That low mortgage rate was a matter of pride when you bought your current house. Now, you want to move, perhaps need to relocate. However, higher mortgage rates lock you into your home. What can you do? The best choice will depend on your financial situation and stage in life.

Learn more: 3 tips for selling your home in today’s market

More than 80% of U.S. homeowners have a mortgage rate under 6%, according to Realtor.com. That means they are very reluctant to sell and buy another home with a higher loan cost. It's called the "lock-in" effect.

Jake Krimmel, a senior economist with Realtor.com, told Yahoo Finance that it has frozen the real estate market.

"It's about mortgage rates for existing homeowners versus what they can get out there on the market. Those numbers are still out of whack," Krimmel added. "It is certainly changing people's behaviors in ways that we haven't seen in the past, which has ramifications for inventory, for transactions, and why we're still in this holding pattern."

In fact, Kimmel is feeling the lock-in effect himself.

"I'm locked in at 2.75% right now. I'm moving to New York, but we're going to rent our house out."

If you can swing it, you might consider keeping your existing house and hopefully covering the mortgage and a little more by renting it out. With that rental income, you may be able to qualify for another mortgage on your new home.

Your existing low mortgage rate will help you pay off the loan sooner and enjoy the benefits of passive income.

Being a landlord has its own challenges and expenses, though, so you may want to consider a management company to get some professional advice and handle the burden. For a fee, of course.

Read more: Will mortgage rates ever be 3% again?

If you don't want to rent out your existing home, here's a strategy to soften the blow of incurring a higher interest rate on your new place.

It's a loan product that allows you to buy your next house before you sell your current home — and then lower your monthly payment on the new house.

It's called a mortgage recast. Here's how it works:

You get a mortgage on your new home.

Once your old home sells, you pay off the previous mortgage. Then, apply the cash equity left over to the loan for your new home.

The lender will recalculate your monthly payments based on your lower loan balance.

An example: You buy your next home for $450,000. With a 20% down payment and a 30-year fixed mortgage at 6.5%, your monthly payment is $2,275 on the $360,000 loan. When you sell your old home and pay off your mortgage, you have $100,000 left over, which you apply to the principal balance of your new home loan. Your recast mortgage payment is $1,643.

Not all lenders will recast a mortgage, and in this instance, you will have to qualify for two mortgages until your original home sells. Most conventional loans can be recast; however, government loans, such as FHA, VA, and USDA mortgages, cannot.

This will be a long shot, but you need to know it's out there. Assumable mortgages allow you to take over the loan of someone with a low-interest mortgage when you buy their house. These are usually government home loans, namely FHA, VA, and USDA loans.

There are a few hurdles, though:

Assumable loans aren't that easy to find.

Not all mortgage lenders want to deal with them.

You'll need to raise cash to pay the existing owner the difference between the sale price and the mortgage balance. You also must cover closing costs.

One way to get a lower mortgage rate on your next house is to look for a rate buydown. Some lenders offer these promotional loan programs, in which your rate is lowered for a year or two and then reverts to the regular loan rate.

Current buydown offers are available from national lenders like New American Funding and Guild Mortgage.

Home builders often use buydowns to attract buyers to their new subdivision developments.

Learn more: The best mortgage lenders right now

Here's another home loan twist that sounds too good to be true. Unfortunately, we have found no evidence that it's available in the United States. Yet researchers said it could be a powerful tool to unlock the U.S. real estate market.

It's called a portable loan.

Available in Canada and the United Kingdom, porting a mortgage allows you to sell your house and move your existing loan to your new home. You keep your existing loan terms and interest rate.

Why aren't portable loans available here? The U.S. mortgage industry is a complicated web of state and federal regulations. It funds itself with investments tied to loans, and the system relies on a mortgage being paid off when a property is sold.

Could it be done? Possibly. The state of Maine has worked on a plan to enable portability and "promote housing affordability."

Meanwhile, the Federal Housing Finance Agency, which administers mortgage market makers Fannie Mae and Freddie Mac, told the New York Times that porting mortgages is "not under active consideration."

