Is anyone selling their house with 2% mortgage to move to a better house?

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Starbase
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Is anyone selling their house with 2% mortgage to move to a better house?

Post by Starbase »

My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
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snackdog
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by snackdog »

Depending on the specifics of the homes, your property tax and insurance costs could also skyrocket such that $7000/mo is really $8000/mo or more. But if you can afford it and it would make the spouse happy, you may eventually get forced into it, as we all know from experience.
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mmw6
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by mmw6 »

I'm at 3% and holding tight where I am.
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arcticpineapplecorp.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by arcticpineapplecorp. »

Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
this is one reason why there is less availability of housing. Who would sell their house with a 2.35% mortgage to buy a house with a 6.5%-7% mortgage? I get that if you want a different size house, or different location or forced move (job relocation), etc. you don't have a choice. But if you're happy with your home why move?

she wants a bigger house. Do you need one or is she trying to keep up with the Joneses?

You say for $5000 we can go on vacations every weekend but:
1. does she want to go on vacations or does she want a bigger house (she may not be able to have both. Which is the greater want?)
2. would you actually use that $5000/month for more vacations? It's one thing to say it, but if she doesn't believe it then she wants the bigger house because she maybe can't really count on a vacation every weekend?

You say my partner wants "me" to sell "my" house...
Then you say "Our" payment would go....

So is it your house alone or both your house? Whose is it?

If it's yours, does she have a right to tell you what to do with your house?
Is she contributing to this new house you both will live in, or are you contributing alone?

If you are having a hard time convincing her is it her difficulty understanding the math, or just not caring and wanting the bigger home?

if you can't convince her, perhaps the two of you simply have different values, in which case this might be a relationship rather than a financial issue, and relationship issues are verbotten on der bogleheads.

you say "my partner" but that means you work together, not against each other.
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LFKB
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by LFKB »

I’m at 1.625% and I can’t imagine selling until I am a year or less away from my rate change
snowday2022
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by snowday2022 »

Post more details of your finances. For some people, 5000/mo is not material, for others it will bankrupt them in a recession.

May be more cost effective to renovate your current house or do an addition, buy nicer furniture etc, assuming the neighborhood and location are tolerable to spouse.
Alan S.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Alan S. »

This very factor has slowed home sales in the last several months and complicated job transfers. And now HO insurance availability has added to this problem in certain areas of the country with catastrophe exposure. The latter problem will be more long lasting than the high interest rates.

Her next point will probably be that you could accept the higher rates for a while and then re finance when the rates come down. :wink:
ajg189
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by ajg189 »

I’ve considered this hypothetical situation many times. Being locked in at a sub 3% rate makes it impossible for me to justify giving that up unless we really needed more space or to relocate, neither of which are necessary at the moment.
Firemenot
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Firemenot »

That’s crazy talk. I’ll never give up my 2.6% mortgage.

Can you do a modest addition to address whatever perceived shortcomings are an issue?
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by mrspock »

Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
Need way more context to answer this. You are going from how many sqft to what? Same neighborhood, or are schools a factor? What is your household income? Expenses ? What is the state of your retirement savings? Whats the kids situation?

In general finances are always a factor with houses, but if you are living in a small 1k sqft place with a growing family, the interest rate is a secondary consideration. You need to live your life. What good is the extra money if you are living in a house which isn’t suitable for your life?
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by ranger3 »

We have a 2.25% mortgage. We won’t ever pay extra on the principal, however if the right house came along we would not hesitate to purchase a new one. I’d rather make a decision that would make me happiest rather than one that is most perfectly financially optimal, within reason. Depending on the rental market in our area at that hypothetical time, we might keep our current home and rent it out (despite not wanting to be landlords) because the payment is just so low on this mortgage. Is that an option for you?
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by CletusCaddy »

1.5% adjustable rate here.

Absolutely not moving.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by HootingSloth »

We had paid off our first home but decided to move to be closer to our relatives. In our case, it was obviously the right decision for our family, and it would have been silly to let interest rates dictate what kind of life we choose to live.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by runswithscissors »

We would much rather have a better home than go on a vacation every weekend. But I completely understand why some people would rather live in an inexpensive/less ideal home and spend more time away from it by traveling.

