Thinking about moving, but hesitant to let go of your ultra-low mortgage rate? You’re not alone. With interest rates rising, many homeowners are looking for ways to keep their current home as a rental while qualifying for a new primary residence.
The good news: it’s possible—and even strategic—to rent out your current home and still qualify for a mortgage on your next one. In this post, I’ll explain how this works under conventional mortgage guidelines and what you need to know before you make the move.
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Why Homeowners Feel “Stuck” in Their Current Homes
Many of my clients today are sitting on 3% or even sub-3% mortgage rates—and understandably don’t want to trade that for a 7% rate. But just because rates have gone up doesn’t mean you can’t move. In fact, renting out your current home may be the key to unlocking your next purchase.
The Strategy: Rent Out Your Current Home
This method is a simple form of house hacking. Instead of selling your current property, you:
- Rent it out to a qualified tenant
- Get a signed 12-month lease agreement
- Use the rental income to offset your current mortgage payment
This approach allows you to remove your existing mortgage from your debt-to-income ratio—making it much easier to qualify for your next home loan.
How Lenders Calculate Rental Income
If you’re applying for a conventional mortgage (Fannie Mae/Freddie Mac), here’s how it works:
- You can use 75% of your lease agreement as qualifying income
- That income is used to offset your current mortgage payment
- If rent exceeds the mortgage, the excess may count as additional income (if you’ve claimed rental income on your taxes before)
Example:
- Your mortgage payment = $1,000/month
- You rent your home for $2,000/month
- Lenders allow you to use 75% of that rent = $1,500
- That $1,500 can be applied to “cancel out” your $1,000 mortgage
If you’ve reported rental income on past tax returns, you may also use the extra $500 to boost your qualifying income for your next purchase.
What If You’ve Never Rented Before?
If you don’t have a history of claiming rental income on your taxes, that’s okay. You can still use 75% of the rent to offset the mortgage, even if you can’t count the leftover amount as income. This still allows you to wipe out your existing mortgage from the lender’s perspective, freeing up your income to qualify for your next home.
What Happens After You Move?
Once you’ve purchased your next home and moved in, you:
- Keep your original low-rate mortgage as an investment
- Build equity and rental income from your first home
- Enjoy potential appreciation on two properties
- Optionally refinance the new home later, when rates drop
Over time, you can repeat this strategy to build a real estate portfolio, one home at a time.
Key Steps to Make This Work
✅ Find a qualified tenant
✅ Get a signed 12-month lease
✅ Make sure the lease starts immediately after you move
✅ Share lease details with your lender during pre-approval
✅ Purchase your next home
✅ Repeat after one year, if desired
FAQ: Renting Out Your Home to Buy Another
Can I use future rent to qualify for a new mortgage?
Yes—as long as you have a lease agreement, you can use 75% of the rent to offset your existing mortgage.
Can I count excess rent as income?
Only if you’ve reported rental income on your tax returns before. Otherwise, you can only use it to offset your mortgage.
Do I need a property manager?
Not necessarily. You can manage the rental yourself, but you’ll need to provide a formal lease agreement to your lender.
Will this strategy work with FHA or VA loans?
This specific rental income offset method is based on conventional loan guidelines. FHA and VA loans may have different criteria.
Can I do this more than once?
Yes—many investors build portfolios this way. Just make sure you meet lender occupancy requirements with each new property.
If you’re considering this strategy and want to explore what’s possible with your current home and income, contact me today. I’ll help you build a plan that works now—and grows with you in the future.