Should I Sell My House If I Have a 3% Mortgage?

If you own a home in Santa Clarita, Valencia, Saugus, Stevenson Ranch, Newhall or Canyon Country, you may be asking:

“Should I sell my house and buy a bigger home if I have a 3% mortgage?”

It's one of the biggest concerns I hear from homeowners who want to move up.

A 2%, 3% or 4% mortgage rate is incredibly valuable, but that doesn't necessarily mean staying in your current home is always the best financial decision.

Sometimes you need to look beyond the mortgage rate and ask:

What is my total cost of staying versus moving?

When Does It Make Sense to Give Up a Low Mortgage Rate?

Here's a simple example.

A family earning approximately $300,000 per year owns a home worth about $1.1 million with approximately $520,000 remaining on their mortgage at around 3%.

They want to buy a larger home around $1.3 million, but they're afraid to give up their low mortgage rate.

However, they also have:

• $70,000 in credit card debt, some at 18%–25% interest

• $80,000 in auto loans

• $1,900/month in car payments

• $1,400/month in credit card payments

That's approximately $3,300 every month in consumer debt payments.

Suddenly, protecting the 3% mortgage isn't the only financial consideration.

Could Your Home Equity Help You Move Up?

If they sell their current home for approximately $1.1 million, they could potentially net around $520,000 after paying off their mortgage and estimated selling expenses.

That equity could allow them to:

Pay off $70,000 in high-interest credit cards.
Pay off $80,000 in auto loans.
Eliminate approximately $3,300 in monthly debt payments.
Still have approximately $370,000 available.

That's why homeowners considering a move should look at their home equity, debt and total monthly expenses—not just their mortgage rate.

Can I Afford to Buy a Bigger House?

Their current monthly obligations are approximately:

Mortgage, taxes & insurance: $3,700
Car payments: $1,900
Credit cards: $1,400

Total: approximately $7,000 per month.

A $1.3 million replacement home with approximately $300,000 down could have an estimated total housing payment around $8,000–$8,500 per month, depending on the mortgage rate, loan program, property taxes and insurance.

Yes, that's more.

But they could also be moving into the larger home their family needs while potentially eliminating $150,000 in consumer debt.

That's a very different comparison than simply asking:

“Why would I give up my 3% mortgage?”

Is My Low Mortgage Rate Keeping Me From Moving?

Maybe.

If your current home still works for your family, keeping your low mortgage rate may be an excellent decision.

But if you've outgrown your home, need more bedrooms, want a larger yard, need a home office, want to move to a different neighborhood or simply need a house that better fits your life, don't let the mortgage rate make the entire decision for you.

Your low mortgage rate can sometimes become “golden handcuffs”—financially attractive, but keeping you in a home that no longer meets your needs.

Instead, look at:

Your home equity. Your current debt. Your total monthly expenses. Your purchasing power. Your long-term goals. And the lifestyle you want for your family.

There may also be tax considerations when moving to a more expensive home, which should always be reviewed with your CPA or tax professional.

And while nobody can predict future mortgage rates, refinancing may become an option if rates decline. I would never recommend buying a home today based solely on the expectation that you'll refinance later.

Thinking About Selling and Buying a Bigger Home in Santa Clarita?

Before deciding that you can't afford to move because you have a 3% mortgage, let's run the numbers.

I can help you estimate:

What your Santa Clarita home is worth today, how much equity you may have, what you could potentially net from selling, and what buying your next home could actually look like.

Sometimes staying is absolutely the right answer.

Sometimes moving is.

The important thing is to make that decision based on the entire financial picture—not one interest rate.

Thinking about moving up in Santa Clarita? Contact me and let's find out what your options really are.