We will be facing a similar dilemma where we will likely be moving into a new home in the next couple years. We're hoping rates will be lower when we make that future move but nobody knows. Regardless, we will be making the move and losing our 2.75% mortgage.
PNWpilot
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by PNWpilot »

Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
With that interest rate, I’d get a new partner before I got a new mortgage.
KlangFool
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by KlangFool »

OP,

It is very simple.

Get her to pay for the difference. Money talks. It is easy to spend someone's else money.....

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bombcar
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by bombcar »

If you could afford the 5000 a month you could afford to pay down your mortgage quite quickly and that might make you an a different position where if you own the house out right would you upgrade to a new bigger one at a mortgage of 7%?

Another way to get a feel for it is to start bringing $3000 in cash probably 20s or hundreds and just start leaving and lying around every single month.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Ron Ronnerson »

If I were to buy an identical house right next to the one I’m living in, my annual property taxes would go up from $10k to $20k, I’d owe almost six figures in capital gains taxes, I’d owe roughly $100k in transaction costs, and my mortgage payments would go up by more than $1k/month (assuming I got a mortgage for the same amount as the remaining balance on my current home). Additionally, most of the mortgage payment currently goes toward principal due to the 2.37% rate (30-year term) but that would change and the vast majority would start going toward interest instead at current rates.

I’m a public school teacher and my spouse is a stay-at-home parent. We couldn’t afford to move even if we wanted to. We like our home just fine but we’re essentially trapped in it. The mortgage rate is perhaps the least of the reasons we’re trapped.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by dukeblue219 »

I'm glad we picked out a great home before we had kids, because we're not going anywhere now. If we moved and gave up the 26 years left at 2.875% for a 7% rate we'd be paying more in interest alone than we pay for PITI combined.

It's crazy that these rates haven't completely tanked the housing market.
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bd7
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by bd7 »

Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house
Let's stop right there. Why? Is this a personal issue where she wants to have an "our" house and not feel like an insecure guest living in "your" house? Or is your house a smallish dump in a high crime area with bad schools? Unless there is some substantial reason--reducing a commute, better area, etc--then it would seem to be a very poor financial decision.
BirdFood
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by BirdFood »

I’m wondering what the complaint is about the current house? Any way to remodel it away for less cost?

We’ve always lived in a “starter” sized home, but changed it to our taste. We finally do want a little more space, but the plan is to add an addition for cash.
texasdiver
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by texasdiver »

We are in the opposite position.

We are empty nesters in a too-large house at 2.6% that we bought 10 years ago before the run-up.

Downsizing would cost us more than staying put. So it's a no-brainer. And we continue to live in a house in which all 3 college and adult girls still have their childhood bedrooms sitting empty and we still have 2 additional guest rooms on top of that. About the only time the house is full is Christmas and Thanksgiving.

Feels extravagant and wasteful sometimes. But I'm not going to go through the enormous headache of moving in order to pay more for less.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by thefireguy »

I recognize everyone’s situation is different but we bought and sold in 2021 and current home is at 2.875%. I’ve wanted to get into more real estate, mostly long term rentals for a while…so we are going to hold this home and buy in the next 12 months. For me, it’s another form of income and appreciation over the long term and getting the first rental on the game board; the low rate has made this home a big asset in not willing to lose.

Monthly living cost will likely go from about $2500 to $5000 and we will get *most* of what we want. First world problems. But it’s all good and we will enjoy it. :sharebeer
RJC
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by RJC »

We did this last year. Moved from a 2700 sq ft townhome with a 1.875% 15-year to a 4000 sq ft single family with a 5.875% 7-year ARM.

No regrets whatsoever.
investingdad
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by investingdad »

We refi’d into a 15 year fixed at 1.875% during the Covid lockdown. No way we’d pay off early or sell. Every situation is different but I’d think twice.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by YeahBuddy »

No, I have not. We are never selling.

