When offers come in below what you hoped, keeping the house and renting it out can look like the simple answer, especially with a mortgage rate well below today's. Whether it works depends less on the rate you keep and more on what keeping the house does to the purchase of your next one.
Follow the equity
A sale frees the equity in your current home for the next down payment. Keep the home and that money stays in it, so the next purchase usually needs a larger loan at current rates. A smaller down payment on a conventional loan generally adds mortgage insurance, too. Holding on to a low rate on a modest remaining balance can mean borrowing much more at a higher one.
A simple example
Say the offer is $500,000 and you still owe $250,000 at a 3% rate. After selling costs of roughly 7% ($35,000), a sale leaves about $215,000 for your next down payment. On a $600,000 next home, that means borrowing about $385,000. Keep the house instead and put down $60,000 from savings, and you borrow about $540,000, plus mortgage insurance. That's $155,000 more at today's rates. At an example rate of 6.5%, that adds roughly $980 a month in principal and interest. The rent then has to cover the old home's mortgage, taxes, insurance and upkeep, and still help offset that extra payment. These figures are for illustration only.
Let the rental earn its place
For renting to come out ahead, the rent has to cover the real costs of being a landlord, such as repairs, insurance, vacancies, and management. Loan paydown and appreciation then have to make up the extra cost of the new mortgage. Your equity, your next purchase, and the direction of local prices can each change the answer.
Ask how the lender will count the rent
Fannie Mae has updated its rules for rent from a home you are moving out of. A signed lease is no longer accepted as proof of that income; lenders rely on market rent from the appraisal or on comparable rentals. With less than a year of property management experience, you may also need six months of reserves for the home you are keeping. FHA, VA, and Freddie Mac loans each have their own guidelines.
Put a date on the tax question
The home sale exclusion generally requires that you owned the home and lived in it for at least two of the five years before the sale. Once you move out, the window to sell and still qualify begins to close, so "we will rent it until the market comes back" needs a timeline and a conversation with your tax adviser.
Why it matters
Renting turns a home sale into an investment decision with its own costs, financing rules, and tax timing. Comparing both paths with real figures shows which one supports your next move.
Next step
Before you set an offer aside, let's compare both options side by side: an estimate of what you would net from a sale, and the figures your lender and tax adviser provide for keeping the home. I can also pull recent sales and rental activity near you, so the comparison reflects your part of St. Louis County.
