Real Estate

Mortgage for renting a residential property

  • Last Updated:
  • Oct 13th, 2019 5:25 pm
[OP]
Newbie
Oct 10, 2019
4 posts

Mortgage for renting a residential property

I'm in the middle of my mortgage term and happens that I have to be out of country 5-6 months per year for the next few years. Been thinking of renting my place for the months I am away. Not sure if I need to inform the lender since this is still my principal residence or is changing the insurance to rental enough?

Is there any clause in the mortgage agreement that prohibits from renting short term or temporarily?

Thank you
7 replies
Deal Addict
Mar 20, 2017
1328 posts
1113 upvotes
In rent controlled areas of Canada short term renting may become decades renting, if not carefully planned:)
All brokers and salespeople basically cannot tell you the answer you want because they will be punished for that. So at the moment when you stated the intention to rent, you've become a person that is not eligible for any help advice.

Your current clause in the mortgage agreement probably already has something like "property is intended to be owner occupied", new mortgage is likely similar. They can't prohibit it, but they state clause about intentions.
Legally, to satisfy that requirement, even one day of living in the property is enough and then changing your intentions. People have changing lifes, changing intentions...nothing bad is about it...
However, in your case you already have intention to rent it out and you told us about it, so basically you are gonna falsify mortgage application because intention already exists and nobody would be willing to help you.
[OP]
Newbie
Oct 10, 2019
4 posts
GalvToronto wrote: In rent controlled areas of Canada short term renting may become decades renting, if not carefully planned:)
All brokers and salespeople basically cannot tell you the answer you want because they will be punished for that. So at the moment when you stated the intention to rent, you've become a person that is not eligible for any help advice.

Your current clause in the mortgage agreement probably already has something like "property is intended to be owner occupied", new mortgage is likely similar. They can't prohibit it, but they state clause about intentions.
Legally, to satisfy that requirement, even one day of living in the property is enough and then changing your intentions. People have changing lifes, changing intentions...nothing bad is about it...
However, in your case you already have intention to rent it out and you told us about it, so basically you are gonna falsify mortgage application because intention already exists and nobody would be willing to help you.
Not sure if I understand your answer. I'm not applying for a mortgage. I have already lived in this property for a couple of years and I'm in the middle of my mortgage term. Just wanna know how to properly deal with this situation. Do I legally have to inform my current lender that I'll be renting the place 5-6 months a year when I am out of country? Or since this will remain my principal residence, I can continue with the same mortgage?
Deal Addict
Mar 20, 2017
1328 posts
1113 upvotes
CB2589 wrote: Not sure if I understand your answer. I'm not applying for a mortgage. I have already lived in this property for a couple of years and I'm in the middle of my mortgage term. Just wanna know how to properly deal with this situation. Do I legally have to inform my current lender that I'll be renting the place 5-6 months a year when I am out of country? Or since this will remain my principal residence, I can continue with the same mortgage?
Oh I misunderstood that you are just doing it under your existing mortgage.
You definitely need to inform insurance company as you mentioned.
For relationships with lender, all restrictions are already in your current mortgage agreement. Generally people don't tell much about changes in their life to lender during the term, unless it is absolutely required.
[OP]
Newbie
Oct 10, 2019
4 posts
GalvToronto wrote: Oh I misunderstood that you are just doing it under your existing mortgage.
You definitely need to inform insurance company as you mentioned.
For relationships with lender, all restrictions are already in your current mortgage agreement. Generally people don't tell much about changes in their life to lender during the term, unless it is absolutely required.
Thank you. Is there a chance that the insurance company notifies my lender and would that be a problem in that case? Certainly don't want to commit a fraud but I will be living in the place for the months I am in the country, so not sure if the property should be counted as rental since it's my primary residence?
Deal Addict
Mar 20, 2017
1328 posts
1113 upvotes
CB2589 wrote: Thank you. Is there a chance that the insurance company notifies my lender and would that be a problem in that case? Certainly don't want to commit a fraud but I will be living in the place for the months I am in the country, so not sure if the property should be counted as rental since it's my primary residence?
I don't know if there is a notification...but basically you wanna find you in position where it does not matter if there is one or not.
As I said, if agreement has wording about intentions to occupy property, even one day of occupation satisfies it and you are allowed to change your intentions during the term, as far as you had intention to occupy property when you signed mortgage.
If there is something else mentioned in agreement, you need to analyze it.
[OP]
Newbie
Oct 10, 2019
4 posts
lawbooth wrote: The terms of the mortgage may spell out if it is to be a primary residence or not. In the event you switch it to a rental property, your lender may ask to have an "assignment of rents" registered on the property.
Thank you. Is it possible that they also change the interest rate on the mortgage? Since I will be living the majority of the year in the property, would that be still called rental property?

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