Learn more: The average mortgage rate by state

Shorter loan terms may be an option for home buyers looking for lower rates. Shop 20- and 15-year fixed-rate mortgages. You may find a decent rate break from 30-year terms. Adjustable-rate mortgages may also offer a lower initial loan rate, but the rate will change periodically — up or down.

Life decisions are often more than a matter of choosing the best financial option. If your reason for relocating is for a new job or evolving family situations, you may have little choice. However, it is important to consider your priorities. If the move is more of a "want" than a "need," perhaps it can be delayed until you have more financial options or real estate market conditions are more favorable.

If you are moving for lifestyle reasons rather than a necessary relocation, consider making your current home more suited to your current needs. You may have sizable equity in your home that can be tapped by a home equity line of credit (HELOC) to add rooms, install upgrades, and construct amenities like a pool or outdoor kitchen.

Laura Grace Tarpley edited this article.

Mortgage rates are stuck in a rut, and expectations for a little monetary assistance are pushed back to mere days before the official start of fall.

At its last meeting on July 30, the Federal Reserve once again left short-term interest rates unchanged. Wall Street isn't expecting a rate cut until September at the earliest. That means mortgage rates won't make any big moves downward anytime soon. Until market forces influence interest rates to fall, you'll need to work the system to get the lowest mortgage rate you qualify for. Here's how.

Learn more: How the Fed rate decision impacts mortgage rates

Analysis by Yahoo Finance of nearly 5,000 mortgage lenders reporting 2024 loan information under the Home Mortgage Disclosure Act reveals the surprising truth: the lenders offering the lowest mortgage rates.

Unfortunately, the results won't help the typical borrower.

By and large, the mortgage lenders who offered astonishing, rock-bottom mortgage rates made a tiny number of loans — no doubt allowing drastic rate concessions to a small slice of preferred customers. We're talking median interest rates from 2.4% to 4.75%, which are made by lenders underwriting loans to as few as a handful of customers.

Other lenders offering the absolute lowest mortgage rates in 2024 were banks catering to select clientele, credit unions serving local members, and homebuilders financing their own construction.

So, what if you aren't buying new construction from a lender offering a buydown, a member of a credit union willing to offer below-market-rate loans, or an affluent investor with a million-dollar portfolio?

Here are eight strategies to get the lowest mortgage rates with the cheapest home loan you can qualify for — all while using a regular, more well-known mortgage lender.

Read more: How to get a mortgage in 2025

You may already know that mortgage rates vary by credit score. Whenever you boost your credit score from a lower to a higher tier, you save money.

For example, the entry-level FICO Score of 620 might earn you an annual percentage rate, or APR, of 7.896% (based on mortgage rates as of July 16, 2025, with the purchase of one discount point). Raise your score to the next credit band of 640 to 659, and your interest rate could improve to 7.145%.

Bigger rate discounts are offered as you climb the credit score ladder. Here are the interest rate breaks as shown by MyFico.com's Loan Savings Calculator:

Read more: What credit score do you need to buy a house?

The amount of recurring monthly debt you carry when applying for a mortgage is another significant factor in the interest rate you'll earn. The more debt, the higher your mortgage rate.

To get the lowest mortgage rate, aim for a DTI of 25% or less. To calculate your debt-to-income ratio, divide your total monthly debt by your monthly income before withholdings. For example, say you need $700 for monthly rent, $300 for a vehicle loan, and $100 in student loan payments. That's $1,100. With a monthly gross income of $5,000, your DTI is 22%.

1100 / 5000 = 0.22

You're in the pocket for a lower mortgage rate. Mortgage lenders may consider DTIs up to 50%, but prefer 35% or less — and the lowest mortgage rates go to borrowers with DTIs of 25% or less.

Another best practice for getting the lowest mortgage rate is to make as much of a down payment as you comfortably can. While you can get a home loan with as little as 3% down, paying more upfront will earn you a lower mortgage rate.

For first-time home buyers, the median down payment was 9% in 2024, according to the National Association of Realtors.

Learn more: What’s the average down payment on a house?

Prepaying interest to lower your ongoing mortgage rate, called buying discount points, gains popularity in times of higher interest rates.

Buying one point equals 1% of the loan amount and will generally reduce your interest rate by one-quarter of a percentage point. Any number of points can be purchased and applied in fractional amounts too.

