If you bought or refinanced your home in 2020 or 2021, there's a good chance you're sitting on a mortgage rate somewhere in the 2's or 3's. You're not alone. About half of all homeowners with a mortgage still have a rate under 4%.
And if your family has outgrown the house, you're probably stuck on the same question a lot of my clients are asking right now: do I really want to sell and give up that rate?
Here's an option a lot of people don't consider. Don't sell it. Rent it out.
Why keeping it can make sense
Think about what you'd be holding onto:
- A rate you'll likely never see again.
- A payment that's probably well below market rent. If your principal, interest, taxes, and insurance add up to $2,100 a month and the house would rent for $3,200, that's a property that pays for itself and then some.
- Appreciation on an asset you already own. You keep building equity while your tenant helps pay down the loan.
- No selling costs. Selling a home typically costs 6% to 8% of the price in commissions and fees. Keeping it avoids that hit.
For a lot of people, this is the easiest way to become a real estate investor, because you're not buying a rental at today's prices and today's rates. You already own it.
The hard part: qualifying for your next home
Here's the challenge. When you buy your next home, the lender has to count the mortgage on your current home in your debt-to-income ratio (DTI). The good news is that they can also count rental income from it, which can offset that payment.
The standard approach is that the lender takes 75% of the rent (the 25% haircut covers vacancies and maintenance) and compares it to your full monthly payment on the current house.
Using the example above: market rent of $3,200, 75% of which is $2,400, against a current payment of $2,100. That nets out at plus $300.
In that scenario, the rental income fully covers the old mortgage, so it effectively disappears from your DTI. That's a big deal, because it means you can qualify for your next home almost as if you didn't own the first one.
An important change starting November 1
Fannie Mae just changed how this works, and it's worth knowing about if you're planning a move in the next few months.
Previously, many lenders could use a signed lease on your departing home to document the rental income. For Fannie Mae loans with applications dated on or after November 1, 2026, a lease alone won't do it anymore. Instead, the rent has to be supported by an appraisal with a market rent analysis or a market analysis backed by at least three comparable rentals.
A couple of other details from the updated rules:
- If the rental income more than covers the payment, the extra can only offset that property's payment. It can't be added to your income to help you qualify for more.
- If you don't have at least 12 months of experience managing rental property, you'll need to show six months of reserves covering the departing home's full payment, on top of any other reserves required.
Freddie Mac, FHA, and VA each have their own rules for this too (FHA, for example, has generally required you to have at least 25% equity in the departing home to use its rental income), so the program you choose matters.
Things to think through before you decide
- Are you ready to be a landlord? Tenants, repairs, and Portland's tenant protection rules are all part of the deal. A property manager typically costs 8% to 10% of the rent, so build that into your numbers.
- Taxes change. Once it's a rental, you'll report the income and can deduct expenses and depreciation, but the capital gains exclusion you get on a primary residence has time limits. Generally, you need to have lived in the home for 2 of the 5 years before you sell to exclude the gain, so converting it to a rental starts a clock. Talk to your CPA before you make the move.
- Insurance changes too. You'll need a landlord policy instead of a homeowners policy.
- Reserves matter. Have some cash set aside for the inevitable vacant month or surprise water heater.
Bottom line
If you've got a low-rate mortgage on a home that would rent well, keeping it as a rental could be one of the best financial moves you make. But qualifying for your next home takes some planning, especially with the new Fannie Mae rules starting November 1.
If you're thinking about moving up, reach out before you list your current home. I'll run the numbers both ways (sell vs. keep) and show you exactly what you'd qualify for in each scenario.
Example is for illustration only and is not a loan approval or quote. Rental income treatment varies by loan program and is subject to lender and investor guidelines, which may change. This is not tax advice; consult a tax professional about converting a primary residence to a rental.
Want this run on your actual numbers?
Everything above is a worked example. Give me your real figures and I'll tell you what it looks like for you, with no application and no credit pull.