A rate you signed years ago doesn’t move to your next house. It stays with this one, and on most houses bought before rates climbed it’s worth more than the equity sitting under it.
Can you rent out your house and buy another one?
Yes. Nothing about owning two houses requires you to sell the first one. The question a lender asks is narrower: can you carry both payments, and does the rent on the house you’re leaving count toward that?
If the house you’re leaving carries an FHA loan, the promise you made was about the year you moved in, not forever. HUD’s handbook says at least one borrower must “occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year” (Handbook 4000.1, last revised 8/12/2026). Once that year is behind you, renting it out is an ordinary thing to do, and the same rule is what lets anyone live in one unit of a small building and let the rest.
Will the lender count the rent on the house you’re leaving?
Some of it, and only with paperwork. Fannie Mae calls the house you’re moving out of a departing residence. Its rule says “the lender must document a current housing payment to use any rental income from the departing residence in qualifying,” and the lender then multiplies the monthly gross rent by 75% and subtracts that house’s full payment (B3-3.8-05, dated 09/02/2026). A positive result can offset the payment. A negative one goes into your debt-to-income ratio.
Two details catch people out. A signed lease isn’t accepted as proof of the rent: the file needs an appraisal with market rents, a rent schedule for the unit, or data from a market tool covering at least three comparable rentals. And with less than twelve months of property management experience behind you, the same rule asks for six months of reserves on the house you’re vacating.
FHA is tighter. Under HUD’s handbook, rental income from a property you’re leaving counts only if “the Borrower must be relocating to an area more than 100 miles from the Borrower’s current Principal Residence,” and the lender has to obtain “a lease agreement of at least one year’s duration after the Mortgage is closed and evidence of the payment of the security deposit or first month’s rent.” With no rental history on the property, the handbook also wants an appraisal showing market rent and “at least 25 percent equity in the Property.” Moving across town doesn’t qualify.
What is the old loan worth each month?
Take a $300,000 house with $200,000 left on a 3.5% loan and 25 years to run. The payment on that balance is $1,001 a month. Rent it for $2,400, with $3,600 a year of property tax, $1,680 of insurance, 5% of rent held back for empty months, 5% for maintenance, 5% for the big replacements and 8% for a manager.
Now buy the same house today instead: $300,000 at 20% down on a 30-year loan at 7%, which is $240,000 borrowed and a $1,597 payment. Every other line is identical.
| Keep the old loan | Buy it today | |
|---|---|---|
| Rent | $2,400 | $2,400 |
| Mortgage | −$1,001 | −$1,597 |
| Property taxes | −$300 | −$300 |
| Insurance | −$140 | −$140 |
| Empty months (5% of rent) | −$120 | −$120 |
| Maintenance (5% of rent) | −$120 | −$120 |
| Big replacements (5% of rent) | −$120 | −$120 |
| Property management (8% of rent) | −$192 | −$192 |
| Cash flow each month | +$407 | −$189 |
These are example figures, not a forecast for any market.
The gap is $596 a month and all of it is the loan. Same house, same rent, same tax bill, same manager. Selling hands that note back to the bank.
The cash side is just as lopsided. Keeping the house costs nothing to acquire, because you already own it. Buying it today takes $69,000: $60,000 down plus $9,000 of closing costs at 3%. What a first rental costs in cash breaks that pile apart.
What changes the day it becomes a rental?
Your insurance has to change first. A homeowners policy covers a house you live in, and a tenant in it is a different risk under different coverage, which is why landlord policies exist and cost more. Tell the insurer before the tenant moves in, not after a claim.
Depreciation starts, from a number that isn’t your purchase price. IRS Publication 527 says that if you used the property for personal purposes before changing it to rental use, “its basis for depreciation is the lesser of its adjusted basis or its FMV when you change it to rental use” (Publication 527, for use in preparing 2025 returns). On a house that has gained value the adjusted basis is usually the lower figure, so the gain doesn’t enlarge the deduction. How rental depreciation works covers the schedule it runs on. Your own facts decide the tax treatment, so ask a tax professional before you file.
The house also stops being your home for the home-sale exclusion clock. That rule, and the sell-or-keep decision around it, sits in rent or sell your house.
How do you check your own house?
Run it in the rental calculator twice.
- As you hold it now. Set Purchase price to what the house is worth, Down payment to the share of that value you’ve already paid off, and Interest rate and Loan term to the loan you actually have, with Closing costs at 0. The payment it shows should match the one you pay.
- As a stranger would buy it today, at a current rate and 20% down, with closing costs back in.
If the first version cash flows and the second doesn’t, the loan is doing the work, and that’s the whole case for keeping the house. If neither clears, the rent is too low for the house, and the lender’s 75% haircut will reach that conclusion before you do.