However, it's a good idea to calculate the up-front cost of buying points and compare that with the discount you receive on your long-term interest rate. Other factors to consider in this calculation include how long you expect to live in the home and your down payment.

Lenders sometimes add a point or two to a mortgage proposal to make their offered interest rate appear more enticing. But remember, you're actually paying for the discount with an up-front fee.

When shopping for a loan, compare loan offers with zero points. Then, you can decide how many points to buy, if any, to lower your interest rate.

Here's a surprising fact: In a Zillow survey of home buyers over seven months of 2024, about 45% obtained a mortgage rate below 5% — when rates were above 6.5%, like they are now.

How? One-third were successful in negotiating special financing with the home seller or builder. More than one-quarter got a rate buydown from the seller or builder (see below). Nearly a quarter (23%) bought discount points, as we've just mentioned.

If mortgage rates are near 6% and you want to get below 5%, you'll need to buy four to five discount points. (Remember, each point you buy reduces your interest rate by approximately a quarter of a point.)

For example, one point on a $300,000 mortgage would equal $3,000. If you want to purchase five points, you'll likely pay $15,000. You will want to discuss your point-buying strategy with your lender to ensure it gets your long-term loan rate to your target.

Borrowers can lower their mortgage interest rate for the first few years of the loan term with a buydown. Home builders, sellers, and some lenders sometimes offer an interest rate buydown to boost sales. However, it is a rare option among mortgage lenders.

For national mortgage lenders with buydown programs, check out Guild Mortgage and AmeriHome Mortgage.

For example, a buydown might lower your interest rate from 7% to 6.5% for two years. It can be a good deal if the company offering the buydown isn't making it up with fees somewhere else.

While you get a short-term break on the interest rate, your payments and total interest may actually be higher over the long term. Buying down your interest rate is a strategy that requires running the numbers on the long-term benefits.

If you're interested in a buydown, compare a mortgage both with and without a buydown. Lenders will qualify you based on the permanent interest rate, not the temporary buydown rate. Finally, be prepared for your monthly payment to rise at the end of the buydown’s discount period.

A mortgage product that increases in popularity whenever rates begin to rise is back: the adjustable-rate mortgage.

ARMs have a fixed interest rate for an introductory period, often three to 10 years, and then the rate changes regularly, usually once or twice a year. Tips when shopping for an ARM:

Look for an introductory rate that is lower than a fixed-rate mortgage.

Choose a term you feel comfortable with, perhaps in line with how long you plan to stay in the home.

Make sure you budget for possible increases in your monthly payment if the interest rate moves higher after the end of the introductory fixed-rate period.

In the past, it was common to find ARMs with introductory rates well below the prevailing long-term fixed interest rate. These days, it isn’t a given that an ARM rate will be lower. You'll have to shop diligently — and bravely negotiate.

Dig deeper: Adjustable-rate vs. fixed-rate mortgage — Which should you choose?

Are you looking for an interest rate that never changes and allows you to build home equity faster? Consider a shorter-term loan. Mortgages with 20- or 15-year fixed terms, as opposed to the traditional 30-year term, typically come with lower interest rates.

However, since the term is shorter, monthly payments tend to be higher.

Keep learning: 15-year vs. 30-year mortgage — How to decide which is better

An assumable mortgage allows you to take over the remaining payments of an existing home loan. You would likely make a lump sum payment to the current owner to cover the value of any equity or for a profit. That would require you to have the needed cash on hand or perhaps get a loan.

As tempting as it might be to pick up a low-interest-rate assumable loan, most conventional mortgages aren't eligible. That means you would need to find a seller with an FHA, VA, or USDA loan.

Read more: Mortgage rate predictions for the next five years

Since mortgage rates are constantly changing, and each lender's rate varies, the lowest mortgage rate you can earn requires some research. You will want to know your credit score, debt-to-income ratio, and the amount of your down payment.

With that information, you can begin contacting lenders. Knowing generally where you want to buy a house and how much it will cost, you can gather rate estimates based on your creditworthiness.

Once you have two or three contenders, you can apply for preapproval with each and get a more exact mortgage rate.

