Renting out your home can be a great opportunity to earn passive income.
Whether you invested in a property with the intention of turning it into a rental property or you choose to rent out your home while you are away, you should be wary of breaking any rules or regulations established by your mortgage company.
Some lenders will allow homeowners to rent out their homes as long as the monthly payments are made.
However, in other cases, lenders may not approve of renting out your home and doing so could be against the terms of your loans.
Here is how to know whether or not you need to notify your mortgage company before renting out your home.
Review Your Mortgage Contract
The first step you should take is to review your mortgage contract in its entirety.
Try to find any information regarding rental restrictions. Often, if your lender does approve of renting out your home, they will require you to take certain steps beforehand. This might include providing information about the tenant.
Contact Your Lender
If your mortgage contract doesn’t contain any information specifically restricting renting out your property, then you are likely able to rent it out without taking any additional steps. In some cases, though, you might not be able to find any such information and don’t want to take any risks.
When in doubt, contact your lender to be sure. Explain your situation (i.e. why you are considering renting out your property) and ask if there are any requirements and who needs to be notified.
Take down the contact information of anyone who may need to be informed and make a list of any rules regarding renting out your home.
As stated above, your lender might allow you to rent out your property providing you comply with certain stipulations.
In many cases, lenders require that homeowners pay for additional insurance coverage before renting out the property. You might also have to have your tenants take out a rental insurance policy.
Keep in mind, your lender approved you for a loan, not your tenants. They approved you because they trust you to make the required monthly payments; however, they can’t be sure that your tenants will make their payments on time.
Moreover, even if your lender doesn’t have any requirements, you should notify the mortgage company of your address change. This will ensure that any information regarding your mortgage is sent to you and not the tenants that are renting your property.
Lastly, you should be sure that you will still be able to make your monthly payments in the case that your tenants don’t make their payments on time. Renting out property can be a great source of income, but you shouldn’t depend on your tenants’ payments to pay off your mortgage. Defaulting on your mortgage can have serious consequences.
Renting out your property may not always require you to notify your mortgage company. It completely depends on the rules established in your mortgage contract.
Be that as it may, it is generally a good idea to contact your lender, regardless of whether or not it is required.