Thinking about turning your home into a rental but wondering whether you need to loop in your lender? In most cases, yes—you do need to tell your mortgage lender if you plan to rent out your house, especially if the loan was issued as an “owner-occupied” mortgage.
Lenders care because your mortgage terms are often tied to how the property is used. Renting it out without disclosure could violate your loan agreement, potentially trigger a due-on-sale clause, or even lead to foreclosure in rare cases. According to Consumer Financial Protection Bureau, misleading your lender about occupancy can be considered mortgage fraud.
That said, many homeowners do convert primary residences to rentals legally—either by informing their lender, refinancing, or waiting out a typical one-year occupancy requirement.
Why Lenders Care If You Rent Out Your Home
When you close on a mortgage, your loan is classified as either:
- Owner-occupied (you intend to live there)
- Investment property (you plan to rent it out)
Owner-occupied mortgages come with lower interest rates, smaller down payments, and looser underwriting. If you rent out your home without informing your lender, it may violate your occupancy affidavit—a standard clause in most residential loan documents.
If your loan is federally backed (FHA, VA, USDA), additional occupancy requirements may apply. For example, FHA loans typically require the borrower to live in the home for at least 12 months.
When You Can Rent Without Telling Your Lender
There are a few scenarios where you may not need to alert your lender:
- You’ve lived in the home for over 12 months, satisfying your loan’s occupancy period
- Your mortgage was issued as an investment property loan
- You’re renting out part of your home while continuing to reside there
Still, it’s a good idea to check your mortgage agreement or speak with your servicer before making any assumptions.
What Happens If You Don’t Tell Them?
If your lender discovers that you’ve violated the loan terms, they may:
- Require you to refinance into an investment loan
- Charge penalties or higher interest
- Call the loan due under a due-on-sale clause (see Fannie Mae’s Guide)
- Restrict access to escrow or impound accounts
Although enforcement is rare, it’s still a legal risk that can jeopardize your property and financial security.
HOA Rules May Also Impact Rental Plans
Even if your lender is on board, your HOA may not be. Many HOAs restrict rental activity, especially for short-term or absentee-owner arrangements. If your property is subject to a homeowners association, review the bylaws and CC&Rs for:
- Lease length minimums (e.g., no rentals under 30 days)
- Owner-occupancy ratios or rental caps
- Required landlord registration or screening procedures
HOA laws vary across in every state – whether it be Florida, Georgia, Texas, North Carolina, Illinois, Washington or any other – each with different restrictions that could impact your rental plans.
What To Do Before Renting A Mortgaged Property
- Review your mortgage documents to confirm occupancy terms
- Contact your loan servicer to clarify or get written permission
- Understand local short-term rental laws if applicable
- Review your HOA’s governing documents for leasing restrictions
- Replace your homeowners policy with proper landlord insurance
If you’re considering listing on Airbnb or VRBO, remember: standard homeowners insurance does not typically cover rental use. You’ll need a specialized policy designed for landlords or short-term rental hosts.
Bottom Line
Yes, you can rent out a house with a mortgage—but only if you follow the right steps. Notifying your lender avoids legal risks, helps ensure your insurance coverage remains valid, and positions you as a responsible investor.
No matter which route you take, make sure your rental is properly protected. Get a quote from Steadily today—America’s best-rated landlord insurance provider, covering long-term and short-term rentals in all 50 states.
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