Learn more: 6 tips for choosing the right mortgage lender

Current home loan interest rates are well above 6%. Many (72.1%) of existing homeowners have a mortgage rate below 5%, and over half (54.1%) have a rate below 4%, according to Realtor.com. So, refinancing is not an option for many homeowners right now.

However, owning a home is a long-term commitment, and mortgage rates are very cyclical. Just because mortgage rates are above historic lows doesn't mean a refinancing opportunity will not present itself some years down the road.

After you move in, keep an eye on interest rates. Look for a dip of about 1% to 2% below your current mortgage rate before refinancing. Just remember — there will be refinance closing costs, and you need to decide if your goal is to lower your monthly payment or to pay off your home sooner.

Dig deeper: 6 times when it makes sense to refinance your mortgage loan

The lowest mortgage rate ever on a 30-year loan was 2.65% in January 2021, according to Freddie Mac. It takes dramatic and systemic financial stress to shock mortgage rates to such a low level. COVID-19 was just that. Some 15 months later, mortgage rates were up to 5%.

Never say never — but it's unlikely that mortgage rates will go back down to 3%. A drastic event (like the COVID-19 pandemic) would have to occur again for rates to drop this low.

VA loans, especially 15-year VA loans, usually have the lowest mortgage rates because shorter terms have lower rates than longer terms.

This article was edited by Laura Grace Tarpley.

If you’re in the market for a home, it’s understandable to wonder when mortgage rates will go down. While interest rates might not fall all the way to 3% again, what about 4%? Even before the COVID-19 pandemic, rates lingered at or below 4%. Currently, rates are hovering around 6.5%. And while you should consider many factors when considering whether to buy a house — such as whether you can afford monthly payments and home maintenance projects — securing a low mortgage interest rate can lead to significant savings.

Read more: The best mortgage lenders right now

In this article:

Will mortgage rates go back down to 4%?

What drove 4% mortgage rates in the 2010s?

When will mortgage rates fall again?

Should you buy a house now or wait for rates to drop to 4%?

FAQs

Interest rates on 15- and 30-year fixed-rate mortgages are not likely to return to 4% anytime soon.

“We expect that mortgage rates will fall over the next five years,” said Charles Goodwin, head of bridge and DSCR lending at Kiavi, via email. “As inflation stabilizes and the Fed eventually shifts to a more accommodative stance, rates could fall slightly, although not to the previously historically low levels where they once were.”

Mortgage rates are closely tied to the 10-year Treasury yield. Lenders set rates partly based on the yield to make mortgage-backed securities (MBSs) attractive to investors. If the bond yield remains elevated, so do mortgage rates.

Keep learning: When will mortgage rates drop back to 5%?

Rates on a 30-year fixed mortgage reached 3.35% in May 2013, the lowest rates in history (at the time). These lows were brought on by the years-long response to the 2007 financial crisis when millions of U.S. homeowners faced foreclosures on their houses (many of which had subprime mortgage loans), and financial institutions collapsed.

In response to the crisis, the Federal Reserve lowered the federal funds rate to near 0%, similar to its policy during the COVID-19 pandemic. It also purchased large amounts of Treasury bonds and mortgage-backed securities, which encouraged lending and made borrowing cheaper.

The significantly reduced rates of 2010 and, more recently, 2020 were driven by major economic downturns. It’ll likely take similar seismic events to see rates drop that far again.

“Returning to a 4% mortgage rate would likely require a deep recession, a sharp rise in unemployment, and more aggressive monetary stimulus,” noted Goodwin. “The recession would need to be more severe than most forecasters' current base case.”

Dig deeper: Do mortgage rates decrease in a recession?

When deciding the right time to buy a home, it’s best to focus on your financial situation. Broader economic trends are difficult to predict and rely on several intertwining factors, but you have some level of control over your own finances.

“Trying to time the market rarely works in real estate,” said Stephen Clyde, Realtor and CEO of Stephen Clyde Real Estate Group, via email. “Over the past 75 years, U.S. home prices have only declined seven times. Plus, there are several advantages to buying now, like less competition and more room to negotiate on prices, repairs, and closing costs.”

