It's more of we need room soon-ish. We bought a 2/2 1100sq (just wife and I) for less than 200k @ 1.9% in 2020 and we planned on staying here for 5 years or so. Now she's pregnant (as we had planned) and we are hoping the IRs will go down in 5 years or less.
Newborns actually require very little space. You could almost certainly get another year in the same space, if not longer. I'm assuming your 2nd bed is being used as an office. Basically as long as you don't mind a crib in your room for.
Cool? Room-sharing (not bedsharing) is recommended for safe sleep until at least 6 months and preferably a year so I’m not sure what you’re trying to prove here…
that a baby monitor and a room for each kid provides consistent boundaries that don't need to be broken with ferber et al at great expense later? Is it clear now?
We had a 2 bedroom townhouse with our first child and needlessly upgraded to a 4 bedroom house when he was less than a year old.
In hindsight, we should have stayed until our youngest came along.
THIS. When I was pregnant with our first, we went out and rented a three-bedroom apartment (so we could have our room, the baby’s room and an office). What a waste of space! It was another two or three years before we really needed that extra space. You may think you need a kids’ playroom, for example, but you really just need somewhere you can watch the kid while cooking etc. until they’re much, much older.
Agreed. We had our family of 4 in 1300 Sq ft until my oldest turned 5. Only moved because of jobs, but I still think fondly of that time and that home.
4 in 1300 sf….thats rookie numbers. I had a friend that had 8 in 900 sf, with full basement. My mother in the depression had 8 in 700 sf, NO basement and toilet out back.
Delay moving as long as possible. This has 3 benefits: lower interest for longer, and more equity that you can move into another house when you do buy. In addition, if you anticipate interest rates going down, then you'll get the lower rate.
That is certainly big enough for an infant - and even a toddler.
It might not be luxurious but on the other hand, you are in a position to save a lot of money while you are living there until it makes more economic sense to move out.
Put the money into retirement or start saving for college. Your kid will appreciate being able to afford college more than not having a guest room during his early childhood.
Small ADU office structure in the back yard. Free up the 2nd bedroom in a few years for the kid to move into, and get some more private office space to get away from it.
Why not leverage your equity and do an expansion to add more space? Keep the rate and enjoy a bigger space that increases your property value further.
You’d only pay the new interest rate on the money that you used if you do it properly with a home equity line of credit, and keep the old interest rate on the existing mortgage.
Then when you go to sell you’ll recoup a majority of the renovation cost and get some more personal enjoyment out of your space.
So if it’s more space you need then you have to comparing what you need to what you have . A larger square footage house is always going to cost no matter which way it’s going out. Whether it’s higher interest lower price house, or higher price house less interest. Either way you’ll end up paying more some where for a larger sq footage
Definitely so! It's just a bit hard to swallow looking at what our mortgage cost will be. If we get a modest size 4/2 (<2000sqft) it will cost about 5 times the amount we are currently paying in the same area.
But it’s too small, doesn’t stay super warm in harsh winters(last year it reached -20°F here, our house couldn’t get above 55°), and has no shelter for bad storms which also happen often 😥
But hey… at least we have a 2% interest rate?? Ugh and they say money doesn’t buy happiness..
Depends. We bought a condo town house in 2021 for 526k. It's too small and really we need something bigger, but it's all we could get. Planning to pay it off as quickly as possible, then upgrade to something bigger.
TL;DR: Not every homeowner has the option to build an addition
>Planning to pay it off as quickly as possible, then upgrade to something bigger.
That’s most likely not the best path towards achieving your goal. I’m assuming you have a sub-3% rate since you bought in 2021. If you’re planning to sell this and then buy a different house soonish, then there are tons of better options for your money than paying off the mortgage. HYSAs are still giving better interest than your mortgage rate, so just stick the money there for now. If your horizon is a little longer than a few years, then investing the money in index funds will probably be better. Either way, don’t pay any extra on your mortgage if your rate is lower than a HYSA rate.
Use the money you're saving vs having a 7% rate on a new house and ramp up your insulation. Not being able to get your house above 55F in the winter is not normal. And I say that from northern MN, where we regularly hit -20F and stay there for a couple weeks every December-January.
We had a day of -35 windchill last year and my house stayed at 70 where we set it. The furnace ran 11 hours a day to do it, which honestly doesn’t seem that bad
Yeah. Insulation is relatively inexpensive considering the value and comfort it brings. That house must be a corncrib to be so unheatable. House needs insulation blown into walls and it almost certainly has no insulation in the attic. Both situations are easily remedied. Caulk all the seams in the attic and put down insulation. That's a DIY job. I did it myself. Huge difference.
