Seller’s Desk · By Address District · · 10 min read
Should I Sell My House If It Means Giving Up a 3 Percent Mortgage? Weighing the 49.1 Percent Share, the 7.28 Percent Rate and the Equity Behind It
In the second quarter of 2026, 49.1 percent of outstanding U.S. mortgages carried a rate below 4 percent, FHFA data show, while Freddie Mac’s 30-year average reached 7.28 percent on Oct. 1. How much an owner would borrow again matters more than the rate given up.
- Mortgage rates
- Lock-in
- Home equity
- Renting out
- Moving
Table of contents
- Key findings
- How many owners are holding a rate this low?
- What does giving up the rate cost each month?
- How much does equity change the trade?
- Where are owners most locked in?
- What about renting the house out instead?
- What does a private sale change for an owner with a low rate?
- Methodology and limitations
- Conclusion
- Frequently Asked Questions
- Sources
The mortgage was refinanced in 2021, and the statement still shows a rate that begins with a 3. Now the house is too big, or too far from a new job or from family, and every listing the owner looks at comes with a quote above 7 percent. Millions of owners face some version of this, and many conclude that the rate alone is a reason to stay. For most of them, the rate is a smaller part of the decision than it looks.
This brief sets the Federal Housing Finance Agency’s latest count of outstanding mortgages beside Freddie Mac’s weekly rate, an FHFA study of how low rates hold owners in place, and the IRS rules for owners who rent a house out instead of selling. It then works through the arithmetic of trading a low rate for a smaller loan, and asks what a private sale changes.
The limits are plain. The mortgage figures are national and state averages, every dollar example is arithmetic on assumptions, and the tax rules are federal and carry exceptions. Nothing here forecasts rates or prices, and no house is valued.
Key findings
- In the second quarter of 2026, 19.2 percent of outstanding U.S. mortgages carried a rate below 3 percent and 29.9 percent a rate from 3 to just under 4 percent, a combined 49.1 percent, down from about 65 percent in early 2022 (FHFA, September 2026).
- Freddie Mac’s 30-year fixed rate averaged 7.28 percent in the week of Oct. 1, 2026, against 6.34 percent a year earlier, the highest reading since November 2023 (Freddie Mac, October 2026).
- FHFA researchers found that each percentage point by which market rates exceed a borrower’s own rate cuts the probability of a sale by 18.1 percent, and estimated that the effect prevented 1.33 million sales from mid 2022 through 2023 (FHFA, March 2024).
- The average outstanding mortgage was 45.1 percent of the home’s current estimated value in the second quarter of 2026, leaving owners with mortgages, on average, more than half their home’s value in equity (FHFA, September 2026).
- A former main home rented out after the owner moves can still qualify for the federal exclusion of up to $250,000 of gain, or $500,000 for joint filers, if it is sold while the two of the last five years test is still met, but depreciation claimed on the rental cannot be excluded (IRS, 2025).
How many owners are holding a rate this low?
About half of all mortgaged owners. FHFA’s National Mortgage Database counted about 51.4 million outstanding mortgages in the second quarter of 2026, and the share below 4 percent has fallen only slowly as owners sell, refinance or pay off their loans.
Outstanding mortgages by interest rate, second quarter of 2026
A year earlier the share below 4 percent was 52.1 percent, and at its high in early 2022 it was about 65 percent. Meanwhile the share at 6 percent or more has risen to 22.5 percent from 7.5 percent in the first quarter of 2022, as recent buyers took on loans at today’s rates. The average rate across all outstanding mortgages was 4.4 percent, and the average monthly payment was $2,044.
Source FHFA, National Mortgage Database, outstanding residential mortgage statistics, quarterly data through the second quarter of 2026, posted September 2026. Shares are of all outstanding mortgages in the database sample.
What does giving up the rate cost each month?
On the same loan balance, a lot. The table compares the monthly principal and interest on two balances at a 3 percent rate and at the 7.28 percent average Freddie Mac reported for the week of Oct. 1.
| Loan balance | At 3.00 percent | At 7.28 percent | Difference each month |
|---|---|---|---|
| $200,000 | $843 | $1,368 | $525 |
| $250,000 | $1,054 | $1,711 | $657 |
Table 1. Hypothetical new 30-year loans. Standard amortization arithmetic, not a loan quote. Taxes and insurance are excluded.
