Can You Rent Your House If You Owe On It?

Renting your house can be a smart financial decision for a number of reasons: maybe you were transferred with your job, got married and moved to your spouse’s home or purchased another home but want to keep your first residence as an investment. Having renters in the property ensures that someone is there taking care of the house and it gives you a way to cover the mortgage payments.

1. Read through your mortgage documents. Ensure that you didn’t agree to own the property only as your primary personal residence. A clause stating that would legally prevent you from renting out your house. If the mortgage doesn’t contain any language to that effect, you’re in the clear.
2. When you move, notify your lender of any change in address so you will still receive your mortgage statements.

3. Advertise the house in the newspaper, Craigslist, your local penny saver and with a sign in the yard.

4. Interview potential tenants and have them fill out applications. You can keep the application on file so that if you ever have issues, you’ll have such information as Social Security number, birthday and where they work. This can be helpful if a tenant fails to pay rent.

5. Choose a tenant and sign a rental agreement. You can find sample agreements online and tailor them to meet your needs. A typical rental agreement provides information such as price per month, how long the tenants can stay, details on responsibilities for maintenance and emergency contact information.

Take your mortgage due date into consideration when choosing a due date for rent. You’ll want to leave plenty of time for your tenants to send you a check and for you to deposit it into your account. If your mortgage is due on the 15th, for example, rent can be due on the first and you’ll have two weeks and a day to get the money.

6. Pay your mortgage each month just like you would if you were living in the house.

Tips

If you don’t want to use generic applications and rental agreements, you can have your lawyer write them.
Drive by the house periodically to make sure the tenants keep it well- maintained.

Don’t trust your tenants to make their rent payment directly to the mortgage company. Your credit is on the line, so you should make sure each payment is on time and paid in full.