The secret to upgrading your home without sacrificing your low rate.

If you want to sell your home but don't want to give up your low interest rate, you may be facing a challenging decision. Many homeowners want a space that’s a different size but are hesitant to move because they refinanced a few years ago and secured a 2% to 3% interest rate. If this is you, one solution is to explore turning your first home into a rental property and use the rental income to qualify for your next home.

By keeping your first home as a rental, you can benefit from the lower mortgage payment compared to current rental rates, generating positive cash flow. Lenders may count up to 75% of the rental income toward the qualifying income for your new home, even if it comes with a higher interest rate. This can help keep your payments manageable.

While interest rates won’t likely drop back to the 2% to 3% range, there is a possibility that they may come down a little bit soon. In that case, you could consider refinancing your second home to take advantage of the lower rates.

“You can generate cash flow by keeping your first home as a rental.”

If being a landlord seems daunting, you can hire a property management company to handle the day-to-day tasks. They usually charge around 8% to 10% of the monthly rent, but the rent you receive will exceed this cost and you'll still benefit from property appreciation.

Just know that it's essential to consult with your financial advisers and accountants to understand the tax benefits of being a landlord. There are potential tax advantages that could make this investment more attractive.

If this approach interests you, reach out to us for more information. We have helped many clients with similar situations and can guide you through the process. However, keep in mind that this strategy may not be suitable for everyone. Call or email us so we can explore whether it makes sense for your specific circumstances.