How To Use Your Current Home To Buy Another

Use Your Low Current Rate to Buy Another House

So you own a home and you have a super low interest rate on it…which makes you not want to go buy another house right now while rates are way higher than what you currently have...but what if I told you that you could use your low interest rate on your current home to help you buy another one?

I have noticed recently that when I talk to people that are considering purchasing a home this year, they have been reluctant to do so for usually one main reason.

Interest rates.
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Especially if they already own a home, chances are the interest rate that they currently have is much lower than you can get today. That leads people to think that the best possible solution is to stay put for now and wait for rates to get better. While that may be the right answer for some people, I have an alternative option that might help you accelerate your ability to afford a new home and even help you build wealth long term

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For the last couple of years interest rate have been historically low, but on the flip side rents have been historically high. So why not use both of those things to your advantage and rent out your current home instead of selling it?

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Rent is up nearly 29% where I live in Oklahoma City specifically since January of 2020 through February of 2023 according to the data that I found on apartmentlist.com. Since your current rate is probably low and rent is high, there is probably some margin between what you could charge for rent and what your current mortgage payment is. That margin can then help you offset the payment of a new home while also allowing you to build wealth by having someone else pay down your mortgage for you.

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I actually ran this exact scenario for a recent client. Their current interest rate was a 2.99% leaving their mortgage payment to be around $1800 including taxes and insurance. Then we called up a realtor friend of ours and found out what similar properties were renting for in their neighborhood.  We found they could expect around $2400/month in rent. Now if you rent out your property there will be other expenses besides just your mortgage, especially if you hire a property manager to help you out and things eventually break and you will have to fix them, etc. But either way, in this scenario our client felt there was enough margin to go through with the idea.

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Now when I brought this up to other people they were worried about this method causing two main problems.

1. Having two mortgages would increase their expenses and make it tougher to qualify for another mortgage

• There are actually ways to use the new rent that you are charging to offset your current mortgage payment to help you qualify, but this depends on your and your financial profile, and even the loan program that you choose for your next mortgage.
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2. They need the cash out of their current home for the down payment on the next home

• If it were me I would suggest looking into a home equity line of credit that you can tap into, to access the equity that you currently have in your home and even use for the down payment on your next house. HELOC's are pretty easy and quick to get and give you access to...your own money. Might as well put it to work rather than letting it sit there and make you $0.
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Today I just wanted to give potential home buyers some different tools and ideas to help them navigate the current real estate environment that we are in. So I hope I've given you something to think about!
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- Thomas Wilson

Founder of Fox Financial

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