That gap is what the FHFA study measured in behavior. Its authors found that each percentage point between the market rate and an owner’s own rate made a sale 18.1 percent less likely, and estimated that the effect prevented 1.33 million sales between the second quarter of 2022 and the end of 2023 and pushed prices up 5.7 percent by holding supply back. With the market rate now more than 4 points above a 3 percent loan, the pull to stay is strong. NAR’s chief economist, Lawrence Yun, said in September that contract signings were running roughly 30 percent below their pre-pandemic level.
The table also overstates the cost for most sellers, because almost nobody who sells borrows the same amount again.
Source Freddie Mac, Oct. 1, 2026, FHFA Working Paper 24-03, March 2024, and NAR, Sept. 17, 2026. Payments are arithmetic on hypothetical balances.
How much does equity change the trade?
Usually more than the rate does. Take a hypothetical owner who borrowed $240,000 at 3 percent in mid 2021 and pays $1,012 a month in principal and interest. About five years in, roughly $211,900 is still owed. Suppose the house would sell for $400,000 and selling and moving cost a hypothetical 8 percent.
| Line | Stay | Sell, buy at $400,000 | Sell, buy at $300,000 |
|---|---|---|---|
| Sale price | Not sold | $400,000 | $400,000 |
| Selling and moving costs at 8 percent | None | $32,000 | $32,000 |
| Payoff of the 3 percent loan | None | $211,900 | $211,900 |
| Equity carried to the next home | None | $156,100 | $156,100 |
| New loan at 7.28 percent | None | $243,900 | $143,900 |
| Monthly principal and interest | $1,012 | $1,669 | $985 |
Table 2. A hypothetical owner and hypothetical prices. Arithmetic on assumed figures and Freddie Mac’s Oct. 1 rate, not a forecast or an offer. Taxes, insurance and the new home’s own costs are excluded.
Moving to a house of the same price costs this owner $657 a month more in principal and interest. Moving to a $300,000 house costs about the same as staying. An owner who has paid down more, or whose house has risen further in value, can borrow less still or buy without a loan. FHFA’s figures suggest many are in that position, since the average outstanding mortgage was 45.1 percent of its home’s current estimated value in the second quarter.
Some loans can also travel with the house. The Department of Veterans Affairs says a buyer can assume a VA-backed loan, taking over the seller’s loan instead of opening a new one. A seller with such a loan can ask the servicer what an assumption requires, though the buyer must still cover the gap between the loan balance and the price.
Source FHFA National Mortgage Database, second quarter of 2026, Freddie Mac, Oct. 1, 2026, and the U.S. Department of Veterans Affairs. Every dollar figure in Table 2 is hypothetical.
Where are owners most locked in?
Mostly in the West. The share of mortgages below 4 percent ranges from 60.1 percent in California to 38.7 percent in Oklahoma. California, Utah, Hawaii and Washington hold the highest shares, and Oklahoma, West Virginia and Mississippi the lowest.
Share of outstanding mortgages below 4 percent, second quarter of 2026
In California, 27.0 percent of mortgages carry a rate below 3 percent. In Florida and Texas, the share below 3 percent is 15.6 and 15.9 percent, and about a quarter of mortgages carry 6 percent or more. State figures describe averages, not any one owner’s loan, and the state pages show where older homes cluster in each.
Source FHFA, National Mortgage Database, outstanding residential mortgage statistics by state, second quarter of 2026.
What about renting the house out instead?
It keeps the rate and adds a job. Some owners keep the house, rent it and buy the next one with a new loan. Zillow reported that 2.3 percent of homes listed for rent on its site had earlier been listed for sale, the second-highest share in nearly six years, HousingWire reported in July. Its writer, a Northern Virginia property manager, warned that taxes, insurance premiums, association fees and repairs do not stay frozen because the mortgage rate is low.
The tax rules set a clock. The federal exclusion of up to $250,000 of gain, or $500,000 for joint filers, requires two years of ownership and two years of use as a main home within the five years before the sale. An owner who lived in the house for at least two years, then moved out and rented it, can generally still claim the exclusion by selling within three years of moving out, and IRS Publication 523 gives the example of an owner who rented a former home for more than two years and kept the exclusion. The depreciation claimed, or allowed, on the rental cannot be excluded and is taxed when the house sells.
Source HousingWire, July 28, 2026, and IRS Topic 701, updated Sept. 24, 2026, and Publication 523 for 2025 returns. Federal rules only, with exceptions. Not tax advice.
What does a private sale change for an owner with a low rate?
