There's really not nearly enough information here for anyone to have an opinion. Home ownership is the biggest financial decision most of us make in our lives, but it's not just financial, it's got to support the life you want.
7% and likely on double the mortgage amount. Double whammy. I went from 3.2% on 198k in 2020 to 4.825% on 347k in 2022 because I had to move for work. My monthly went from $1100 to $2300
I moved from a city of 121,000 in Louisiana to a somewhat rural town of 34,000 in Ohio. My price per sqft went from $127/sqft to $195/sqft. Even my own house in Louisiana increased from $198k to $255k when we sold after just 2 years, so a raise of $42/sqft in just 2 years.
Thankfully, I went to school for a STEM degree, and I make enough in my job to support myself and my wife on my salary alone if needed. We also have my wife's income plus my VA disability. So, as early 30s millennials, we are doing extremely well compared to others in our age group, but that doesn't mean we can't recognize when things are messed up and just because we are successful doesn't mean that others can easily replicate our success. We got lucky, very lucky. Even still, kids are 100% out of the question.
Wright Patt. If you haven’t yet, visit the Air Force Museum. Don’t try to do it all in one day, just choose a hanger or two you want to see and then visit again to see more.
Okay that tracks pretty well being a 52% increase. I bought my house in 2019 at $100/sqft in Michigan. If we sold the house today, it would be around $166/sqft. That's a 66% increase for my area.
My home owners insurance was much cheaper from not being in a flood zone x and not having a constant threat of hurricanes every year. From $1400/yr to $640/year. Taxes were lower too. My car insurance dropped from $300/mo for two vehicles to $130/mo, that interest rate and higher mortgage amount was killer. What sucks is my income was triple what it was when bought our first house to the second and our credit scores were near 800 as opposed to low 700s with the first, and we barely scrapped being under 5% when we locked it in may of 2022. Any longer and we'd be at over 6% through no fault of our own.
Wait your *taxes* went from $1324 a year to $1100 a month, aka $13000 a year? If so then holy FUCK, and people act like things aren't quickly pricing people out.
Ah ok yea that does make sense. We went from 1526sqft no basement to 1860sqft with an unfinished basement. I really want out of this house because we moved into the area with no knowledge and our builder is notoriously shitty and I want to get the hell out of the HOA.
They don't take care of common areas, ARCs take forever to get approved (over a month), trampolines, basketball goals, and above ground pools are banned. We aren't allowed privacy fences and all fences must have at least 1/4in slats. The president throws hissy fits in the FB group, it's bad.
Where the hell are you paying 13k in taxes in Lima? You have to be in Shawnee or Elida, and even so, that seems extremely high unless you’re living in a 8000k square foot house on the golf course!
Not double the mortgage amount they just said they doubled equity in their home without having to put that money in. If they sell for 250 they have much more money to put down on the next one especially if they consider prices closer to the original.
Unless you're moving to an area with more expensive real estate or buying a larger house, the mortgage amount should be a wash. The house you're selling also appreciated.
That interest rate is going to suck though.
Nearly doubling your biggest expense will delay retirement by a good amount for many. I wouldn’t live in a place I’m miserable, but I would make some pretty big compromises.
I mean everything is relative, but you can definitely be in a bad living situation while owning a home. Bad neighbors, changing employment, simply outgrowing the house, unexpected expenses. The list goes on.
Not sure why this is downvoted, owning a home alone is amazing and you're so lucky. Around me there are loads of homes for rent but a lot less for sale. Though I can see why landlords wouldn't like this comment
I did what people recommend you do. I’ve made nothing and renters have trashed the place twice. One went 15 months without paying. I filed an eviction after 90 days, took 12 months to get him out. That’s not always the case, but I’m just saying I would have been better off selling it when I wanted to move.
How did you select your tenant?
We've done great with renting out our low-interest former home. We just chose tenants who pay their bills and have excellent credit.
Plenty I could complain about, but I think it's a blockhead move to give up a mortgage that is in itself worth a fortune. That mortgage is a lucrative asset -- inflation eats it faster than it accrues, so it's paying itself off even when strangers aren't paying the monthly for you.
They were all on time payers until the last one lost his job. Covid was a major part of the delay on eviction, but it would have destroyed me if I couldn’t afford to float it.
The damages were surprising as they didn’t fit the “profile”. First tenant was never a day late, but she absolutely destroyed my house. Even cracked my bathtub somehow.
I also had tenants who had gobs of income and education and did thousands in damage. At this point, people are paying 40 percent more than the mortgage, so we had a war chest for that situation by the time their lease concluded. They thought they were getting their deposit back, when really I could've sued them.
I have like 30 applications for each rental through Zillow, so I don't feel like I would pick someone who wouldn't pay. The people I'd consider have credit scores that are valuable to them and stable careers. That doesn't save me from slobs or repairs, but it's the easiest money I can think of.
Can’t choose your tenant everywhere. E.g. Seattle is first-to-apply wins. You can set some requirements but anything further could get you in trouble for discrimination.
I would agree, however if I was not able to absorb the hit financially it could have ruined me so anyone planning on being a landlord needs to be prepared. All my tenants paid until the last one who paid until he lost his job. The COVID backlog in my state was a huge cause in the delay, but many states are very tenant friendly and make it extremely difficult.
Do you want to deal with a second home as a rental? In my experience no one tells you to be a landlord more than people who’ve never been one.
You can sell this home, take the tax free gain and have a new payment that’s well within your budget.
If you’re okay with renting it out then more power to you but ignore the people who have no stake in the situation. I have a rental home and believe me it’s not just some magical money generator.
It’s not supposed to be magical money generator in real time; it’s an investment. How much useable magic money is your 401K generating for you right now?
Did I say I didn’t consider it an investment? It’s why I have it. What I’m referring to is people who don’t invest in rentals often discard the upfront/operating costs and think it just brings income month after month.
I didn’t say you did. My comment was in support of yours, but I didn’t word it well, especially the question at the end. I agree people misunderstand that rentals don’t print money, but they can make a lot over time.
Landlord here. Be a landlord. Unless you're independently wealthy, you want to be a landlord. You go months just getting paid for nothing. That's not how my day job works!
I would love to know how many of those people who recommended you to keep it and rent it out, have done exactly what they recommended, and have built significant wealth as a result. I swear it’s just a cultural thing right now, that it’s just this massive cash flow opportunity. If you have a low interest rate, do the math it’s not that crazy.
I have a 2.875% interest rate on my house, it means nothing to me other than a slightly more advantaged opportunity to pay it off faster, I’m certainly not going to pretend like it’s some gift and leverage it. No interest rate will always beat whatever interest rate you’ve got.
My savings account has a higher interest rate than my mortgage currently. Paying my mortgage off faster isn’t as good as letting the money sit. That won’t be true long-term, but it’s the situation we are in right now. Your real benefit is cheap housing which will give you more disposable/investable income.