If you’re ready to buy now, consider an adjustable-rate mortgage (ARM), a seller-paid buydown, or a shorter-term mortgage loan to keep your rate low. And remember, you can always refinance your loan later if rates drop.

Rates on ARMs can be lower than fixed mortgage rates, at least initially. However, your interest rate can fluctuate periodically based on economic conditions, so you could get stuck with a higher rate later.

With a seller-paid buydown, the seller pays money to lower the buyer's rate. It’s usually a temporary rate buydown, but it can be for the life of the loan if the seller pays for discount points at closing.

Mortgage lenders typically offer lower mortgage rates on shorter loan terms (e.g., on a 15-year mortgage versus a 30-year one). You’ll pay less in interest over time, but since you’re paying off the same principal amount in a shorter time, your monthly payments will be higher.

Regardless of your loan type, make sure you can afford the monthly mortgage payment. In addition to principal and interest, your payment can include homeowners insurance, property taxes, and private mortgage insurance, if required.

Learn more: How to get the lowest mortgage rate possible

Mortgage interest rates rose significantly in 2022 as the Federal Reserve responded to inflation. After setting the federal funds rate near 0% in the height of the pandemic, the Fed raised rates 11 times in 2022 and 2023 in an effort to slow down the economy. Raising the federal funds rate made borrowing more expensive, which impacted consumer borrowing on products like auto and home loans.

It is extremely unlikely that mortgage rates will go down to 4% in 2025. While rates may inch down, many economists expect them to stay above 6% through the rest of the year and even in 2026.

Interest rates are difficult to predict, especially further out. You’ll be hard pressed to find expert predictions extending past 2027. However, some experts anticipate future Federal Reserve rate cuts, so they expect a gradual decline in interest rates. Most expect rates to stay above 6% through 2026. These predictions can change depending on U.S. and global economic conditions and the central bank’s response.

Laura Grace Tarpley edited this article.

Getting a great price for your home can feel like quite the win — but when it comes time to file taxes, you might feel differently.

That’s because you could owe capital gains taxes. This is a separate tax for profits made off certain investments. Depending on how long you owned the home and various other factors, these taxes can reach up to 20% of the profit from your sale, adding a hefty amount to your annual tax bill.

Fortunately, there are ways to reduce your capital gains taxes or even avoid them altogether. Are you planning to sell a home soon? Here’s what you can expect for capital gains taxes — and how to plan ahead.

Dig deeper: How much does it cost to sell your house?

In this article:

What is the capital gains tax on real estate?

When do you pay capital gains tax on real estate?

How much is real estate capital gains tax?

How to avoid capital gains tax

FAQs

A capital gain is a profit you make off an investment. So, if you sell your house for more than you initially paid for it, that’s considered a capital gain.

The Internal Revenue Service charges a separate tax for these types of profits in addition to those you’ll pay on your regular taxable income. We’ll go more into the exact numbers later, but generally speaking, you’ll pay anywhere from 0% to 20% on your home sale profits.

Learn more: What is taxable income?

You’ll owe capital gains taxes when selling a home you’ve owned for more than one year. (According to the IRS, you can start counting from the day after you acquired the house until the day you sold it.)

The payment won’t actually come due until you file your tax returns the following year, though. So, if you sold a home in 2024, you won’t pay the capital gains tax until you file your 2024 return in April 2025. You’ll use a Schedule D form to report your capital gains.

There are some scenarios when you may not owe capital gains taxes — for example, if you didn’t own the home very long or earn less than a certain income threshold. You also may qualify for a capital gains tax exclusion, which we’ll go into further down.

Dig deeper: Is now a good time to sell your house?

The cost of capital gains taxes depends on three main factors: How long you held the property before selling it, your total taxable income in the year you sold it, and how you file your taxes (e.g., filing as a single taxpayer versus jointly with your spouse).

Let’s look at all three factors:

Length of time holding the property: Capital gains are classified as either short-term or long-term. If you have an asset for over a year, the gain is long-term and taxed at the IRS’s capital gains tax rates below. If it’s less than one year, it’s considered short-term capital gains and taxed based on your ordinary income tax bracket.

