More Homeowners Are Choosing to Rent Out Their Old Homes Instead of Selling Low-Rate Mortgages

Some owners are beginning to treat moving and selling as separate choices. A new job may take them to another city, a growing family may need more space, or older parents may need to live closer by. Rather than putting the old house on the market, they buy another home and rent out the one they left behind. In many cases, the mortgage rate is a major reason for that decision.

Griffin Funding examined federal mortgage data, rental listing trends, research on rate lock-in, and Fannie Mae’s updated underwriting rules to understand why more homeowners are taking this route and who is actually able to qualify. The review suggests that low-rate loans explain why many owners want to hold on, but the ability to do so depends on less obvious factors. Under Fannie Mae’s revised standards, keeping the old home requires documented market rent and several months of cash reserves, and a tenant that appears to cover the payment may still not be enough on paper.

The home that does not sell becomes a rental

Zillow refers to these owners as accidental landlords, using a narrow definition for the term. A property counts if it was listed for at least two weeks, came off the market unsold, and then appeared as a rental within three months. By that measure, these homes accounted for 2.3% of Zillow’s rental listings in a recent October, matching the October peak seen earlier in the cycle. Only one month in late 2022 ran higher in nearly six years of data, and Zillow says the trend may still not have topped out.

Zillow’s estimate captures only owners who tried to sell first, not those who never listed their home at all. The company says the recent rise is mostly tied to a softer housing market. Buyers have gained leverage, homes are taking longer to sell, and renting the property buys time without forcing a price cut. The regional pattern supports that view. Denver leads at 4.9%, and seven of the top 10 metro areas are in Texas or Florida, where price reductions are common. Providence, Boston, and New York, all tighter markets, have the smallest shares.

Cotality’s latest single-family rent report, which covers August, shows the South as the weakest region for rent growth. Only two markets posted annual rent declines, and both were in Florida: Cape Coral-Fort Myers and North Port-Sarasota. Houston, second on Zillow’s list, recorded just 0.6% growth, the lowest among major metros. Chicago, at 4.9%, led the group. In broad terms, the places producing the most accidental landlords are also the places where rents are softest.

Zillow points to another reason as well: owners who bought or refinanced at 3% or below often have payments low enough that rent can cover them. That can turn a temporary fix into a long-term arrangement.

The mortgage can be more valuable than the sale

By the end of June, 49.1% of outstanding U.S. mortgages carried a rate below 4%, according to the Federal Housing Finance Agency’s National Mortgage Database. About one in five was still below 3%, although loans above 6% now account for 22.5% of the total and outnumber the ultra-cheap loans. At the same time, Freddie Mac’s latest survey put the average 30-year fixed mortgage rate at 7.4%, the highest level since late 2023, up from 6.95% in mid-September. It remained 7.24% in a later reading.

On a $400,000 mortgage with a 30-year term, the difference is dramatic. At 3%, principal and interest come to about $1,686 a month. At 7.40%, the same loan would cost about $2,770. That is roughly $1,080 more each month, or 64% higher, before taxes, insurance, or other costs are added.

Cheap mortgages are leaving the system slowly

Low-rate mortgages were expected to fade out gradually as owners sold for normal life reasons, shrinking the supply of cheap loans and loosening the market. That process is underway, but it is moving slowly.

The share of mortgages below 4% peaked at roughly 65% in early 2022. It fell below half in the first quarter of 2026, landing at 49.9%, and dropped further to 49.1% three months later. Some of that decline reflects new, higher-rate loans entering the pool rather than only low-rate loans being paid off. Even so, the movement is only in small quarterly increments. As rates rose again in the fall, the advantage of keeping a cheap loan widened for anyone who still had one.

What the research shows

A revised FHFA working paper on the lock-in effect by Ross Batzer, Jonah Coste, William Doerner, and Michael Seiler found that for each percentage point market rates exceed a homeowner’s fixed rate, the chance of that homeowner selling falls by 18.1%.

