I am thinking about renting out my finished basement. It has a separate entrance and it could easily be a basement apartment. Will I have any issues with my mortgage company?
As a general rule, if you live in a mortgaged property and you'll continue to live there, and if you have held the mortgage for some time, there should be few issues with you renting out your basement. But you should always to check with your lender because there may be exceptions.
Some USDA loans, for example, won't allow borrowers to rent out portions of their homes. In fact, in some cases, no one except immediate family members can reside in the home. There is an exception for disabled homeowners.
Of course, the issues you encounter with this plan may not be about your mortgage. You'll have to consider your compliance with building codes, zoning rules or homeowner's association by-laws, if you have one.
Move and rent?
The question is more difficult if you want to completely move out of a property that is mortgaged as your residence and rent it out.
It's essential to check your mortgage contract in this case. Some mortgages have an occupancy clause that specifically states you must be the occupant of the home. If this is the case, you must notify your lender of your intention to rent out the property.
With some loans, you can move out and rent your home after a certain period. This is the case with FHA mortgages. You must occupy your home for about a year before you can rent it.
Insurance may be an issue. If you rent your mortgaged home, your lender will want to be sure you have enough insurance to protect their investment in the event of a disaster. Insurance for landlords is very different from homeowner's insurance.