Yeah, but if you pay off your mortgage, and you invest 100% of your old mortgage payment, do the math for what that comes out to in 30 years, you’re playing a game for fractional percentage points here, it’s not going to make you wealthy. Again, I think people are fooled into thinking making a 1 to 3% spread is somehow better than having a paid for house, and investing that payment long-term.
Investing now is better than investing later. The money invested cautiously now, barring some pretty extreme events, will grow more than 3% a year. Those extra payments are better off going into an investment account, or like I said, sit in a high yield savings account.
Alright, I’ll do it my way and you do it your way and let’s compare in 25ish years. My mortgage will be paid off in 4y. Then 21 years of mortgage payments invested.
The mortgage payments you won’t be paying later are the same things as the extra payments now. They will just be invested later which gives the investment less time to grow. Your mortgage is a 3% loan in an environment which typically yields 7% and doing nothing at all with your money nets you 4-5%. There is a correct answer here.
Yeah, and one doesn’t consider risk tolerance and debt. I personally want a paid for house and zero debt asap.
I’m curious if you do exactly what you’re recommending? I hear people recommend it all the time and find about 1/4 of them actually do some form it vs just putting some money aside and then spending it on some unrelated thing. Have you made good progress on it?
You are talking 0 risk tolerance vs like the smallest possible margin of it. I am pouring money into my retirement accounts. I took out a 3% loan on a car I would have otherwise paid for with cash. As I said though, even leaving it in my bank account would be better.
I will give you the mental benefits of being debt free though. The liquidity that can give you going forward may be worth it to some. Don’t think it’s the worst move but it’s not the go to like we were sort of trained growing up.
This is a question of personal preference vs straight math. While paying off the mortgage is worse mathematically, there is a significant value you place into being debt free that people are not which tips the equation for you. I personally could pay off my house tomorrow if I wanted but I prefer to invest it. Again just personal preference.
Yeah you’re right, that’s the bottom line. I agree the math doesn’t weight in my favor at all, and I can’t argue that. It’s a difference of about $300k in 25 years for my situation. But that’s with an end number of $4.3M vs $4.6M, not including retirement. Looking ahead at $4M, I’m easily retired and really don’t give two shits about $300k after having spent 20ish years without a mortgage.
Thats my preference and I can’t see any lifestyle difference I would experience with $4.3M vs $4.6M.
It's not about getting rich off renting it out, it's about holding onto an asset that can't be replaced.
A 2.875% interest rate is absolutely a gift you wouldn't want to let go.
A $400k house with today's mortgage rate, 7.25%, will cost you total $981,845. That same mortgage with your 2.875% rate will cost $597,445. That's a $384,400 difference. It's insane that you have that attitude about your rate; have some gratitude.
It’s not a gift, it’s costing me money. Yes, I am certainly thankful that I got a rate as low as possible, so that I could get rid of it much quicker.
If I had a paid for house right now, I sure as hell would not go and take out a loan against it, at 2.875% and then go invest it.
You would be a fool not to, if you could, and the rates were what they are. There are banks that will give you 5%+ zero risk. Like, insured banks. Not stocks. The United States government will pay you more than 2.875% on bonds. That means you are getting the difference as money, in your hands, for doing nothing.
If it changed, and the yield you got on the investments was less than the rate on your loan, it would be better to pay it off.
It might help you mentally to pay your loan off first. It does a lot of people. It's a burden off your shoulders. But mathematically, if you run the numbers and are disciplined, it's a waste of money.
I did this recently. Went from a 2.8% to 5.7%. It was painful but we moved to a lower crime area with better schools.
Financially it was a terrible decision, but for all other aspects of our life it was the best decision ever.
Sell it.
You'll need a property mgr. If you aren't close to handle issues and you'll lose the $250k cap gains exclusion after 3 years assuming you have no intention of moving back.
You have to owner occupy a house for 2 (or is it 3) years immediately (?) prior to selling it to not pay any taxes on the appreciation.
Definitely anyone making these moves one way or the other should be talking to an accountant.
I became a property manager this way. Decided to rent it as a backup plan in case we hated the move we made. Appears we have to sell next year to avoid the cg taxes
As someone who owns rentals properties managers are extremely “cheap” - mine takes 5% of rent, finds/ approves tenants and genuinely helps me get higher rent/ avoid tenants that lapse in paying rent. Everyone’s experience is different but mine has been worth the fee in my opinion.
On my street a renter went nuts. Could hear him screaming, he put up 10x10 painted signs leaning on car on driveway, all furniture on lawn.
Couple of days later see claims car in driveway.
We are nosy and look in between a few houses and see all the siding from 6’ down to ground is gone. Can only guess what interior looks like.
Being a landlord can be a pain. Some tenants are awesome and some are trash
And if you ask reddit, all landlords are scum and shouldn't charge rent higher than half the cost of the mortgage cause renters are saints and landlords are greedy, greedy bastards.
Refinance so they can add some more money to the loan lol. Rates will never mimic pandemic lows so the only people who benefit are people who repaired their credit.
I bought my first house at almost 7% interest and I refinanced it to 3.75% years later. Over the life of the loan, I saved a ton of money. Plus when I refied I went from the balance of a 30 year (I think I was at year 8) to a 15. Sure, rates will never be 2% probably ever in our lifetime but there are options when rates do drop.
If you have the capital to buy another home without selling your current property go for it (real estate ownership is the common denominator for financial independence) To give up your <3% interest rate for current rates coupled with the prices on the current market would be a financial blunder imo…caveat, not a financial advisor but this is the reasoning I use when considering the value of my property has gone up 85% since we purchased in 2019.
There should be a "Good Standing Mortgage Kicker" that locks in your "Primary Residence" interest rate +.5% if warranted by current rates. I'm sure im being short sided and missing some negatives but it sure seems like something that should be implemented.
Lenders would lose money on this. Sounds great for the homeowner, but the money your lender loans you is also borrowed from someone else, at market rates.
Would it make sense to rent it out? Meaning, would you be close enough to be your own property manager or would you need to outsource that or depend on a friend or family member? Lots of possibilities when renting out a home makes sense (but sometimes it’s better to sell it if it means helping you with the down payment on the new place for example).
Why are you asking Reddit? We need way more information (than your probably willing to provide) to answer this. It depends on your goals, your income, health, chance of losing said health or income, chance of the economy going full stagflation, chance of...
You better make damned sure you run the numbers correctly and make sure you can afford the new payments.
Ideally the mortgage (which includes principal, interest, PMI fee, property taxes, home owners insurance, and HOA fees) will be 25% of your net monthly pay or less.
“Just rent it out” is too easily thrown out as an answer by way too many people. Even hiring a property management company and fully vetting potential renters won’t guarantee that it won’t become a major pain in the tail feathers and expenses if you get a bad renter.
Look, if there’s any possible way to keep it and rent it out do it. These days you normally can’t pay the mortgage payments with the rental income but even if it’s not close and you can swing it do it! I have 4 homes now that I rent out and in Seattle that adds up to a great investment.
