What Happens to My Mortgage If I Move Abroad or Rent Out My Property?
You got a job offer in London. Or you're inheriting a property and want to rent it out. Or you're buying a vacation home. What happens to your mortgage? Can you just leave the country? Can you turn your primary residence into a rental? The answer is complicated—and violating these rules can cost you thousands. This guide reveals exactly what you need to know.
The Critical Issue:
Most mortgages have an "owner-occupancy" clause. You MUST live in the home. If you don't, you're in breach of contract.
Violation can result in: higher interest rates, loan acceleration, or foreclosure.
The Owner-Occupancy Clause: What It Means
When you signed your mortgage, you likely agreed to live in the property as your primary residence. This is called the "owner-occupancy clause." Understand your mortgage terms before relocating.
What Owner-Occupancy Means:
• You must live in the home as your primary residence
• You cannot rent it out to others
• You cannot use it as a vacation home only
• You cannot leave it vacant for extended periods
Why do lenders care? Because owner-occupied homes have lower default rates. Landlords are more likely to walk away from investment properties than primary residences.
Scenario 1: Moving Abroad (Leaving the Country)
What Happens If You Move Abroad?
If you move abroad and leave your home vacant or rent it out, you're violating the owner-occupancy clause. Here's what could happen. Contact your lender before moving abroad.
⚠️ Risk #1: Lender Discovers Violation
Lenders monitor properties through:
- Property tax records (showing rental income)
- Insurance claims (rental property insurance is different)
- Neighborhood complaints (about rental activity)
- Online rental listings (Airbnb, VRBO, etc.)
⚠️ Risk #2: Loan Acceleration
Lender can demand immediate repayment of entire loan balance. This is called "acceleration."
If you can't pay, foreclosure follows.
⚠️ Risk #3: Interest Rate Increase
Lender can increase your interest rate to "investment property" rates (0.5-1.5% higher).
On a $400,000 mortgage, this costs $2,000-6,000/year extra.
⚠️ Risk #4: Insurance Issues
Homeowners insurance doesn't cover rental properties. If there's a claim, insurance can deny coverage.
You're left uninsured and liable.
What You SHOULD Do If Moving Abroad
✅ Option 1: Sell the Property
Simplest solution. Sell, pay off mortgage, no complications. If you're moving permanently, this is best.
✅ Option 2: Refinance to Investment Loan
Before moving, refinance to an investment property loan. Rates are higher (0.5-1.5%), but it's legal and lender-approved. Get quotes for investment property refinancing.
✅ Option 3: Rent It Out Legally
Contact your lender BEFORE renting. Some lenders allow short-term rentals or will refinance. Get written approval. Find lenders who approve rental properties.
✅ Option 4: Leave It Vacant (Temporarily)
If you're moving temporarily (1-2 years), leaving it vacant is better than renting. Notify your lender and maintain the property.
✅ Option 5: Have a Family Member Live There
If a family member can live in the home as their primary residence, owner-occupancy clause is satisfied. Discuss family occupancy options with your lender.
Scenario 2: Renting Out Your Primary Residence
Can You Rent Out Your Mortgaged Home?
Technically, no—not without lender approval. Your mortgage contract likely prohibits it. But here's the reality:
The Practical Reality:
Many homeowners rent out their primary residences without lender approval. Lenders don't always catch it. But if they do, you're in violation.
Don't risk it. Get approval first.
How to Legally Rent Out Your Home
Step 1: Contact Your Lender
Call your lender and ask: "Can I rent out my primary residence?" Be honest about your plans.
Step 2: Explore Your Options
Lender might say:
- "OK, no problem" (rare but possible)
- "You need to refinance to investment loan" (most common)
- "No, you cannot" (then you have a choice)
Step 3: Refinance If Needed
If lender requires it, refinance to an investment property loan. Rates are higher, but it's legal and approved.
Step 4: Update Insurance
Switch from homeowners to landlord/rental property insurance. This is critical.
Step 5: Report Rental Income
Report all rental income on your tax return. This is required by law.
Investment Property Loan: What You Need to Know
If your lender requires you to refinance to an investment property loan, here's what changes:
| Factor | Primary Residence | Investment Property |
|---|---|---|
| Interest Rate | 6.0% | 6.5-7.0% |
| Down Payment | 3-5% | 20-25% |
| Closing Costs | 2-3% | 3-5% |
| Credit Score | 620+ | 660+ |
| DTI Limit | 43-50% | 30-40% |
Real Example:
You have a $400,000 mortgage at 6.0% ($2,398/month). You refinance to investment property at 6.75% ($2,657/month).
Cost: $259/month extra = $3,108/year
Scenario 3: Buying an Investment Property (Rental)
If you're buying a property specifically to rent out, you need an investment property mortgage from the start. Don't try to get a primary residence loan and then rent it out—that's fraud.
Investment Property Mortgage Requirements
- Down Payment: 20-25% (sometimes 15% with good credit)
- Credit Score: 660+ (higher than primary residence)
- Debt-to-Income: 30-40% (stricter than primary residence)
- Rental Income: Can count 75% of expected rental income toward qualification
- Reserves: 6+ months of mortgage payments in savings
- Interest Rate: 0.5-1.5% higher than primary residence
FAQ: Mortgages & Moving/Renting
Can I rent my home on Airbnb?
Technically, no—not without lender approval. Airbnb is short-term rental, which violates owner-occupancy. Contact lender first.
What if I rent to a family member?
Still a violation. Lender cares about owner-occupancy, not who the tenant is. Get approval first.
Can I refinance to investment property loan?
Yes, but rates will be higher (0.5-1.5%). You'll also need 20-25% equity. It's an option if lender requires it.
What if I move abroad temporarily?
Contact lender and explain. If it's temporary (1-2 years), leaving vacant might be OK. Get written approval.
Will my lender find out if I rent it out?
Possibly. Through property tax records, insurance changes, rental listings, or neighbor complaints. Don't risk it.
Contact Your Lender Today
If you're planning to move, rent out your home, or buy an investment property, talk to your lender first. Get written approval.
Find a Lender to Discuss Options →The Bottom Line
Moving Abroad: Sell the property, refinance to investment loan, or get lender approval. Don't just leave it vacant or rent it out without permission.
Renting Out Your Home: Contact lender first. They might approve, require refinancing, or deny it. Get written approval before renting.
Buying Investment Property: Get an investment property mortgage from the start. Don't commit fraud by getting a primary residence loan and then renting it out.
The key is communication. Lenders are reasonable—they just want to know what you're doing and protect their investment. Be honest, get approval, and you'll be fine.
Meet Sarah
Senior Mortgage Advisor & VA Loan Specialist
Sarah Mitchell brings over 12 years of mortgage industry expertise, specializing in VA loans and first-time homebuyer programs. As a certified NMLS professional, she has helped thousands of veterans and military families achieve homeownership through specialized loan programs. Her deep understanding of VA benefits and down payment assistance programs makes her a trusted advisor for service members transitioning to civilian life.
EXPERTISE:
KEY ACHIEVEMENT:
Helped 2,500+ veterans secure home loans