renters, you’ll have to check the contract with your lender. You may not have noticed at closing, but every mortgage will contain language surrounding renting or subletting the property. This may sound like a pain, but remember, the bank technically owns your house if you still have a mortgage.

For example, some lenders will only permit subletting a room or portion of the property if you still live there. VA or FHA loans require you to live in the home at least a year before renting it out. And they check to make sure you adhere to this. 

Looks Good from Here, Now Can I Rent Out? 

Not so fast. If you don’t find any red flags in your mortgage language right away, you can move to the next step. Now you actually reach out to your lender and clearly outline your intentions. 

At the very least, they will require you to have additional homeowners insurance with renters. You’ll also need to show you have reserves to pay the mortgage should the property sit empty between renters. And you’ll have to show your home passes all appropriate ordinances as a rental property. These can be very different from what the house needed to pass as your primary home. 

Need Help Renting a House?

Working through the intricacies of renting out a previous primary residence can be tricky, but well worth it in the end. From working with current mortgage lenders to getting your house rent ready, The Realty Medics can help. To go over your material or learn about options available to you, contact us today or call 321-218-4753.