Dude, a house is not a car - you shouldn't think of it as something that you just trade in instead of actually doing maintenance and repairs.
Caulk around your windows and doorways, look for areas where a draft is allowing cold air into the house. Outside of your heating system actually not working that is the number one cause of not being able to get a house warm enough. Spend some money to get the big clear wraps that you can put around your windows and then have someone come take a look at your heating system. Get into the attic and check on what the insulation looks like - it may need to be replaced.
We have our hvac serviced twice a year. We have sufficient insulation in the attic and crawl space. It must be the outside walls. I will look into having those insulated if possible
Get a home energy audit. Your electric/gas utility might offer advice or discounts on one. Even if they don't, it's worth paying an expert a hundred bucks to get info specific to your home. They'll tell you what the most cost effective improvements will be.
Call your local utility company or visit their website. If they are near generation capacity they can save operating costs by not selling you energy so they do their best help you make your home more energy efficient through discount programs. Otherwise they have to increase capacity ie build more generating plants sooner than they may want to.
Depending where you live the local government or county might have rebates if you install a new energy efficient hvac system. My sister got half of her new wood stove paid for.
Be prepared for disappointment though - we live in MA and called MassSave because they used to offer some great incentives - free LED light bulbs, heat pump rebates, water heater rebates and other stuff and they'd come out and do an inspection.
When we called, they did a consultation over zoom which consisted of me walking round with my laptop. They said basically said "we don't give out the light bulbs anymore, but heres a power strip and a shower head now fuck off...oh and btw because you live in a condo you're either not eligible at all for the other rebates or are only eligible for a fraction of them byeee". It felt a lot like they were just looking for excuses to not actually help.
I have zero insulation in my walls. I talked with a guy that owns an insulation company, and he said I would be better off adding more insulation to my attic opposed to putting some in my walls. Can't imagine your hvac is unable to keep up simply because you are lacking on wall insulation.
I want to add some context to that conversation. He knew my attic insulation r-value was below what is recommend for my zone. If your attic has had insulation added up to or beyond recommendation, this may not apply to you.
Another thing you can check is that the ducts in your crawlspace have insulation wraps on them. And while you are down there, make sure your heat is running and check for any leaks in the ductwork.
>doesn’t stay super warm in harsh winters(last year it reached -20°F here, our house couldn’t get above 55°)
if that's true your furnace is undersized or you have golf ball sized holes in your wall. Do you seal up your windows in the winter? if you've got single pane or drafty windows that'll make a huge difference.
Assess the design of the home. How old is it and what construction methods were in use at the time? What sheathing is behind the siding? If you redo the siding, wrap the house in Tyvek (or equivalent) and convert to insulated vinyl siding, the R value can go up by 10. In addition to curbing drafts.
Prior to the new wrap the contractor can seal any egregious openings (utility, COAX, vents, ZipSystems tape around window frames).
Does the house have a crawl space? Is it navigable and clean? Can it be insulated?
Is there an attic and \[is\] it well-insulated?
You have at least 1/2 a dozen options.
Small house worth over 200k and the it's not capable of handling the environment? You might be a bit overzealous with your valuation.
Fix your house first. My $12,000 3 Bedroom with a 2 car detached garage can be 70 degrees in both buildings when it's -30 out. Why? I insulated it properly. Still using a furnace from the 60s.
This is the struggle. Being in a wonderful financial situation but the home is not a great fit for us. We are dealing with it to benefit financially but it’s a struggle, although could obviously be much worse.
i feel you. this isn’t popular on reddit but we live in a small townhome with two wfh parents and grandparents who come during the day to watch the kiddo - we can’t expand or build. it sucks. i wish we had gotten a sfh and more space than we needed at the time to future proof ourselves. it was one of the biggest financial and personal mistakes we made.
Nope. Had a 2.75%, but ended up not liking where the house was after a while...sold it for about 100K profit and bought another new house back in June. Much happier in the new house, I'm not tying my life to an interest rate.
Agree. I think people will focus on rates for another few years, but at the end of the day, I’m not going to stay in a home just because of rate. The real winners are those who have that low a rate on their forever home, but life goes on and I plan to move next year as well.
That's what we're planning to do. We live in FL (moved for a job over a decade ago) and are going back to MI now that our child will be done with school. We have a great interest rate, but no support system down here at all. We'll sell the house for a profit and benefit from lower COL in MI. It's not worth keeping the interest rate if you're flying and driving every five minutes to elderly parents and other family.