Some questions for you.
1.) Can you easily afford it?
2.) Why does spouse *want* this new big house?
3.) This one is none of our business, maybe more a rhetorical question - are there other issues in the relationship? are there many demands, unhappiness or is this just how spouse is? I wouldn't want to get stuck in a huge financial situation if things go sour.
4.) Will it be worth it?


My spouse looks at bigger houses as headaches because more maintenance, more to clean, or complicate it by hiring cleaners, etc. We both despise moving. And we are grounded here with kids in school, all their friends, etc. But we do know others that have moved up to bigger and significantly more expensive houses within the area and they and their kids have done just fine. We're just not the type to upgrade just to upgrade. Hope this helps!
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crg11
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by crg11 »

$5000/month can quickly add up to a nice little addition and/or remodel of your existing house to meet whatever your partner thinks is the deficiency of the current house.

I think that is potentially dangerous move to jump that high in a mortgage, both monthly cost wise and interest rate wise. (Edit) Especially given your recent post history of needing advice around $$$ for your ex.

My advice: get your financial and personal situations in order / stable before making rash and potentially long term dangerous financial decisions.
Last edited by crg11 on Mon Jul 08, 2024 8:35 am, edited 1 time in total.
flyfishers83
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by flyfishers83 »

We went through similar analysis last year. We just finished a major remodel, but before starting we looked at every reasonable house for sale in our small town. Our low interest rate was a major factor in not moving and going forward with the remodel.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Watty »

Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
That would be even worse than it sounds because you might be going from having about 20-25 years left on the loan to extending the loan and starting over at 30 years.
beardsicles
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by beardsicles »

Nope, absolutely not. Then again, we bought a house that suits our needs and I don't see that changing.
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tuningfork
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by tuningfork »

I think it's important to understand *why* she wants to move to a better house. What does *better* mean? Larger? More rooms for hobbies, office, kids? Bigger kitchen? Bigger yard? Quieter neighborhood? Better schools? Closer to shopping? Faster Internet availability? Hates the current neighbors?

I recently went from a paid off house to a $5000 mortgage. I can afford it and it was well worth it because the new house and location are better for me in some important ways than the old house. As I'm aging, I need fewer stairs and less yard to maintain, and I wanted to live closer to amenities than my previous house out in the sticks. Those items and a few others had reached critical importance to me so it was time to move, no matter the cost.

Does your partner have specific things that can't be accommodated at the current house where a change would greatly improve her and your quality of life?
fasteddie911
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by fasteddie911 »

Depends how much better. We've entertained the idea. Lots of assumptions being made here.
CoAndy
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by CoAndy »

Would this "partner" be your wife??
rockstar
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by rockstar »

Nope. I am able to live in a much better home staying put. And I can save more.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by hoofaman »

Even if you don't have a mortgage, the transaction cost of buying a house and selling your existing house is substantial, not to mention other costs like moving/remodeling/etc

We moved to a more expensive house 10 years ago, but the primary reasons we did that were: school district, much better(safer) neighborhood, walkable/access to nature, space for dedicated home offices

For us those reasons were worth the cost and effort of moving
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by cowbman »

PNWpilot wrote: Sun Jul 07, 2024 9:37 pm
Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
With that interest rate, I’d get a new partner before I got a new mortgage.
:D but divorce could cost more.
cowbman
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by cowbman »

Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
No, this forbidden, this is why younger folks can't have homes. Older people who may want to downsize, move, etc. are not "allowed" to give up their low rates.
rockstar
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by rockstar »

cowbman wrote: Mon Jul 08, 2024 1:56 pm
Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
No, this forbidden, this is why younger folks can't have homes. Older people who may want to downsize, move, etc. are not "allowed" to give up their low rates.
Young folks can’t have homes because builders didn’t build enough. And PE firms went nuts buying them up. Now, add to this that I’m seeing subdivisions of homes go up that are rental only. It’s a mess.
Silverado
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Silverado »

We move when we (really my spouse) get an advancement opportunity from our megacorp. As such, we have happily and aggressively paid off the last several mortgages. The last one was at 2%. It wasn’t going to be around for the full term anyway given our last 25 years of history.

