But my interest rate on my current home is so low…
If you have a very low-rate mortgage (say 2–4%), selling your current home can feel painful because you’d be replacing it with a much higher-rate loan. Many homeowners are dealing with this exact situation.
Here are the main options to consider:
1. Keep the Current Home and Buy Another
If your income and savings support it, you may be able to qualify for a second mortgage while keeping the existing home. Some people:
- Stay in the current home and buy a vacation/investment property.
- Move into the new home and rent out the old one.
- Keep the old home for future flexibility.
The key question is whether you can comfortably handle two properties, including taxes, insurance, maintenance, and vacancy risk if renting.
2. Turn the Current Home Into a Rental
A low-rate mortgage can be a valuable asset. If the home rents well, keeping it as a rental may provide:
- Cash flow
- Long-term appreciation
- Continued benefit of that low interest rate
Be sure to analyze all costs, not just the mortgage payment. This approach can be used with any interest rate – sometimes called ‘house hacking’ – buying a home, living in it for a year, and purchasing a new home to live in and converting the old home into a rental is the simplest way to add ‘Investor’ to your resume!
3. Look for an Assumable Mortgage
Some mortgages, especially certain FHA, VA, and USDA loans, can be assumed by a buyer. In some cases, buyers specifically seek homes with low-rate assumable loans. Likewise, you may find a home whose seller has an assumable mortgage with a favorable rate.
4. Use Home Equity for the Next Purchase
If you have substantial equity, a HELOC or home equity loan may help fund the down payment on the new home while allowing you to keep your current mortgage intact. This increases leverage and risk, so run the numbers carefully. [refiguide.org]
A Good Decision Framework
In today’s rate environment, many financial planners suggest asking:
“Would I buy this current house today as a rental if I already owned it free and clear?”
If the answer is yes, keeping the property may make sense. If the answer is no, don’t let the low interest rate alone convince you to keep a house that no longer fits your goals.
The best choice usually comes down to:
- Your debt-to-income ratio.
- Whether the current home would make a good rental.
- How long you expect to stay in the new home.
- Your cash reserves after the move.
Moscow Realty and our Lender Partner Fulcrum Home Loans can help compare the numbers for your specific situation to include current mortgage rate, balance, home value, and the type of home you’d like to move into. Give us a call for more information, 208-882-5531.