It lines up the sale with the next purchase. When the new loan, not the old one, decides what a move costs, the risk is selling too early or buying too soon. A sale to Address District involves no listing, no showings or open houses, and no repairs, staging or deep cleaning. A member of our team reviews the house and may ask to see it, the offer arrives in writing with no obligation, there is no commission, and the seller is told in writing who the buyer is. The owner picks the closing date, weeks or months ahead, which can be set to follow a purchase, a lease or a job start.
The trade-off is real. A listed house can draw competing bids, and in markets with few homes for sale that competition can raise the price. A private sale brings one offer on a schedule the owner controls. Which matters more depends on the house, the market and how tightly the next purchase is timed.
Source Address District purchase terms.
Methodology and limitations
Mortgage shares, average rates, payments and loan-to-value ratios come from FHFA’s National Mortgage Database aggregate statistics for the second quarter of 2026, a sample of outstanding residential mortgages that covers all loan types. The early 2022 share is the sum of the two lowest rate bands in the first quarter of 2022. Market rates are Freddie Mac’s weekly averages for conventional conforming purchase loans, and individual quotes vary by borrower and lender. The sale probability and lost sales estimates come from a 2024 FHFA working paper covering 2022 and 2023. Tax rules are federal and summarized from IRS Topic 701 and Publication 523. Tables 1 and 2 are arithmetic on hypothetical balances, prices and costs and are not forecasts, valuations or offers.
Conclusion
The sources support a few plain conclusions. About half of mortgaged owners hold a rate below 4 percent, and the gap to today’s 7.28 percent is large enough that FHFA’s research shows it keeping many in place. On an equal loan, the monthly cost of moving is steep. But most sellers do not borrow an equal amount again. Equity built over years, and a next home that costs the same or less, can shrink the difference to little or nothing, as the hypothetical in Table 2 shows.
They do not say whether any one owner should move. A listing may bring competing offers, and a private sale brings a written offer and a closing date of the owner’s choosing. Pricing the next loan, against the reasons to move, is where the decision starts.
Frequently Asked Questions
Can I take my low mortgage rate to a new house?
Generally not. Most mortgages are tied to the house they finance and must be paid off at sale. Some loans, including VA-backed loans, can be assumed by the buyer of your house under the loan’s rules, which helps the buyer rather than your next purchase.
Should I wait for rates to fall before selling?
Only if the plan works without a forecast. Rates have risen 1.30 points since February, and nobody can say where they will be when you buy.
Is renting the old house out better than selling?
It can be, if the rent covers the full cost and you want to be a landlord. Selling within three years of moving out can preserve the federal exclusion, but depreciation on the rental is taxed. Ask a tax adviser.
How do I know how much I would need to borrow?
Start with a payoff statement from your servicer, a realistic sale price from recent nearby sales, an estimate of selling costs and the price of the home you want next. The difference is the new loan.
Sources
- Federal Housing Finance Agency, September 2026. National Mortgage Database, outstanding residential mortgage statistics, national and state quarterly data through 2026 Q2. https://www.fhfa.gov/data/national-mortgage-database-aggregate-statistics
- Freddie Mac, Oct. 1, 2026. Primary Mortgage Market Survey. https://www.freddiemac.com/pmms
- Federal Housing Finance Agency, March 2024. Working Paper 24-03, The Lock-In Effect of Rising Mortgage Rates. https://www.fhfa.gov/research/papers/wp2403
- National Association of Realtors, Sept. 17, 2026. NAR Pending Home Sales Report Shows 0.3% Increase in August. https://www.nar.realtor/newsroom/nar-pending-home-sales-report-shows-0-point-3-percent-increase-in-august
- U.S. Department of Veterans Affairs, accessed Oct. 5, 2026. VA-backed purchase loans. https://www.va.gov/housing-assistance/home-loans/loan-types/purchase-loan/
- HousingWire, July 28, 2026. Mortgage lock-in effect fuels rise of accidental landlords. https://www.housingwire.com/articles/mortgage-lock-in-accidental-landlords/
- IRS, Sept. 24, 2026. Topic 701, sale of your home. https://www.irs.gov/taxtopics/tc701
- IRS, 2025. Publication 523, selling your home. https://www.irs.gov/publications/p523
- Address District, Oct. 5, 2026. Mortgage rates reach 7.28 percent. /stories/mortgage-rates-october-2026.html
Figures retrieved October 5, 2026. This brief is general information, not legal, tax or financial advice. Photographs are illustrative.