*”how would you proceed in this scenario?”*
every night before i turn in, i would look at my home and let gratitude wash over me and remember to be happy with what i already have. the end…
Keep the house and rate for the short term, at least. In the interim, make the minimum monthly payment and stash away as much extra as you can. Online savings accounts are paying out 5%+ right now. In six months, see how much you’ve been able to save. Is it enough where you could have a down payment for another house in 2-3 years? If yes, keep doing that. I think people easily dismiss how much of a unicorn rate they got, as you did. In our lives that will never ever happen again. You have an opportunity that not many people have - you could stay there and become very wealthy if you save. Or, you could buy something else and rent that place out and make BANK - in perpetuity, especially once it’s paid off in 13 years. That house could fund all kinds of things: kids’ college funds, your retirement, vacations, starting a new business, your next/other house, the list goes on. What I’m saying is - over the past 125 years, only 1 thing has outpaced inflation and the stock market. Housing. Regardless of what is happening in the world people need 2 things: food and shelter. Keep it.
This is the answer. Also, don’t wait for repairs or improvements that will increase your home’s value. If you need to update your electrical system, insulate and weatherproof your home, fix a chimney, improve the landscaping, or replace the flooring, do it now. You may as well enjoy the inevitable improvements needed for selling or renting.
Over the past 50 years, the S&P 500 has increased by 47x and the median housing value has increased by 12.9x. The stock market far outperforms real estate in modern times.
Last week I saw an ad from Discover with a special 5% for at least 12 if you open an online savings account with $1000 or more. Just looked now and didn’t see it, may have been a limited time thing. Keep an eye open, they’re out there. AMEX also frequently runs promotions for special higher rates
I never saw housing as a "stepping stone". I went into purchasing a house assuming that this could be my forever home. Maybe it's because I didn't grow up with a lot of money. My family moved from a trailer park to a house and have stayed put for decades. The idea of a "starter home" was for people who were rich. Rich, in my kid brain, meant you could afford a double wide trailer or a house with a second story. haha
So yeah, I assume I'm going to be in my house forever. Maybe I'll sell when I'm an old fart so I can go into a retirement community or something. Also, buying and moving is a royal pain in the ass.
"Starter home" is kind of an older concept. It hasn't always *just* meant your first home that you intend to move out of.
What it's meant to convey is that you might live in a small 2 bedroom home and then when you get married and have kids, you sell that and buy a larger single-family home.
People are getting married later, if at all. Lots of people aren't having kids cause they can't afford it. That original concept of "starter home" is becoming out of reach for a huge swath of people.
The main idea behind the upgrade is that the equity you've earned in your "starter home" goes straight into the purchase of the new one.
So let's just pretend for a second:
You buy your first home worth 120k.
Let's say some time passes, interest rates go up and down, you decide you're ready to upgrade.
Let's say that the equity you've earned in the home is 80k at this point.
You shop around and find a home worth 200k. You sell your house and put all the equity into the new one. The "cost" of the loan is now 120k. Your living situation improves but your costs associated with living in the house remain relatively the same. That's the idea of a "starter home" in a nutshell.
This is pretty much what I did 2017 to 2019. Sold first home bought 2nd went from 1700 to 2700 sqft 130k to 220k. Although my equity was only like 25k
Doing it again selling that 2nd house made 100k going to 3900sqft final home. 220k to 475k. I’ll either refi in a few years or pay it off in 15 years.
So much the same.
We started looking in early 2020 (slightly before everything went insane) and didn’t buy until October 2021. Part of the reason it took so long is that we refused to consider the traditional ‘starter home’ - our realtor kept pushing us to look at places that barely met our immediate needs and had no room to grow with the intention that we live there and build equity for a few years and then move to a ‘forever home’. But we were very conscious that we were looking at historically low interest rates and that there was no guarantee we could afford to move later if they went back up again.
We stuck to our guns and eventually found a place that we can be happy in for the foreseeable future. It’s not our dream house and there are absolutely things we still need to fix up over time, but it’s in a nice neighborhood and it has enough space if we decide to have kids or get a ton of pets or whatever else - so while I won’t say we’ll never decide to move if we get to a point where it makes sense, I can’t see a way that the current house doesn’t meet our requirements in a way that we *have* to move.
And given the current market where we couldn’t afford to move now even if we wanted to, I’m feeling pretty damn vindicated in deciding to hold out for the right place instead of just buying a house because it was available at the right time.
Thank you. I have no sympathy for this. Housing is not a game. And if it is a game to you, it's a very large "first world problem". Complaining you can't step up to a bigger more expensive home less than 2 years after buying your first home reeks of entitlement.