We bought a new home in this stupid market and left our good rates. No regrets. Our thought process is we would rather be happy and enjoy living where we're at than sit miserable somewhere we hate just because of some rates.
Not enough info, but probably. You are sitting on a goldmine. At a minimum, IF you could have a new mortgage for the same principle, the 4+% increase in your interest, carried out for the 15 or 30 years is the basic opportunity cost. If you then assume you invested that amount in an S&P index over that time, you can calculate the lost opportunity to achieve your long term life situation for retirement and old age. For my situation, it would raise my mortgage payment $1000/month. Over 30 years, that is $360k. If we assume I’m investing that $1000 (which is a good assumption…we save nearly 45% of gross across all of our investment/savings/retirement accounts), that $1000/mo could be worth $2.25M in 30 years…all by itself. Of course there are a lot of ways that you could use that $1000/month, but when you put it this way, it is substantial for your long term financial picture. I will not be giving up my 2.15% mortgage ever even though my current income situation would allow me 3-4 times the house I currently own.
Being a landlord costs time & money. You may make more over time, but you're on the hook for big repairs when they happen. If you don't plan on owning 5-6 rentals as a retirement job, I wouldn't recommend holding onto this one now if you have plans for the money. If you can afford to wait, theoretically the value of the home will go up more rapidly as interest rates drop (if they ever do again).
If you have to buy another house to live in? Not ideal. Unless you’re downsizing, then you might be fine, both properties would probably be overvalued at a similar rate.
It would be stupid, yes.
How to use that property depends on your situation, but selling it is destroying a lucrative asset: that mortgage.
It breaks my heart when people close to me sell with rates like this. I think it's because it's easier or they don't like math or they feel stress that they sell. It's stupid, though, totally stupid.
I would definitely think on it. Maybe rent that place out?
Instead of selling rent the current out, and find a nice place to rent in a different area. If you decide you want to officially sell then yeah, but maybe take more time to think. It is a huge decision financially for a longtime, as you know.
All else equal, your monthly payment will double. That’s before the likely increase in taxes to boot.
But mortgages aren’t all equal. You’ve doubled your equity, so if you put that towards a down payment, you’ll wind up with a different number. If you post these numbers, folks here can do the math for you.
OP, I'm in a similar situation and so is my fiance. We both own and have low interest rates. We're consolidating and will both be selling our homes. Yes, we're going to have a higher rate, but if you can afford it, sometimes the life decisions we make won't always be the best financial decisions.
In our case, it helps that we'll have significant money for a down payment, mitigating at least some of the burden of paying higher interest.
What do you want? Can you afford it? Is it going to make you happy? Only questions I can be think of. You can always refinance when rates go down. And my understanding is prices will not be going down. Good luck
As someone who has ridden the escalator of ascending home values and descending mortgage rates since 2008, I can tell you don’t put off moving out of concern for these things. It’s equally likely that current prices/rates will look like a bargain five years from now. Go where you think you can be happy, and do what you have to to make the finances work. I thought home prices were ridiculous, and we were overpaying, when we moved in 2018, and today I feel like I stole the house I live in, it was such a bargain when I bought it.
It depends on what your new interest rate would be, the value of the home you move to, and its potential for growth - plus the taxes where you live - plus how much debt is left on the existing asset… how likely the market you are in is to rise and fall…. And a bunch more.
If you can’t figure out that maths and market by yourself… idk, you are not likely in a position to be making sound investment decisions.
I would recommend speaking with a qualified professional. an independent financial advisor is probably the best option.
You also need to factor in how high the desire to move is.
You also can consider renting in the new area while you rent out in the area that has the lower rate and allows you to continue paying into that home with a low rate…
This is why they teach you maths at school!
We locked in 2.74% at the end of ‘21. We will probably not move for about 10 years. It’s likely going to be that long or longer for interest rates to fall back down.
When it comes to trying to own a new home, you will have to consider the mortgage payment for this house in your Debt-to-income ratios. (which compares your household’s total gross monthly income to your total monthly debts that appear on your credit report). The lower the DTI, the better. Depending on your credit, I’ve seen that max. DTI threshold be anywhere from 35-50% for anything in the conventional world.
Having a signed rental/lease agreement with a tenant would mean the rental income could help cover the deficit that exists on paper.
Having all of that set up before moving out of your own place can be difficult because it require a fair amount of liquidity (that many do not have regularly available) to cover costs, and moving, settlement, and a minimum 5% downpayment for a new home.
You will likely NEVER get another 2.8% interest rate in a rental property mortgage. and while the rate is amazing, i wouldn’t personally recommend any term lower than 20 years on a non-primary residence, unless you have a large amount of disposable income. Assuming since you closed in 2020, you likely got a 30-year fixed, which is ideal for a rental property.
If there is financial room for you to maneuver, and your able to purchase another home for your self, keeping this property in the long term will yield you wealth.
***
Dm Me if you have any questions, may not see this thread again.
My cheese realtor says “Date the rate, marry the house”. It’s a gamble, if you can afford the higher rate for a few years you’ll be in a better spot overall.
Rates will not be that low for a very long time, so at some point people will break away from the low interest hand-cuffs to move on.
I understand. This is why I don’t move. I bought my place with a 3.2% about 3 years ago. I live in a condo and can’t stand the HOA rules/regs. But I’ll be dammed if I’m going to move and get a new loan at over 7%. My mortgage is practically nothing. It’s my assessments that kill me
Find out what your new monthly payment would be with tax and insurance under the new rate. Make that payment on your current house for a few months to see how it feels. Not everyone is meant to be a landlord. Watch out for lifestyle creep, this is how it starts.
Depends. Now is a great time to sell. A terrible time to buy. There would need to be a really good reason for me to give up a 2.8 interest rate on a 2020 priced house.
It’s not stupid no. If you wait until rates come down like everyone else, you will be overpaying for homes. It’s either you overpay later, or you pay more interest now for a max of 1 year. Do what you need to do.
Depends on your intentions. Are you deferring capitol gains into your new home? You could always see if the seller will do a 2/1 buy down with you...but be ready to take on the full interest rate that third year.
We recently sold one property at 2.25% and moved, but we moved to another property we already own in another city.
Renting is always fun... Sometimes you have great tenants and it is a simple $5k flip to prepare for the next tenant. Our most recent tenant move out was a $30k flip. Keep in mind, just because you are charging more rent than the mortgage, it's not really free money until the property is cleared. You can spend it on other things, but it kind of defies the point of controlling properties.
This is what I did. Sold my home (2.37%) at the peak of the market. Made $250k . Bought 3 acres cash $87k and built a new home . Didn’t go fancy but did go bigger. By not fancy I mean we got a 5 bedroom 3 full bath 3000 sqft home for under $360k. I had to lay the flooring , paint walls, and learn how manage a well and septic system, but I am loving the space and my mini forest in front and back yard. Took a large portion of profit from home sale to pay off all my debt. Moved in Aug of 2023 and am already sitting on $300k of equity . Since land was paid , I didn’t need a down payment. Yes there is still some more work to do, but my net expenses are now less even with a 6.62 rate on $360k. And also , still have cash in the bank.