Not really sure how much of an anchor a mortgage would be with a 4-5% increase on a large balance. I think it would be pretty heavy, but not sure.
Stoic9
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Stoic9 »

Starting 8th year of retirement and this is our 3rd residence. Bought in 2020 under 3%. Retired military, if we make it here one more year it will set a record for us (longest in one house) in 40+ years of marriage. Our first house was 14 and 7/8%. No real reason to move, yet that she's mentioned, (although I'd move to Portugal or Italy tomorrow, she would not). Of course we travel outside the US 6 months of the year so that helps.
Ron Ronnerson
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Ron Ronnerson »

Silverado wrote: Mon Jul 08, 2024 2:17 pm
Not really sure how much of an anchor a mortgage would be with a 4-5% increase on a large balance. I think it would be pretty heavy, but not sure.
On a 30 year mortgage, the payment is close to double at a 7% rate compared to a 2% rate (this is not very precise but gives a basic idea). So, for a large loan, that would mean several thousand extra dollars would need to be paid each month.

It gets worse, though. The higher the interest rate, the lower the proportion of the payment that goes toward principal from the very first payment that’s due. So one accumulates equity a lot more slowly as well at higher rates. That’s the bad news.

The good news is that we’re at about the historical average these days as far as mortgage rates are concerned, meaning it could be a lot worse. Rates were close to 20% in the early 80s. They could be even higher at some point in the future. Given a long enough time horizon, I bet they will be. Records are made to be broken.
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Nicolas »

I’m at 0% (no mortgage) for the last 21 years and I have no qualms about moving up — in fact I just did. :D
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by rogue_economist »

No, and that is the problem with the housing market that has it frozen solid.
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Gecko10x
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Gecko10x »

We did last year. Gave up our 2.75% mortgage and acquired a new one at 6% (triple the size too). The new payments eat up our budget, but we don't regret it at all and hopefully we'll be able to refi to a lower rate in the next couple of years.
Billionaire
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by Billionaire »

What assurances do you have that your partner will not jump ship after closing on the new more expensive home? Hopefully my question doesn't head into "warning" territory to avoid interpersonal situations, but that was the first thing that came to my mind.
rockstar
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by rockstar »

cowbman wrote: Mon Jul 08, 2024 1:54 pm
PNWpilot wrote: Sun Jul 07, 2024 9:37 pm
Starbase wrote: Sun Jul 07, 2024 8:34 pm My partner wants me to sell my house where I have a 2.35% loan to buy a new bigger house with a 6.5-7%. Our payment would go from $2000/month to $7000/month.
I keep telling her that for that $5000/month we can go on vacations every weekend, but she is a hard one to convince. Has anyone here abandoned their 2% mortgage for a better house?
With that interest rate, I’d get a new partner before I got a new mortgage.
:D but divorce could cost more.
Should save money and hire a nanny to move this along :)
CoffeeTime
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by CoffeeTime »

I'm considering this. We had to change jobs some years ago and are now working across the city so the commute is dreadful. Our jobs are now about as stable as you can get so I'm not anticipating getting uprooted by employment any time soon. Additionally, our current house and area was what we could afford ~10 years ago. We've come a long ways since then, but the neighborhood definitely hasn't and I wouldn't miss it one bit. Remodeling the house can't fix those problems.
JBTX
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by JBTX »

We are at 2.35 with about $200k remaining on $500k house. Never say never but I’d have a hard time paying a 6-7% mortgage.
texas lawdog
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by texas lawdog »

You need to think about what your target rate should be in the context of your overall financial strategy.

How long are you willing to wait out interest rate decreases to get the rate you want? Also realize that everyone else will be doing the same.
Perhaps rationalize that mortgage rates are somewhat "normal" now looking back over 30 years and they may never return back to the low rates we experienced.

Life is short and I wouldn't let a somewhat elevated rate keep me from moving forward unless it jeopardized your financial strategy.
eg1
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Re: Is anyone selling their house with 2% mortgage to move to a better house?

Post by eg1 »

We have a 2.75% 30 year mortgage and the only way I am moving is if I am buying a cheaper house where our current equity would pays for most of the purchase price of the new house. I would love a bigger house but no way with how much more it would cost.

I would not sell or move if I was in your shoes.
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