Taxable income: Capital gains tax rates vary by how much you make per year, with homeowners with lower annual incomes paying 0% and those with higher incomes paying 15% to 20%.

Filing status: Income thresholds vary by filing status within each capital gains tax bracket. Single filers and married couples filing separately have the lowest income thresholds, while those married and filing jointly have the highest.

See the table below for a breakdown of what you’ll pay in capital gains taxes for the tax year 2024:

Capital gains taxes will rise slightly for the 2025 tax year, which you will file in 2026. See these thresholds below:

Dig deeper: How to choose the right federal tax filing status

You only owe capital gains taxes on the profits from your home sale. To calculate how much you owe, you’d first find your capital gains tax bracket on the above chart (make sure to use the year you sold the home). Then, you’d multiply that by your total profit.

For example, if you’re in the 15% bracket, bought your home for $550,000, and the sale price was $900,000, your taxes would look like this:

Total capital gain: $450,000 (900,000 - 550,000)

Total capital gains tax owed: $67,500 (450,000 x 0.15)

In the above example, you’d owe $67,500 in real estate capital gains taxes for 2024.

Learn more: Can you get a tax break for selling your house at a loss?

There are several ways to reduce capital gains taxes or even avoid them altogether. Here are some options.

When selling your house, the best way to avoid capital gains taxes is to use the IRS’s capital gains tax exclusion. This exempts you from paying capital gains taxes on up to $500,000 of capital gains on a home sale (if you’re married filing your taxes jointly) or $250,000 (for other taxpayers) — but only if you meet specific requirements.

To qualify, you must have owned and used the property as your residence for at least two years (730 days) out of the last five. Also, the sale must be of your “main home,” which the IRS says is the address you use for the U.S. Postal Service, on your voter registration card, on your tax returns, or on your driver’s license and car registration.

Note: There are quite a few special exceptions and rules regarding this exemption, so make sure you go through the IRS's step-by-step guide or speak with a tax advisor to determine if you qualify. You may also qualify for a partial exclusion in some situations.

If your income is below a certain threshold, you may fall into the 0% capital gains tax bracket, exempting you from paying capital gains taxes on any profit you earn from your home’s sale.

To do this, you can:

Max out your 401(k) contributions, as these contributions won’t qualify as taxable income

Make charitable donations, which are deductible up to a certain threshold

Contribute to your Health Savings Account (HSA) if you have one, as these contributions are tax-deductible

Find additional tax deductions you may be eligible for

Tax deductions reduce your taxable income, and many are available — including ones for mortgage interest, property taxes, and home office costs. Remember that taking these means itemizing your deductions, or writing off these costs one by one. Taking the standard deduction (a single, lump-sum deduction) offers the most annual savings for many taxpayers. Consult a tax professional to determine which method is best for your tax returns and learn about other tax deductions you might qualify for.

Dig deeper: Should you take the standard or itemized tax deduction?

If you rent your property out or use it for business purposes, you have another option: A 1031 exchange. This is a type of swap in what the IRS calls “like-kind” properties and assets, allowing you to take one asset (or the proceeds from that asset’s sale) and then reinvest those into a similar asset within a certain time period, essentially deferring your capital gains taxes until later on. The 1031 is for business and investment properties, not primary residences.

If you opt for this strategy, make sure you consult a 1031 specialist, as they can be complicated transactions.

If you’re looking to minimize the taxes you pay on your upcoming home sale, speak to a local tax professional in your area. They can help you estimate what taxes you will owe, as well as how you can reduce or even eliminate them altogether, if possible.

Learn more: 8 tax deductions for homeowners

You might pay capital gains taxes when you sell a house, but it depends on your total annual income, tax filing status, and how long you owned the home. Many homeowners qualify for an exclusion that exempts them from some or even all of the capital gains taxes on their home sale.

Capital gains taxes are based on your income, tax filing status, sales profits, and the time you had the property. If you had the home for less than one year, your sale profits will be taxed at your ordinary tax rate.

To avoid paying capital gains taxes when selling real estate, you can use the capital gains tax exclusion (if eligible), sell the home through a like-kind 1031 exchange, or reduce your taxable income.

This article was edited by Laura Grace Tarpley.