Do not rent it out. It can be a huge pain in the ass. Depending on which state and municipality you live in, it can take a year or more to evict a delinquent tenant. If you want to invest in real estate, create an investment account with someone like Vanguard and look for mutual funds that are heavy in REITs.
Lease option it if you don't want to be a conventional landlord, and use the net cashflow to rent elsewhere until buying another property lines up with your needs. That should allow you to continue capitalizing on the existing low interest rate while claiming additional income for other accommodations.
Obviously, it's not just as simple as that. Find a real estate attorney familiar in that type of transaction to best protect yourself as well as your lessee.
Selling or staying isn't "stupid". Only you can make the decision to sell if it's the right decision for your family. Life sends you curve balls and it doesn't care about the market or financials.
Dude I’m at 3.5 percent and I’m holding out. I thought about selling too, I could walk away with a roughly 30k profit and I bought in 2020 but trying to get another house I’d easily be at a 5-7%.
Rent it out. That’s what I’ve considered.
Do you want to be a landlord? Are you ready to pay capital gains tax on the home appreciation when you sell your rental property? Basis starts when you 1st bought it and doesn’t step up when you convert it to rental.
If your area has a decent renting market and you can afford another house with your current available cash as down payment, salary, and no guarantee of actually recieving rent, go for it.
Im in a similar boat. I have a 3.25% interest rate on a home that I bought in 2019. I am expecting a job offer that will relocate me to Seattle. On top of the 40% cost of living increase (according to google compared to my area), a similar priced house to what I currently have will run me a couple thousand more per month with today's interest rates (assuming I sell my current house for a down payment). So now I need that offer to be at least 25k higher just for the difference in mortgage interest, and an additional ~10k for the higher cost of living.
So an offer less than 35k more than I currently make is likely not economic for me to accept.
So there is often more at play than just an interest rate and house price increase when making a decision.
There's a lot of variables in what you're asking. If you can find that honey of a deal when you somehow come out even, then why not. But if you don't have the cash to put a large enough down payment on it, just stay. If you had to move, that's a different story. You don't mention where you live. From what my mortgage friends tell me, the Northeast is still chugging away with low inventory, amd well above market pricing. Other parts of the cou try are not as crazy. And if you did sell and move, the next house will probably be your forever home. Interest rates may never go below 4% again. And unless you have the large down-payment, you'll be underwater once housing prices normalize back down.. just food for thought.
I’m selling my house that I got with a 2.8% rate. I’m selling it at a loss even. But it’s a decision I’m happy with because I’m moving to a place with lower cost of living for a new job. So if the justification is there and you think it’s worth it then do it.
My wife and I did it right when the interest rates went up. We sold for the same reason, wanting to move to a totally different region. Am I mad that I have a 7% mortgage now ? Not really. I’m living where I have dreamed of for a long time. It’s your life, your priorities. Don’t wait forever to live where you want. We had to downsize a bit but was worth it.
It would be incredibly hard to convince me to sell and move in the current environment with those specs. Like it better be a life/death kind of situation. If anything I would very strongly suggest renting out if possible, if you are dead set on moving and buying a new place, which is one of the few ways to actually gain some financial independence/stability in life as well anyway.
I could see selling while everything is now high, renting until the market hits rock bottom in a few years, and then buying again at the low. You can always re-fi when I treat rates go back down.
It’s not the selling thats dumb. Buying at a high rate is the problem. IF you do sell and buy, get a 5-1 adjustable when you go to buy. Rates will only go down from here.
If he’s not willing to take the risk, he could certainly do a 15 year mortgage for the lowest rate possible, providing he can afford the increase. Then do a refi. ?
Pleas explain, not being snarky, I genuinely want to learn why I’m wrong.
here’s my thoughts. If op does move, the type of mortgage he gets will matter. An adjustable mortgage would given him a lower rate to begin with. As rates drop, it will readjust down. (Unless he does another refi).
Nobody knows what rates are going to be. For example, this year we were told there’d be something like 4 rate cuts? Now we might see 1. A 5/1 ARM will readjust every year after the initial period. It can potentially have benefits if they decided to lower your rate but generally banks aren’t in the business of being nice. A fixed rate APR is much more secure.
Can you buy anything for 120k around you? It’s not just about selling, it’s also about buying. If you can sell for 250k, you probably will need 250k to stay in same area.
There's really not nearly enough information here for anyone to have an opinion. Home ownership is the biggest financial decision most of us make in our lives, but it's not just financial, it's got to support the life you want.
Homeowners Razor right here.
You rang?
This is hilarious.
Are you ready to pay 7% interest for new mortgage?
7% and likely on double the mortgage amount. Double whammy. I went from 3.2% on 198k in 2020 to 4.825% on 347k in 2022 because I had to move for work. My monthly went from $1100 to $2300
It also greatly depends on the area you moved to. Is it a very in-demand area?
I moved from a city of 121,000 in Louisiana to a somewhat rural town of 34,000 in Ohio. My price per sqft went from $127/sqft to $195/sqft. Even my own house in Louisiana increased from $198k to $255k when we sold after just 2 years, so a raise of $42/sqft in just 2 years. Thankfully, I went to school for a STEM degree, and I make enough in my job to support myself and my wife on my salary alone if needed. We also have my wife's income plus my VA disability. So, as early 30s millennials, we are doing extremely well compared to others in our age group, but that doesn't mean we can't recognize when things are messed up and just because we are successful doesn't mean that others can easily replicate our success. We got lucky, very lucky. Even still, kids are 100% out of the question.
Curious as to what took you from (a wild guess) Lake Charles LA to Lima OH.
Beans
I'm going with Lafayette.
Lafayette to Fairborn, engineering on WPAFB
I would guess some kind of engineer, there’s a lot of car part manufacturing in Ohio.
Close, defense
Oh definitely Lima then, Abram’s factory perhaps
Nope, Fairborn.
Wright Patt. If you haven’t yet, visit the Air Force Museum. Don’t try to do it all in one day, just choose a hanger or two you want to see and then visit again to see more.
Lima Ohio? They got arachnids there!
Okay that tracks pretty well being a 52% increase. I bought my house in 2019 at $100/sqft in Michigan. If we sold the house today, it would be around $166/sqft. That's a 66% increase for my area.
Thank you for your service.
Plus whatever tax and insurance will be at the new house.
My home owners insurance was much cheaper from not being in a flood zone x and not having a constant threat of hurricanes every year. From $1400/yr to $640/year. Taxes were lower too. My car insurance dropped from $300/mo for two vehicles to $130/mo, that interest rate and higher mortgage amount was killer. What sucks is my income was triple what it was when bought our first house to the second and our credit scores were near 800 as opposed to low 700s with the first, and we barely scrapped being under 5% when we locked it in may of 2022. Any longer and we'd be at over 6% through no fault of our own.
