Why Some Owners With Low-Rate Mortgages Are Choosing to Rent Instead of Sell

Some homeowners are increasingly treating a move and a sale as separate choices. A new job may take them to another city, a growing family may need more space, or aging parents may require someone closer by. Rather than put the old house on the market, they buy another home and rent out the one they leave behind. In many cases, the deciding factor is the mortgage.

Griffin Funding reviewed federal mortgage data, rental listing trends, research on rate lock-in and Fannie Mae’s underwriting rules to understand what is driving this behavior and who can qualify for it. The finding: a low-rate loan is often the reason owners want to keep the house, but Fannie Mae’s updated standards make it harder to do so. Borrowers now need documented market rent and months of cash reserves, and a tenant simply paying the monthly bill may not be enough on paper.

Zillow refers to these owners as accidental landlords, using a narrow definition in its research. A home qualifies only if it stayed on the market for at least two weeks, was removed unsold, and then appeared as a rental within three months. By that measure, these homes accounted for 2.3% of Zillow rental listings in October 2025, equal to the October peak from 2022. Only November 2022 was higher in nearly six years of data, and Zillow says the trend may still not have topped out.

Zillow’s count only includes owners who tried to sell first, not those who skipped listing altogether. The company attributes much of the rise to a softer sales market, where buyers have more bargaining power, homes sit longer and renting becomes a way to wait without cutting the price. The regional pattern supports that view. Denver leads with 4.9%, and seven of the top 10 metros are in Texas or Florida, where price cuts 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 with the weakest rent growth in the country. Only two markets posted year-over-year rent declines, and both were in Florida: Cape Coral-Fort Myers and North Port-Sarasota. Houston, second on Zillow’s list, came in at just 0.6%, the lowest among major metros. Chicago posted 4.9% and led the group. In broad terms, the areas creating the most accidental landlords are also the ones where rents are weakest.

Zillow also points to a second reason. Owners who bought or refinanced at 3% or less often have payments low enough that rent can cover them, making a temporary fix turn into a longer arrangement.

The mortgage can be more valuable than the sale

At the end of June, 49.1% of outstanding U.S. mortgages had rates below 4%, according to the Federal Housing Finance Agency’s National Mortgage Database. About one in five remained below 3%, although loans above 6% now account for 22.5% of the total and outnumber them. At the same time, Freddie Mac’s Oct. 8 survey put the average 30-year fixed mortgage rate at 7.4%, the highest since November 2023, up from 6.95% in mid-September. It was still 7.24% as of Oct. 29.

On a $400,000, 30-year loan, the difference is significant. At 3%, principal and interest come to about $1,686 a month. At 7.40%, the same loan costs 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 disappearing slowly

Low-rate loans were expected to gradually leave the system as homeowners sold for the usual reasons and the inventory of cheap mortgages shrank. That is happening, but slowly.

The share of mortgages below 4% peaked at roughly 65% in early 2022. It fell below half in the first quarter of 2026, reaching 49.9%, and then slipped to 49.1% three months later. Some of that decline reflects newer, higher-rate loans being added, not just low-rate loans being paid off. Even so, the change has been only fractions of a point each quarter. With rates rising again in the fall, the gap widened further for anyone still holding a cheap loan.

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 every percentage point market rates exceed a homeowner’s fixed rate, the likelihood of selling falls by 18.1%.

Applied across the market, the authors estimated that lock-in prevented about 1.72 million sales between the second quarter of 2022 and the second quarter of 2024. They also estimated that keeping that supply off the market lifted home prices by about 7.0%. The paper notes that this affordability pressure tends to hit first-time and lower-income buyers 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 local housing market model to estimate that lock-in reduces the chance a homeowner lists at all by 21% to 23%. By the same estimate, when locked-in owners do list, their homes remain on the market 52% to 142% longer.

How lenders count rent from the old home

Keeping the previous house and buying another one sounds straightforward, but qualifying for both mortgages is more complicated. The key question is whether rent from the departing home covers enough of that property’s payment.

Fannie Mae recently changed its approach. Announcement SEL-2026-08, issued Sept. 2, replaced earlier guidance on departing residences with a new rental income framework in Selling Guide section B3-3.8-05. Fannie told lenders they could begin using it immediately, then updated the announcement on Sept. 23 to make it mandatory for applications dated Dec. 1, 2026, or later.

Under the new framework, a lease is no longer enough for a departing residence. Market rent must come from an appraisal with market rents, a Single-Family Comparable Rent Schedule, or market analysis tools using at least three comparable rentals. That solves a common timing problem, since most homeowners do not already have a signed tenant before closing on the next house.

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

That surprises some borrowers. For example, if the old house can rent for $3,000 a month and the payment is $2,800, it may look like the rent fully covers the cost. But under the formula, 75% of $3,000 equals $2,250, leaving a $550 monthly shortfall that counts against the borrower.

Reserve requirements are clearer now as well. A borrower with less than 12 months of property management experience needs six months of reserves to cover the vacated home’s housing payment, in addition to any reserves required for other financed properties. On a $2,800 payment, that means $16,800 in verified assets remaining after the down payment and closing costs on the new home.

Borrowers whose finances fit that structure can still use a conventional loan on the new house. Others run into issues that have little to do with credit. A self-employed borrower whose tax returns reflect income after deductions may appear weaker on paper than the business really is. Someone carrying two homes may 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 for the new home, for instance, relies on business deposits instead of tax returns, while the low-rate mortgage on the old home remains in place. Refinancing the departing home into a debt-service coverage ratio loan, which qualifies a rental based on its own rent, usually defeats the purpose because it replaces the cheap mortgage the owner hoped 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 personal debt-to-income ratios.

Keeping the house is not always the best move

A low mortgage rate is valuable, but it does not automatically make someone a successful landlord. Vacancy, repairs, management, insurance, taxes and the risk of covering two payments between tenants all weigh against the decision. Rent growth is not offering much help. Cotality’s August numbers put national single-family rent growth at 2% year over year, slightly below the 2.1% pace from a year earlier and near the bottom of its long-term range, with major regional differences.

The new reserve rule points in the same direction. Fannie Mae wants borrowers with two properties to be able to withstand a rough stretch.

Lock-in now looks like a lasting market feature

Lock-in was first seen as a temporary effect of how quickly rates rose in 2022. Now, with cheap loans draining out slowly and rates climbing again, it appears to be a more durable part of the market. Fixed-rate mortgages last for decades. Unless rates fall sharply, millions of households will continue holding loans priced far below what new borrowers can get.

The consequences extend beyond home sales. Lock-in affects where people take jobs, when families move, how many homes reach the market, and increasingly, who ends up owning a rental property without ever intending to become an investor.