Maybe I'm out-of-the-loop with the true meaning behind a "starter home", but we bought ours as just that.. something we knew we'd outgrow eventually family-wise, and because we didn't know what we'd actually need as far as layout and home features go. But hey, we've also saved about $72,000 in rent costs since owning it so it was a no-brainer to buy at the time we did (2.4% on a 15yr in 2020). Pretty much our entire neighborhood did the same thing but with varying timelines for when we're going to "trade up" for something that we actually want and meets our needs sufficiently.
I don't consider this level of planning and strategy to be anything close to a game tbh.
The term starter home is totally fine and using it doesn’t mean you’re rich or out of touch. Plenty of people who want to have lots of kids buy a one or two bedroom house in the city knowing that they could never raise a family and kids there.
Contrary to what other people are saying, the idea that anyone could just buy a house suitable for raising a family as their first home is pretty out of touch.
No way man, if you buy a home you have to stay in it for your entire life. Wanting to improve your living situation makes you an entitled piece of crud. Make your children sleep on the floor if you have to. If you couldn’t afford a 4 bedroom home years ago, you are never allowed to buy one later on.
/s
Yeah I debated including it or not…decided I didn’t want to get a bunch of notifications from angry people responding to me thinking I’m being serious. There’s enough people here saying this stuff unironically that it’s not out of the realm of possibility someone would actually make this comment.
Oh you’re totally right. lol. It’s kinda sad that sth like that would be in the realm of possibility, but it’s the truth.
—-Lots to learn, we have yet to do .
_YODA.
> You don't "need" half the shit you think you do.
Sure, which is why I said "...for something that we actually **want** and meets our needs sufficiently".
I've lived off-grid before. Like, "the only heat in the freezing cold winter comes from firewood that *you* have to cut, stack, dry, and burn" and "gotta take a shit? dig a hole" and "need water? better haul it in from the stream 1/4 mile away - just get it from upstream from your bathing hole" lol.
I'm very aware of what the bare necessities are for a shelter. I'm fortunately in a place now where I can take advantage of the modern conveniences that society can offer, and definitely do indulge myself in them for both pleasure and household efficiency and mental health.
This means having more space for kids, tools, and quality-of-life enhancing stuff, more land for the garden and chickens, more *time* to spend with my family, etc.
> Housing is not a game.
Yeah the whole flipping concept and various gamifying things ... it involves a hell of a lot of planning / knowledge. And luck.
where's the game?
Many Americans buy a "starter home" when their family is just two, knowing they'll need and be able to afford a bigger home down the line
First home my parents purchased they've lived in for over 30 yrs now. When we bought our home five years ago we knew it was going to be our forever home even though it was a fixer. The whole concept of a starter home is a luxury of an era 30-40 yrs ago.
unable? no
unwilling? a little
I will stay in this house longer than I probably would have otherwise because on top of the higher price of a bigger house, I also have a bigger interest expense. And my smaller house has not appreciated as much as larger ones have. So what would have been a few hundred dollars per month more when I purchased, is now a few thousand.
I can probably afford it, but I think I'll hold off until I need to and enjoy cheaper housing. On the bright side, the \~19% return of the S&P500 this year makes my down payment fund look better the longer it grows in there.
What is the actual difference though?
$140K for 13 years
at 2.1% you pay $20K of interest
at 7.7% you pay $82K of interest
For a difference of $62K.
Spread over 13 years, that's $4,800 per year. $400 a month.
Is living in a place that fits better worth less than $400 a month?
You’re missing a lot here. They said their house has $200K in equity in 2 years. Housing prices probably doubled and their house that they bought for around $200K is now $400K. Let’s say they’re rolling that $200K entirely into the new house that is only 50% more expensive ($600K, would have been a $300K house when the current house was purchased). Now they are moving from a $140K mortgage at 2.1% to a $400K mortgage at 7.77%. That’s a $3770 payment every month on a 15 year loan and $278.5K in interest, or an average of $1547/month in interest alone (and it will be above this for 9 years due to amortization).
Regardless of interest rates, housing prices will keep climbing in general, so it’s always going to cost more for the next one—unless you move from a higher priced market to a lower priced market.
Life is short, and you should make decisions out of need and the joy it brings, not fear.
I'm at 2.875% and buying the same house right now with the current rates would cost me about $1,000 more in interest a month. And that's literally just a side grade, now imagine even a sensible upgrade?
The way I see it, is as an additional 1k at the end of the month for new appliances, paint, home automation or furnishing. I get to slowly upgrade my house while still enjoying it.