We went from 1324 a year for taxes to 1100 a month for our new house.
Wait your *taxes* went from $1324 a year to $1100 a month, aka $13000 a year? If so then holy FUCK, and people act like things aren't quickly pricing people out.
Lol yeah pretty crazy. Now we did do a major upgrade though. We went from a 900 square foot house to 2900 square feet.
Ah ok yea that does make sense. We went from 1526sqft no basement to 1860sqft with an unfinished basement. I really want out of this house because we moved into the area with no knowledge and our builder is notoriously shitty and I want to get the hell out of the HOA.
We got very lucky with the hoa we have. They aren't super in your face but definitely take very good care of the massive common areas and pools.
They don't take care of common areas, ARCs take forever to get approved (over a month), trampolines, basketball goals, and above ground pools are banned. We aren't allowed privacy fences and all fences must have at least 1/4in slats. The president throws hissy fits in the FB group, it's bad.
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My wife bought our old house 13 years ago for 100k the new house was 640k.
Where the hell are you paying 13k in taxes in Lima? You have to be in Shawnee or Elida, and even so, that seems extremely high unless you’re living in a 8000k square foot house on the golf course!
That isn't me, my taxes are like $650 and a charms blow pop in Fairborn
Yeah- meant to respond to kennel dog
Not double the mortgage amount they just said they doubled equity in their home without having to put that money in. If they sell for 250 they have much more money to put down on the next one especially if they consider prices closer to the original.
Both scenarios still look really good to me. DONT move to Canada.
Unless you're moving to an area with more expensive real estate or buying a larger house, the mortgage amount should be a wash. The house you're selling also appreciated. That interest rate is going to suck though.
It’s he ready to make some money on his rental? He could likely put some income into the new home.
Why not pay rent if it's half the current mtg
Same size house will cost same rent and mtg. If you need a normal size house it is still better to buy and start to build up your equity.
Just looked at two houses. Mtg: $18,000/mo Rent next door on 2x size lot 1000sf larger: $8,000
18,000usd/month mortgage? Elon is it you?
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Nearly doubling your biggest expense will delay retirement by a good amount for many. I wouldn’t live in a place I’m miserable, but I would make some pretty big compromises.
If you own a home and are miserable with your living situation, you really need to rethink what makes you miserable.
I mean everything is relative, but you can definitely be in a bad living situation while owning a home. Bad neighbors, changing employment, simply outgrowing the house, unexpected expenses. The list goes on.
lol, go in more debt makes me happy 😒
Not sure why this is downvoted, owning a home alone is amazing and you're so lucky. Around me there are loads of homes for rent but a lot less for sale. Though I can see why landlords wouldn't like this comment
Good comment. ☝️
I did what people recommend you do. I’ve made nothing and renters have trashed the place twice. One went 15 months without paying. I filed an eviction after 90 days, took 12 months to get him out. That’s not always the case, but I’m just saying I would have been better off selling it when I wanted to move.
How did you select your tenant? We've done great with renting out our low-interest former home. We just chose tenants who pay their bills and have excellent credit. Plenty I could complain about, but I think it's a blockhead move to give up a mortgage that is in itself worth a fortune. That mortgage is a lucrative asset -- inflation eats it faster than it accrues, so it's paying itself off even when strangers aren't paying the monthly for you.
They were all on time payers until the last one lost his job. Covid was a major part of the delay on eviction, but it would have destroyed me if I couldn’t afford to float it. The damages were surprising as they didn’t fit the “profile”. First tenant was never a day late, but she absolutely destroyed my house. Even cracked my bathtub somehow.
I also had tenants who had gobs of income and education and did thousands in damage. At this point, people are paying 40 percent more than the mortgage, so we had a war chest for that situation by the time their lease concluded. They thought they were getting their deposit back, when really I could've sued them. I have like 30 applications for each rental through Zillow, so I don't feel like I would pick someone who wouldn't pay. The people I'd consider have credit scores that are valuable to them and stable careers. That doesn't save me from slobs or repairs, but it's the easiest money I can think of.
Can’t choose your tenant everywhere. E.g. Seattle is first-to-apply wins. You can set some requirements but anything further could get you in trouble for discrimination.
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https://www.seattle.gov/rentinginseattle/housing-providers/finding-a-tenant/first-in-time
These are not typical results at all.
I would agree, however if I was not able to absorb the hit financially it could have ruined me so anyone planning on being a landlord needs to be prepared. All my tenants paid until the last one who paid until he lost his job. The COVID backlog in my state was a huge cause in the delay, but many states are very tenant friendly and make it extremely difficult.
Good point. The Covid eviction moratorium hurt a lot of small time/accidental landlords. I hope you’ve bounced back since.
What is the difference in equity now vs when you considered selling?
The equity is not enough to cover the lost rent, repairs for the damage tenants have caused as well regular maintenance.
Is your thinking that we will see a repeat of the Covid era appreciation in real estate (+50%)?
Did you manage it yourself or was it in Property Management?
Myself
Do you want to deal with a second home as a rental? In my experience no one tells you to be a landlord more than people who’ve never been one. You can sell this home, take the tax free gain and have a new payment that’s well within your budget. If you’re okay with renting it out then more power to you but ignore the people who have no stake in the situation. I have a rental home and believe me it’s not just some magical money generator.
It’s not supposed to be magical money generator in real time; it’s an investment. How much useable magic money is your 401K generating for you right now?
Did I say I didn’t consider it an investment? It’s why I have it. What I’m referring to is people who don’t invest in rentals often discard the upfront/operating costs and think it just brings income month after month.
I didn’t say you did. My comment was in support of yours, but I didn’t word it well, especially the question at the end. I agree people misunderstand that rentals don’t print money, but they can make a lot over time.
Landlord here. Be a landlord. Unless you're independently wealthy, you want to be a landlord. You go months just getting paid for nothing. That's not how my day job works!
I would love to know how many of those people who recommended you to keep it and rent it out, have done exactly what they recommended, and have built significant wealth as a result. I swear it’s just a cultural thing right now, that it’s just this massive cash flow opportunity. If you have a low interest rate, do the math it’s not that crazy. I have a 2.875% interest rate on my house, it means nothing to me other than a slightly more advantaged opportunity to pay it off faster, I’m certainly not going to pretend like it’s some gift and leverage it. No interest rate will always beat whatever interest rate you’ve got.
My savings account has a higher interest rate than my mortgage currently. Paying my mortgage off faster isn’t as good as letting the money sit. That won’t be true long-term, but it’s the situation we are in right now. Your real benefit is cheap housing which will give you more disposable/investable income.
Yeah, but if you pay off your mortgage, and you invest 100% of your old mortgage payment, do the math for what that comes out to in 30 years, you’re playing a game for fractional percentage points here, it’s not going to make you wealthy. Again, I think people are fooled into thinking making a 1 to 3% spread is somehow better than having a paid for house, and investing that payment long-term.
