The New Trend: How Homebuyers Are Using Equity Without Selling

Many homeowners with rates in the 2s and 3s are using a simple strategy to buy their next home without giving up the low-rate mortgage they already have. This page explains how the trend works, why it matters, and what to watch out for when using your equity to move up.

What This Trend Is All About

Homeowners have gained a large amount of equity over the last several years. At the same time, interest rates increased. Because of this, many people do not want to sell their current home and lose the low payment they already have.

The trend is simple: instead of selling, buyers are pulling a HELOC or a fixed second mortgage against their equity. They use those funds as the down payment on their next home. After they move out, they keep the first home as a rental.

This gives them two clear benefits:

• They keep the low-rate first mortgage.
• The rental income helps cover the mortgage and the second.

Short Video Breakdown

This video shows how the strategy works and why more buyers are choosing this path in today’s market.

How the Strategy Works Step-by-Step

1. Keep the Low-Rate First Mortgage

Most homeowners secured very low interest rates from 2020–2022. Keeping these loans in place gives long-term financial value. Selling the home removes that benefit forever.

2. Open a HELOC or Fixed Second Mortgage

A HELOC or fixed second mortgage uses the equity already built in the home. The borrower can access cash without changing the first mortgage at all.

This money then becomes the down payment for the next home. To learn more about second mortgage options, visit the loan options page.

3. Buy the Next Home

With the down payment secured from the HELOC or second mortgage, the buyer can purchase their next home without needing to sell. This is helpful in markets with tight inventory or when timing is important.

4. Turn the Current Home Into a Rental

After moving out, the original home becomes an investment property. Rental income helps cover the first mortgage and the second. Over time, this adds to long-term wealth and builds a second income stream.

Why This Is Becoming So Popular

Homeowners Want to Keep Their Low Rates

Selling a home with a 2% or 3% mortgage means replacing it with a much higher rate today. By keeping the original home, homeowners hold onto one of the cheapest debts they will ever have.

Home Prices Have Grown

Equity growth makes this strategy possible. Most homeowners now have more usable equity than they realize. Tools like the Mortgage Calculator help estimate payments on both homes.

Rental Demand Remains Strong

Many areas still have strong rental demand. This helps offset the mortgage payments and supports the long-term plan.

Things to Consider Before Using This Strategy

1. Cash-Flow Strength

The rent should reasonably cover the existing mortgage, taxes, insurance, and the HELOC or second mortgage. Even a small shortfall can still work if the buyer’s income supports it.

2. Property Management

Some owners prefer to manage a rental themselves. Others hire a manager. Either choice is fine, but it should be planned ahead.

3. Qualification Rules

Each loan program has different rules. Buyers using a HELOC or second mortgage should understand:

• Minimum credit requirements
• Debt-to-income ratios
• Reserves needed for rental properties
• Documentation needed for the new purchase

The JD.Mortgage team at PRMG helps buyers understand these details so they can make informed choices.

4. Future Selling Plans

Turning a home into a rental is a long-term move. It works best for buyers who want to grow their investment footprint over time.

Who This Works Best For

• Homeowners with interest rates in the 2%–3% range
• People with strong equity who do not want to sell
• Buyers planning to move but keep their current home
• Households who want to build long-term wealth
• Anyone considering adding their first rental property

When This Strategy May Not Fit

• If rent will not support the payments
• If the homeowner plans to sell in the near future
• If equity is too low to support the down payment need

Examples of How This Helps Buyers

Example 1: Moving Up While Keeping the First Home

A homeowner with a $2,100 payment at a 2.75% rate pulls a HELOC for $60,000. They use it as the down payment on a larger home. The original home is then rented out for $2,400 per month, covering the first mortgage and most of the HELOC payment.

Example 2: Turning Equity Into an Investment Property

Another homeowner prefers a fixed second mortgage instead of a HELOC. They pull $80,000, buy a new home, and convert the first home into a rental. Over time, the rental builds equity, and the loan balances go down.

Internal Resources

• Explore loan options
• Estimate your payment
• Contact the JD.Mortgage team

What This Means for You

This trend is a strong option for anyone who wants to buy a new home while keeping the low-rate mortgage they already have. Using a HELOC or fixed second mortgage can turn your current home into a long-term wealth tool while giving you flexibility in today’s market.

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