A home is one of the most expensive purchases that an individual or family may ever make in their lifetime—one that requires a lot of time, effort, and dedication, not to mention, a lot of money. However, there is a way around this whole business of exchanging your hard-earned money for a house. Depending on the circumstances, you can own a house for free—no inheriting or auctioning involved.
There are essentially two methods. One is by getting a mortgage on a rental property, and having your tenants pay off the whole of your mortgage. The second is one of the most unorthodox ways of becoming a homeowner—by squatting.
- There are two main ways to get a house for free. One is to get a mortgage on a rental property, and have your tenants pay off the mortgage. The second is by squatting.
- Squatting laws vary by state, but most require the squatter to live in the home continuously for anywhere from five to 30 years to gain legal possession of it.
- It’s also possible to get a house with no money up front with a no-down-payment mortgage. In this case, however, you’ll have to pay the mortgage yourself.
Using Rental Income to Pay for Your Home
Perhaps the most common way to get a house “for free” is to get a mortgage on a property and then rent it out. In many areas of the country, charging a competitive rent for your property will provide enough money to pay off your mortgage. If you rent out the property for the entire length of the mortgage, it’s possible that your tenants could pay off the entirety of your mortgage. In this instance, you will have bought your house for nothing.
This sounds like an easy way to get a house for free, as long as you have the down payment for the property (on which, more below). However, you should be aware that making a profit from renting out property is not as easy as it seems, and there are plenty of factors to consider before choosing to go down this route.
A related idea is that of a no-money-down mortgage. This type of mortgage doesn’t require a down payment, so you can move into a home without paying any money up front. While you will then have to pay the mortgage every month, you can at least take possession of a house for free.
Unfortunately, this type of mortgage is very hard to get nowadays. They were readily available prior to the subprime mortgage meltdown of 2008, when home values were rapidly rising and credit guidelines were more lax. Now, no-down-payment mortgages from commercial lenders are extremely rare, and those that exist are only available to select individuals who can document an adequate income—and often with minimum credit scores in the mid-600 range. Many private lenders require even higher credit scores.
This said, there are a few lesser-known options that can allow lower-income families to buy homes with little or no down payment.
A more extreme option is to squat a property for long enough that it becomes legally yours. This might sound strange, but it happens—and it’s even legal. As far as real estate case law is concerned, the person living in the property cares enough about the place to inhabit it. That’s more than you can say about an absentee owner, and if the squatter has been living in the property long enough, a court can rule in their favor.
Each state has its own laws surrounding squatting, which is called “adverse possession” in law. In some states, squatters need seven years of continuous possession to lay claim on privately owned property. There may also be other requirements to fulfill the claim. For instance, Nevada requires an adverse possessor to live on someone else’s land for at least five years before they can claim it as their own. In Hawaii, it’s 20 years. Most states range from five to 30 years. Every state also requires that you live there openly and notoriously, and that your residence must be continuous and uninterrupted.
Your presence on the property must be conspicuous, so you can’t claim adverse possession by living in the shadows.
Is squatting illegal?
Yes. In the United States, squatting is illegal and squatters can be evicted for trespassing. Real estate managers recommend that vacant properties be protected by erecting “no trespassing” signs, checking properties regularly, screening tenants, and quickly finding new tenants.
How do you get a house you can’t afford?
There are several sources of help available to buy houses. You can apply for homebuyers’ assistance programs, try a rent-to-own option, or look into alternative loans.
How can a single person afford a house?
A single-person application can sometimes be stronger than a joint application. It’s possible to get a one-person mortgage with a 5% deposit. There are also government mortgage schemes available, such as Help to Buy and Shared Ownership, that can make getting on the property ladder a lot easier.
The Bottom Line
There are essentially two ways to get a house “for free.” One is to take out a mortgage on a property, then rent it out. This way, your tenants might be able to pay off your whole mortgage. The second option, if you’re uncommonly determined, is to take adverse possession of a property, have all the contingencies break in your favor, and hope the current owner never gets wise within the prescribed period.
But for most of us, it’s easier to just shop for houses the old-fashioned way.