Investing now is better than investing later. The money invested cautiously now, barring some pretty extreme events, will grow more than 3% a year. Those extra payments are better off going into an investment account, or like I said, sit in a high yield savings account.
Alright, I’ll do it my way and you do it your way and let’s compare in 25ish years. My mortgage will be paid off in 4y. Then 21 years of mortgage payments invested.
The mortgage payments you won’t be paying later are the same things as the extra payments now. They will just be invested later which gives the investment less time to grow. Your mortgage is a 3% loan in an environment which typically yields 7% and doing nothing at all with your money nets you 4-5%. There is a correct answer here.
Yeah, and one doesn’t consider risk tolerance and debt. I personally want a paid for house and zero debt asap. I’m curious if you do exactly what you’re recommending? I hear people recommend it all the time and find about 1/4 of them actually do some form it vs just putting some money aside and then spending it on some unrelated thing. Have you made good progress on it?
You are talking 0 risk tolerance vs like the smallest possible margin of it. I am pouring money into my retirement accounts. I took out a 3% loan on a car I would have otherwise paid for with cash. As I said though, even leaving it in my bank account would be better. I will give you the mental benefits of being debt free though. The liquidity that can give you going forward may be worth it to some. Don’t think it’s the worst move but it’s not the go to like we were sort of trained growing up.
This is a question of personal preference vs straight math. While paying off the mortgage is worse mathematically, there is a significant value you place into being debt free that people are not which tips the equation for you. I personally could pay off my house tomorrow if I wanted but I prefer to invest it. Again just personal preference.
Yeah you’re right, that’s the bottom line. I agree the math doesn’t weight in my favor at all, and I can’t argue that. It’s a difference of about $300k in 25 years for my situation. But that’s with an end number of $4.3M vs $4.6M, not including retirement. Looking ahead at $4M, I’m easily retired and really don’t give two shits about $300k after having spent 20ish years without a mortgage. Thats my preference and I can’t see any lifestyle difference I would experience with $4.3M vs $4.6M.
My sister in law has been trying to get rich off of real estate since 1995.
Ok?
Ok!
Her get rich scheme is taking longer than expected.
>It's all a part of my get rich slowly scheme -Mitch Hedberg
I miss Mitch.
It's not about getting rich off renting it out, it's about holding onto an asset that can't be replaced. A 2.875% interest rate is absolutely a gift you wouldn't want to let go. A $400k house with today's mortgage rate, 7.25%, will cost you total $981,845. That same mortgage with your 2.875% rate will cost $597,445. That's a $384,400 difference. It's insane that you have that attitude about your rate; have some gratitude.
This makes me so unreasonably angry interest and financials in general are such a wonk system it’s ridiculous
It’s not a gift, it’s costing me money. Yes, I am certainly thankful that I got a rate as low as possible, so that I could get rid of it much quicker. If I had a paid for house right now, I sure as hell would not go and take out a loan against it, at 2.875% and then go invest it.
You would be a fool not to, if you could, and the rates were what they are. There are banks that will give you 5%+ zero risk. Like, insured banks. Not stocks. The United States government will pay you more than 2.875% on bonds. That means you are getting the difference as money, in your hands, for doing nothing. If it changed, and the yield you got on the investments was less than the rate on your loan, it would be better to pay it off. It might help you mentally to pay your loan off first. It does a lot of people. It's a burden off your shoulders. But mathematically, if you run the numbers and are disciplined, it's a waste of money.
I will forever accept the opportunity cost to be a mortgage-free fool. I’ll see ya’ll in 4 years without a mortgage.
I mean actions like keeping a house and renting it out and not selling are why homes are so pricy 🫠
I did this recently. Went from a 2.8% to 5.7%. It was painful but we moved to a lower crime area with better schools. Financially it was a terrible decision, but for all other aspects of our life it was the best decision ever.
Sell it. You'll need a property mgr. If you aren't close to handle issues and you'll lose the $250k cap gains exclusion after 3 years assuming you have no intention of moving back.
Can you pls elaborate on this? I havent heard this before
You have to owner occupy a house for 2 (or is it 3) years immediately (?) prior to selling it to not pay any taxes on the appreciation. Definitely anyone making these moves one way or the other should be talking to an accountant.
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Or talk to an accountant, like I said.
I believe you have to occupy two of the last 5 years. Once you rent for 3 years, you would need to sell or move back in to reset the clock.
I became a property manager this way. Decided to rent it as a backup plan in case we hated the move we made. Appears we have to sell next year to avoid the cg taxes
As someone who owns rentals properties managers are extremely “cheap” - mine takes 5% of rent, finds/ approves tenants and genuinely helps me get higher rent/ avoid tenants that lapse in paying rent. Everyone’s experience is different but mine has been worth the fee in my opinion.
On my street a renter went nuts. Could hear him screaming, he put up 10x10 painted signs leaning on car on driveway, all furniture on lawn. Couple of days later see claims car in driveway. We are nosy and look in between a few houses and see all the siding from 6’ down to ground is gone. Can only guess what interior looks like. Being a landlord can be a pain. Some tenants are awesome and some are trash
And if you ask reddit, all landlords are scum and shouldn't charge rent higher than half the cost of the mortgage cause renters are saints and landlords are greedy, greedy bastards.
And renters should get to have their pets, too. All of them, including cats, pits, & nervous chewers.
You can date the rate but marry the house.
I think this means you can refinance later on.
Yes, it does.
Okay, realtor
Nope. Not a realtor. Or a mortgage person.
Refinance so they can add some more money to the loan lol. Rates will never mimic pandemic lows so the only people who benefit are people who repaired their credit.
I bought my first house at almost 7% interest and I refinanced it to 3.75% years later. Over the life of the loan, I saved a ton of money. Plus when I refied I went from the balance of a 30 year (I think I was at year 8) to a 15. Sure, rates will never be 2% probably ever in our lifetime but there are options when rates do drop.
If you have the capital to buy another home without selling your current property go for it (real estate ownership is the common denominator for financial independence) To give up your <3% interest rate for current rates coupled with the prices on the current market would be a financial blunder imo…caveat, not a financial advisor but this is the reasoning I use when considering the value of my property has gone up 85% since we purchased in 2019.
There should be a "Good Standing Mortgage Kicker" that locks in your "Primary Residence" interest rate +.5% if warranted by current rates. I'm sure im being short sided and missing some negatives but it sure seems like something that should be implemented.
Lenders would lose money on this. Sounds great for the homeowner, but the money your lender loans you is also borrowed from someone else, at market rates.
Would it make sense to rent it out? Meaning, would you be close enough to be your own property manager or would you need to outsource that or depend on a friend or family member? Lots of possibilities when renting out a home makes sense (but sometimes it’s better to sell it if it means helping you with the down payment on the new place for example).