Applied across the market, the authors estimate that lock-in reduced sales by about 1.72 million between the second quarter of 2022 and the second quarter of 2024. They also estimated that this missing supply pushed home prices up by about 7.0%. The authors note that this kind of squeeze tends to hit first-time buyers and lower-income households the hardest.

Kristopher Gerardi of the Federal Reserve Bank of Atlanta, Franklin Qian of the University of North Carolina, and David Zhang of Rice University examined the issue from another angle. Their Atlanta Fed working paper on lock-in and household moves used a model of local housing markets and estimated that lock-in lowers the odds that a homeowner lists at all by 21% to 23%. When locked-in owners do list, the model suggests their homes stay on the market 52% to 142% longer.

How lenders count rent from the house you leave behind

Keeping the old home and buying a new one may sound straightforward, but qualifying for the second mortgage is more complicated. The key question is whether rent from the old property covers enough of its payment for the borrower to manage both.

Fannie Mae has recently updated how lenders should handle that calculation. Announcement SEL-2026-08 replaced prior guidance on departing residences with a new rental income framework in Selling Guide section B3-3.8-05. Fannie advised lenders to begin using it immediately, then later made it mandatory for applications dated Dec. 1, 2026, or later.

Under the new approach, leases no longer count for a departing residence. Instead, market rent must be supported by an appraisal with market rent data, a Single-Family Comparable Rent Schedule, or market analysis tools that use at least three comparable rentals. That solves an old timing problem, since most homeowners do not have a signed tenant before closing on the next house.

The lender counts 75% of gross market rent and subtracts the full housing payment on the old home. If the result is positive, it can offset that payment and nothing more. If it is negative, the shortfall is included in the borrower’s debt-to-income ratio.

That can surprise borrowers. For instance, if the old home rents for $3,000 a month and the payment is $2,800, the rent appears to cover the mortgage. Under the formula, however, 75% of $3,000 equals $2,250, leaving a $550 monthly shortfall that still counts against the borrower.

Reserves are more clearly defined as well. A borrower with less than 12 months of property management experience needs six months of reserves for the vacated home’s housing payment, on top of any reserves already required for other financed properties. On a $2,800 payment, that means $16,800 in verified assets must remain after the down payment and closing costs on the new home.

For borrowers whose finances fit within that framework, a conventional mortgage on the new home can still work. Others run into obstacles that have little to do with credit. A self-employed borrower whose tax returns show income after deductions may look weaker on paper than the business really is. Someone carrying two homes can also run into debt-to-income limits that rent, capped at offsetting the old payment, cannot solve.

Some borrowers turn to non-QM loans, which use different documentation standards. A bank statement loan on the new home, for example, relies on business deposits rather than tax returns, while the low-rate mortgage on the old house remains in place. Refinancing the departing home into a debt-service coverage ratio loan, which qualifies the rental on its own income, often defeats the purpose because it replaces the cheap mortgage the owner wanted to keep. DSCR loans are more often used later, if the accidental landlord decides to buy another rental and does not want each new property added to their personal debt-to-income ratio.

Keeping the house is not always the best move

A low mortgage rate is valuable, but it does not automatically make someone a strong landlord. Vacancies, repairs, property management, insurance, taxes, and the risk of carrying two payments between tenants all remain on the other side of the ledger. Rent growth is not offering much help. Cotality’s August data show national single-family rent growth at 2% year over year, slightly below the 2.1% pace of the prior year and near the lower end of its long-term range, with large regional differences.

The reserve rule reinforces the same point: Fannie Mae wants borrowers who own two properties to be able to withstand a rough stretch.

Lock-in now looks structural

Lock-in was initially seen as a temporary effect of the sharp rate increases that began in 2022. Several years later, with cheap loans draining out slowly and rates rising again, it looks more like a lasting feature of the market. Fixed-rate mortgages last for decades. Unless borrowing costs fall substantially, millions of households will continue holding loans priced far below what new buyers can obtain.

The consequences go beyond home sales. Lock-in affects where people take jobs, when families move, how many homes are listed for sale, and increasingly who ends up becoming a landlord without ever planning to be one.