Your house has been sitting. Sixty days, ninety, maybe longer. The showings dried up and your agent keeps texting about another price cut. Somewhere in the back of your mind you keep coming back to the same thought: I have a 3 percent rate on this house. Maybe I should just keep it.
I’m not going to tell you whether you should be a landlord. That’s your call and it’s a real job. What I can tell you is the part almost nobody explains, which is what that low rate is actually worth, and whether the bank will still let you buy your next house while you hang on to this one.
First thing worth saying. You probably didn’t do anything wrong. A lot of houses are sitting right now, and the number of sellers who give up and pull the listing is the highest it has been in years.
In other words, there’s a whole category of people making this exact decision right now. Buyers know they have room to negotiate, sellers are still priced to last year, and the two sides are staring at each other. None of that’s on you. The market did it.
Here’s the part that surprises people. Right now, if you went out and bought an investment property, the rate you would get isn’t close to what you already have. Investment property financing prices higher than a primary residence, and a primary residence already prices well above what you locked in.
You’re sitting on the exact thing investors are out there trying to buy. A nice house, in a good neighborhood, that rents easily, financed at a rate they can’t get.
So the honest way to look at this isn’t “I failed to sell a house.” It’s more like “somebody just handed me an investment property at financing nobody can buy today.” That’s the mixed blessing. The market wouldn’t give you the price you wanted, so it gave you something else instead.
How much is that worth? Depends entirely on your numbers, which is why I built the calculator below instead of throwing a percentage at you.
Put in what the house is worth, what you still owe, your rate, and what it would rent for. It will show you what selling actually costs you, year by year, including the year the loan is gone and you own it free and clear.
Selling hands you a check today. Keeping it hands you rent every month, a loan someone else pays down, and eventually a house with no payment on it.
Example numbers are filled in. Replace them with yours.
Monthly figures. Put a zero on anything that doesn’t apply.
Compare at year
—Fill in your numbers above.
Enter your loan details to see it.
| Year | Home value | Loan balance | Equity after costs | Rent collected | Total position |
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I’ll pull your real numbers and tell you the part this page cannot, which is whether you can qualify for the next house while keeping this one.
Estimate for planning only. Not a loan offer, a commitment to lend, investment advice, or a guarantee of rent, appreciation, investment return, or approval. Results move with every assumption you change. Figures ignore income taxes, depreciation, capital gains treatment, and the primary residence gain exclusion, all of which can change the answer. Talk to your tax advisor.
This is the question that actually decides it, and it’s the one your agent can’t answer. Most people assume they’re stuck carrying two full mortgage payments on paper. You’re usually not.
When you turn your home into a rental, a lender can count a portion of the rent to offset the payment on the house you’re leaving. Not all of it. Guidelines hold back a slice to cover vacancy and repairs, so a piece of the payment still lands in your debt ratio.
Say the payment on your current house is a thousand dollars and you sign a one year lease for a thousand dollars. Most of that rent offsets the payment, and only a small remainder counts against you. Your thousand dollar obligation gets treated more like a couple hundred.
And here’s the piece people miss. Because your rate is so far below market, the rent you can get is often well above the payment. When that happens the offset can wipe the payment out completely, and you qualify for the next house almost as though the first one isn’t there.
If you already have landlord experience, the rules can be friendlier still, because rental income above the payment can be counted toward the income side rather than just cancelling a debt.
I say this constantly and I’ll say it here. There isn’t much common sense in mortgage guidelines. There’s just what they say. The good news is that on this particular point, they happen to work in your favor.
You’re not finished. There’s another door most homeowners have never heard of, and investors use it every day.
A DSCR loan qualifies the property on its own rent. Your tax returns and your debt ratio don’t come into it. If the house covers itself, the loan can work even when your personal numbers are tight. That’s the difference between asking an agent whether to rent it out and asking a lender whether you can.
Common situation, and it has a clean answer. You take a home equity line of credit on your current home and use that for the down payment on the new one. The first mortgage stays exactly where it is, at the rate you’re trying to protect.
There’s one piece of timing on this that matters more than anything else on this page.
Set up the line of credit while you still live there. Once it becomes a rental, your options get narrower and the terms get worse.
Owner occupied home equity lines get better pricing, better terms, and more lenders willing to do them. The same house as an investment property is a different conversation. If there’s any chance you keep this home and rent it out, get the line in place first. It costs you nothing to have it sitting there unused.
Yes, you’ll have a payment on the line when you draw it. But look at what you’re really carrying. A large first mortgage at your old rate and a smaller line at today’s rate blend together into something still well under what one new mortgage would cost you. Using the line for the down payment can also keep you out of mortgage insurance on the new house, which is money back in your pocket every month.
I would rather tell you this now than have you resent it in eight months. Sometimes selling is the right answer.
If you’re going to stay put anyway, go back to why you listed in the first place. If it was space, or a tired kitchen, or a layout that stopped working, the same line of credit that could fund a down payment could instead turn this house into the one you actually wanted. That’s sometimes the cheapest move on the board.
Usually yes. A lender can count a portion of the rent on the home you’re leaving to offset that payment in your debt ratio. Guidelines hold back part of the rent for vacancy and repairs, so a remainder still counts against you, but when your rate is low and the rent is strong the offset often covers the payment entirely.
In most cases yes, a lease is what makes the income countable, and there can be equity requirements on the departing home as well. This is the specific point to check before you make any decisions, because the answer depends on the loan program you’re using for the new purchase.
Before. Home equity lines on an owner occupied home have better pricing, better terms, and far more lenders willing to write them. Once the property is a rental, your options narrow. Put the line in place while you still live there even if you’re not sure you’ll use it.
A DSCR loan is the usual answer. It qualifies the property on the rent it produces and not on your personal income or debt ratio, which is how most investors finance rentals.
No. It depends on your equity, what the house rents for, and whether it’s a good rental at all. Someone with very little equity has almost nothing to gain by selling and a lot to gain by holding. Someone with a large equity position and a house that rents poorly can easily be better off cashing out. Run your own numbers in the calculator above and then have someone check them.