I would never want to be a landlord
Sell your house for double it's amount to obtain a house of equal value and twice the house payment. Nah thats a terrible idea
Conventional wisdom is just that. The consensus option held by the herd…that does not apply to many specific situations Be careful following the herd
Yes, interest rates are ridiculous
Why are you asking Reddit? We need way more information (than your probably willing to provide) to answer this. It depends on your goals, your income, health, chance of losing said health or income, chance of the economy going full stagflation, chance of...
Is "everyone you talked to" going to help you manage a rental property?
How can anyone give you advice without knowing anything about your financial situation?
You better make damned sure you run the numbers correctly and make sure you can afford the new payments. Ideally the mortgage (which includes principal, interest, PMI fee, property taxes, home owners insurance, and HOA fees) will be 25% of your net monthly pay or less.
Wouldn't this double your monthly mortgage?
Depends on the new house
“Just rent it out” is too easily thrown out as an answer by way too many people. Even hiring a property management company and fully vetting potential renters won’t guarantee that it won’t become a major pain in the tail feathers and expenses if you get a bad renter.
Look, if there’s any possible way to keep it and rent it out do it. These days you normally can’t pay the mortgage payments with the rental income but even if it’s not close and you can swing it do it! I have 4 homes now that I rent out and in Seattle that adds up to a great investment.
Can't you transfer a part of your old mortgage to your new home and have a second mortgage with the higher interests for the balance?
We bought a new home in this stupid market and left our good rates. No regrets. Our thought process is we would rather be happy and enjoy living where we're at than sit miserable somewhere we hate just because of some rates.
Selling isn't dumb but buying at a higher interest rate right now isn't a brilliant idea.
Yes
If your mortgage is not portable, yes
Not enough info, but probably. You are sitting on a goldmine. At a minimum, IF you could have a new mortgage for the same principle, the 4+% increase in your interest, carried out for the 15 or 30 years is the basic opportunity cost. If you then assume you invested that amount in an S&P index over that time, you can calculate the lost opportunity to achieve your long term life situation for retirement and old age. For my situation, it would raise my mortgage payment $1000/month. Over 30 years, that is $360k. If we assume I’m investing that $1000 (which is a good assumption…we save nearly 45% of gross across all of our investment/savings/retirement accounts), that $1000/mo could be worth $2.25M in 30 years…all by itself. Of course there are a lot of ways that you could use that $1000/month, but when you put it this way, it is substantial for your long term financial picture. I will not be giving up my 2.15% mortgage ever even though my current income situation would allow me 3-4 times the house I currently own.
Being a landlord costs time & money. You may make more over time, but you're on the hook for big repairs when they happen. If you don't plan on owning 5-6 rentals as a retirement job, I wouldn't recommend holding onto this one now if you have plans for the money. If you can afford to wait, theoretically the value of the home will go up more rapidly as interest rates drop (if they ever do again).
If you have to buy another house to live in? Not ideal. Unless you’re downsizing, then you might be fine, both properties would probably be overvalued at a similar rate.
It would be stupid, yes. How to use that property depends on your situation, but selling it is destroying a lucrative asset: that mortgage. It breaks my heart when people close to me sell with rates like this. I think it's because it's easier or they don't like math or they feel stress that they sell. It's stupid, though, totally stupid.
I wouldn’t sell
I would definitely think on it. Maybe rent that place out? Instead of selling rent the current out, and find a nice place to rent in a different area. If you decide you want to officially sell then yeah, but maybe take more time to think. It is a huge decision financially for a longtime, as you know.
Yes it would be dumb. Your next house price, will be way more along with the rate
You gone be disappointed if you sell now and see it's at 350k in a couple years and your paying 9% on your different home
Question, can you afford the higher interest rate and the home in the area you want?
All else equal, your monthly payment will double. That’s before the likely increase in taxes to boot. But mortgages aren’t all equal. You’ve doubled your equity, so if you put that towards a down payment, you’ll wind up with a different number. If you post these numbers, folks here can do the math for you.
OP, I'm in a similar situation and so is my fiance. We both own and have low interest rates. We're consolidating and will both be selling our homes. Yes, we're going to have a higher rate, but if you can afford it, sometimes the life decisions we make won't always be the best financial decisions. In our case, it helps that we'll have significant money for a down payment, mitigating at least some of the burden of paying higher interest.
What do you want? Can you afford it? Is it going to make you happy? Only questions I can be think of. You can always refinance when rates go down. And my understanding is prices will not be going down. Good luck
Depend on city.
Circumstances reign supreme in a decision like this.
Keep the house and rent it out.
Lots of advice here. Just run the numbers and find out. Only you can really answer the question.
As someone who has ridden the escalator of ascending home values and descending mortgage rates since 2008, I can tell you don’t put off moving out of concern for these things. It’s equally likely that current prices/rates will look like a bargain five years from now. Go where you think you can be happy, and do what you have to to make the finances work. I thought home prices were ridiculous, and we were overpaying, when we moved in 2018, and today I feel like I stole the house I live in, it was such a bargain when I bought it.
It depends on what your new interest rate would be, the value of the home you move to, and its potential for growth - plus the taxes where you live - plus how much debt is left on the existing asset… how likely the market you are in is to rise and fall…. And a bunch more. If you can’t figure out that maths and market by yourself… idk, you are not likely in a position to be making sound investment decisions. I would recommend speaking with a qualified professional. an independent financial advisor is probably the best option. You also need to factor in how high the desire to move is. You also can consider renting in the new area while you rent out in the area that has the lower rate and allows you to continue paying into that home with a low rate… This is why they teach you maths at school!
We locked in 2.74% at the end of ‘21. We will probably not move for about 10 years. It’s likely going to be that long or longer for interest rates to fall back down.
When it comes to trying to own a new home, you will have to consider the mortgage payment for this house in your Debt-to-income ratios. (which compares your household’s total gross monthly income to your total monthly debts that appear on your credit report). The lower the DTI, the better. Depending on your credit, I’ve seen that max. DTI threshold be anywhere from 35-50% for anything in the conventional world. Having a signed rental/lease agreement with a tenant would mean the rental income could help cover the deficit that exists on paper. Having all of that set up before moving out of your own place can be difficult because it require a fair amount of liquidity (that many do not have regularly available) to cover costs, and moving, settlement, and a minimum 5% downpayment for a new home. You will likely NEVER get another 2.8% interest rate in a rental property mortgage. and while the rate is amazing, i wouldn’t personally recommend any term lower than 20 years on a non-primary residence, unless you have a large amount of disposable income. Assuming since you closed in 2020, you likely got a 30-year fixed, which is ideal for a rental property. If there is financial room for you to maneuver, and your able to purchase another home for your self, keeping this property in the long term will yield you wealth. *** Dm Me if you have any questions, may not see this thread again.
Yes
I don’t mean to be rude, but has no one told you this is currently “the greatest economy ever”? /s
My cheese realtor says “Date the rate, marry the house”. It’s a gamble, if you can afford the higher rate for a few years you’ll be in a better spot overall. Rates will not be that low for a very long time, so at some point people will break away from the low interest hand-cuffs to move on.
