Golden handcuffs: Low fixed-rate mortgages are trapping US homeowners as they wait for a better time to sell. Here are 3 ways to make money without listing your home

Become a landlord

Many homeowners secured low fixed-rate mortgages of 3% to 4% in 2020 and 2021, when the COVID-19 pandemic drove borrowing costs to historic lows.

Now, as mortgage rates and house prices are near record highs, some homeowners are so desperate to hold on to their low mortgage rates that they’re choosing not to sell their properties — even if they’d like to.

Instead, some are becoming "accidental landlords," according to Fortune, and are leasing or renting out properties while they wait for a better time to sell and buy something else when they can get a lower mortgage rate.

There are actually several benefits to renting out your property.

The rental income you generate can be set aside for a future down payment or to add to your retirement nest egg.

When you hold onto your property, there’s always a chance that the market could improve and the value of your home might appreciate — helping you to make a profit when you do eventually sell.

If the hassles associated with becoming a landlord and managing a property don’t appeal to you, but you’re still interested in real estate investments, there are other options.

You can consider buying into real estate investment trusts (REITs) or you can make passive income by investing in properties through a number of new online platforms without needing to take on the mantle of landlord.

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Stay put, build equity

By staying in your home and putting more money toward paying off your mortgage, you can build equity — which comes with many benefits.

Home equity is the difference between how much your home is worth and how much you owe on your mortgage. For instance, if your home is worth $600,000 and you still owe your lender $200,000, your home equity would be $400,000.

U.S. homeowners with mortgages saw their equity increase by a total of $1 trillion in 2022, a gain of 7.3% year over year, according to the CoreLogic Homeowner Equity Insights report.

The report showed that in the fourth quarter of 2022, the average borrower earned about $14,300 in equity year over year.

There are multiple benefits to staying put and building your equity, but most importantly, you’ll come away with more cash when you do eventually sell.

You can use those profits to increase your down payment and get better mortgage terms for your next dream home. Or you could use it to venture into real estate investing — the options are endless.

As you build home equity, you become eligible for a home equity line of credit (HELOC). A HELOC can give you peace of mind if you run into financial trouble during an economic downturn because it generally gives you access to cash at a lower rate.

With a HELOC, a lender will approve you for a specific amount of money — determined by the value of your home and your credit score — which you can use for home renovations, large purchases and debt repayment, among other things.

Renovate to increase your home’s value

If you feel like the current market is binding you to your low fixed-rate mortgage, why not use this time to renovate the basement or build that dream kitchen you’ve always wanted?

A survey from Hanover Insurance Group found that market conditions forced 28% of respondents who were looking to buy a home in 2022 to stay in their current living situation for longer than expected.

The survey also found that 61% of homeowners are planning renovations this year, with one in four homeowners planning major renovations.

When you renovate, you can increase the value of your home significantly, helping you to build equity and long-term wealth.

Sky-high inflation has certainly made renovations more expensive — on both the supply and labor sides. But there are ways to keep the costs of a remodel relatively low, especially if you do your research and plan ahead. The first thing to do is make a budget that factors in a stash of cash to be used in case of delays or any other surprise costs that might come up.

Remember to protect your investment by updating your home insurance policy to ensure your coverage reflects the true value of your home after you have put all this work into it. It could also be worth your time to shop around for a better rate on your policy while you’re at it.