Can You Use Rent To Pay Your Mortgage? Your Tenant’s Rent Can Help Pay the Mortgage!

So your goal is to keep your current home and rent it out after you move into a new one. The question I frequently receive about that is whether you can use your tenant’s rent to pay the mortgage on the rental property. The short answer is yes! How rental income can be used is sometimes confusing, so today I’ll explain how most mortgage lenders treat income derived from a departure residence.

For your loan approval, your lender will need you to find a tenant for the home and get a lease. The length of the lease, whether your tenant can be paying month to month or have automatic renewal, will depend on the program and lender, but usually, they will require a year-long lease. To ensure you’re covered, get a tenant who agrees to a one-year lease. Some lenders may even want to see a copy of the security deposit and first month’s rent.

The great news is that, for loan-qualifying purposes, 75% of the monthly rental income will either apply to your monthly income or go toward your mortgage payment, taxes, insurance, and condo fee (if applicable) on the departure residence. That will allow you to qualify to buy a new home while keeping your old one. Remember to consider the amount of cash you might need to close on your new homeand that you won’t have the proceedsfrom the sale of your departure home to help with that.

As always, if you’re interested in more information or have any other questions, just give me a call. Good luck with home shopping!