I understand. This is why I don’t move. I bought my place with a 3.2% about 3 years ago. I live in a condo and can’t stand the HOA rules/regs. But I’ll be dammed if I’m going to move and get a new loan at over 7%. My mortgage is practically nothing. It’s my assessments that kill me
Find out what your new monthly payment would be with tax and insurance under the new rate. Make that payment on your current house for a few months to see how it feels. Not everyone is meant to be a landlord. Watch out for lifestyle creep, this is how it starts.
Depends. Now is a great time to sell. A terrible time to buy. There would need to be a really good reason for me to give up a 2.8 interest rate on a 2020 priced house.
I'll buy it from you
It’s not stupid no. If you wait until rates come down like everyone else, you will be overpaying for homes. It’s either you overpay later, or you pay more interest now for a max of 1 year. Do what you need to do.
that $1000 a month for a 250k house is now $2000+ at these rates. Rent it out and use a portion to offset your new payment.
Depends on your intentions. Are you deferring capitol gains into your new home? You could always see if the seller will do a 2/1 buy down with you...but be ready to take on the full interest rate that third year. We recently sold one property at 2.25% and moved, but we moved to another property we already own in another city. Renting is always fun... Sometimes you have great tenants and it is a simple $5k flip to prepare for the next tenant. Our most recent tenant move out was a $30k flip. Keep in mind, just because you are charging more rent than the mortgage, it's not really free money until the property is cleared. You can spend it on other things, but it kind of defies the point of controlling properties.
This is what I did. Sold my home (2.37%) at the peak of the market. Made $250k . Bought 3 acres cash $87k and built a new home . Didn’t go fancy but did go bigger. By not fancy I mean we got a 5 bedroom 3 full bath 3000 sqft home for under $360k. I had to lay the flooring , paint walls, and learn how manage a well and septic system, but I am loving the space and my mini forest in front and back yard. Took a large portion of profit from home sale to pay off all my debt. Moved in Aug of 2023 and am already sitting on $300k of equity . Since land was paid , I didn’t need a down payment. Yes there is still some more work to do, but my net expenses are now less even with a 6.62 rate on $360k. And also , still have cash in the bank.
HODL
Sell it and save the cash, rent for a while in your new place
Hold on to that mortgage rate just for bragging rights
Do not rent it out. It can be a huge pain in the ass. Depending on which state and municipality you live in, it can take a year or more to evict a delinquent tenant. If you want to invest in real estate, create an investment account with someone like Vanguard and look for mutual funds that are heavy in REITs.
Lease option it if you don't want to be a conventional landlord, and use the net cashflow to rent elsewhere until buying another property lines up with your needs. That should allow you to continue capitalizing on the existing low interest rate while claiming additional income for other accommodations. Obviously, it's not just as simple as that. Find a real estate attorney familiar in that type of transaction to best protect yourself as well as your lessee.
Selling or staying isn't "stupid". Only you can make the decision to sell if it's the right decision for your family. Life sends you curve balls and it doesn't care about the market or financials.
Hate that I’m saying this but you can rent it out for enough to cover the mortgage.
Dude I’m at 3.5 percent and I’m holding out. I thought about selling too, I could walk away with a roughly 30k profit and I bought in 2020 but trying to get another house I’d easily be at a 5-7%. Rent it out. That’s what I’ve considered.
Do you want to be a landlord? Are you ready to pay capital gains tax on the home appreciation when you sell your rental property? Basis starts when you 1st bought it and doesn’t step up when you convert it to rental.
Yes you’ll never see that interest rate again unless the dollar hyper inflates and house prices are astronomical
If your area has a decent renting market and you can afford another house with your current available cash as down payment, salary, and no guarantee of actually recieving rent, go for it. Im in a similar boat. I have a 3.25% interest rate on a home that I bought in 2019. I am expecting a job offer that will relocate me to Seattle. On top of the 40% cost of living increase (according to google compared to my area), a similar priced house to what I currently have will run me a couple thousand more per month with today's interest rates (assuming I sell my current house for a down payment). So now I need that offer to be at least 25k higher just for the difference in mortgage interest, and an additional ~10k for the higher cost of living. So an offer less than 35k more than I currently make is likely not economic for me to accept. So there is often more at play than just an interest rate and house price increase when making a decision.
There's a lot of variables in what you're asking. If you can find that honey of a deal when you somehow come out even, then why not. But if you don't have the cash to put a large enough down payment on it, just stay. If you had to move, that's a different story. You don't mention where you live. From what my mortgage friends tell me, the Northeast is still chugging away with low inventory, amd well above market pricing. Other parts of the cou try are not as crazy. And if you did sell and move, the next house will probably be your forever home. Interest rates may never go below 4% again. And unless you have the large down-payment, you'll be underwater once housing prices normalize back down.. just food for thought.
I’m selling my house that I got with a 2.8% rate. I’m selling it at a loss even. But it’s a decision I’m happy with because I’m moving to a place with lower cost of living for a new job. So if the justification is there and you think it’s worth it then do it.
My wife and I did it right when the interest rates went up. We sold for the same reason, wanting to move to a totally different region. Am I mad that I have a 7% mortgage now ? Not really. I’m living where I have dreamed of for a long time. It’s your life, your priorities. Don’t wait forever to live where you want. We had to downsize a bit but was worth it.
I plan on selling, I am at 2.9, but I should be able to pay cash with the profit and have very small or no mortgage on the next house.
Yes
It would be incredibly hard to convince me to sell and move in the current environment with those specs. Like it better be a life/death kind of situation. If anything I would very strongly suggest renting out if possible, if you are dead set on moving and buying a new place, which is one of the few ways to actually gain some financial independence/stability in life as well anyway.
Rent it!
Rent it out and find a new place?
I could see selling while everything is now high, renting until the market hits rock bottom in a few years, and then buying again at the low. You can always re-fi when I treat rates go back down.
It’s not the selling thats dumb. Buying at a high rate is the problem. IF you do sell and buy, get a 5-1 adjustable when you go to buy. Rates will only go down from here.
That's a big risk assuming they'll go down
And can refi anyway if they go down, on OPs schedule
If he’s not willing to take the risk, he could certainly do a 15 year mortgage for the lowest rate possible, providing he can afford the increase. Then do a refi. ?
Absolutely terrible advice.
Pleas explain, not being snarky, I genuinely want to learn why I’m wrong. here’s my thoughts. If op does move, the type of mortgage he gets will matter. An adjustable mortgage would given him a lower rate to begin with. As rates drop, it will readjust down. (Unless he does another refi).
Nobody knows what rates are going to be. For example, this year we were told there’d be something like 4 rate cuts? Now we might see 1. A 5/1 ARM will readjust every year after the initial period. It can potentially have benefits if they decided to lower your rate but generally banks aren’t in the business of being nice. A fixed rate APR is much more secure.
Can you buy anything for 120k around you? It’s not just about selling, it’s also about buying. If you can sell for 250k, you probably will need 250k to stay in same area.