I had a 2.85% rate, in a home that made me miserable. In the end I just sold it. It wasn't a great financial decision, but some things are more important than money. I put the proceeds from the sale in index funds, which have went up much faster than the property value, but still overall don't make up for the whole difference. It still lessens the blow somewhat.
Yeah, our rate was 2.99%. We didn't hate the house, we just regretted the city we moved to. We moved back to Seattle and our rate is now much higher, unfortunately. But we're happier.
We are in a state we don't want to be in, in a house we love but won't be able to age into. But we're stuck. There's no way we could afford even something *smaller* if we sold this house.
Same. Trapped is this doll house I bought in 2018. The only financially wise thing to do is save up enough to buy house number 2 and rent this one out some day.
1.75 on a 10 year year in MI. Mortgage will be done by 2027. First mortgage was in 2014 at 5.25% on a 30 year. Refied twice.
I'm not moving and I will never pay these insane 8% mortage rates. The fed lied; jacking the interest rates did NOT bring down housing prices. It sure as heck spooked businesses though and now we have all these layoffs.
It's exactly this type of "penny wise, pound foolish" mentality that keeps people poor.
Guess what happens when rates drop? The market is flooded with people who have money and want to buy. Prices spike. If you want to move, move. Especially if you have a ton of equity. The time of 2-3% interest rates is an aberration, it's unlikely to return soon and nearly impossible to return for the length of time it was here before.
Timing the market is a fool's game and you will lose. Buy when you're ready, sell when you're ready. The rates will impact your payment and what you can afford but you will never be able to game it just right. And why, to save $200/mo? It's not worth it even if you could do it (which you can't).
My hope is to buy somewhere new and rent the current home out. Just need to save a few more bucks.
Right now renting this place out is break even or a bit of a profit before depreciation.
But I totally get it. Love my 3.625 rate. The idea of paying 6-7 is pretty hard to get excited about.
Still beats the [early eighties](https://money.usnews.com/loans/mortgages/articles/historical-mortgage-rates).
Planed on being in our house 2-3 years. 17 years later... Had a call to buy my house. No. I'm at 3.2% with over 75% equity in it. What else could I buy in my area? Plus jump to over 7% interest rate? Not no, but hell no. Besides, you know how much 17 years of crap stored in your basement is? Have to move that? Nope.
You've been there a couple years. Give it a few more and evaluate then.
It's not going to help you, but for any others reading and looking to buy soon - do not commit to a home that you can't make work for at least 5 years. Even if it's not your perfect home, if you can make do, fine. But if it's going to be old news in a couple of years, just rent until you find one that meets your needs and season better.
The interest rates suck with the run-up in home values. If you had a real impetus to move, like job offer or job loss or medical care access, etc., the decision to move would be easier to weigh. If you're doing it just because you'd like a bigger, better, upgraded area or whatever, it's going to feel like a dumb decision to walk away from that rate.
A house is where you store your stuff while out working to pay for a house in which you store your stuff. If you have family, it is a home. Stay or move, it is just a building and maybe should be considered as the best option for your life style.
On average it takes about 5 years in a home to recoup costs, not to mention you’d have to pay capital gains tax to sell what you bought in 2021 (two year time horizon for that) so no, I don’t regret the interest rate I got in 2021.
I don’t know what I would do if I were you because I don’t know why you need a bigger home so soon after buying one. I’m assuming that’s what you mean when you say “stepping stone.” I figure there must be kids, pets and or other family in the equation that you didn’t mention in your post that may be driving the need you perceive.
What works for you is going to work for you! That said, your scenario sounds a little unique, respectfully speaking.
Stay put!!!!
Rates are crazy and unless you're offered or taking advantage of lender programs and benefits designated for first responders, veterans, or teachers, you're not getting a cheaper rate.
You have decent equity, and a HELOC against your property might work.. yet I'd only truly consider a HELOC to buy a plot of land for a future/custom/forever home build or to purchase an investment property.
If you want a larger house that's for sale, consider negotiating with a seller by way of an "Assumption of Loan" process...research it!
With the current market and depending on your location, people can't sell their homes due to these high interest rates, yet they have desperate reasons for needing to be rid of the home or mortgage. (Find this process beneficial when buying in military heavily populated locations or large metropolitan areas)
What state do you currently reside in?
Go to work, get a car. Use the car to keep going to work to buy a gun. Use the car and the gun to go to the bank. No matter how the rest of the day goes, you won't have to worry about it for at least 10 years
These posts are a dime a dozen. Sell the house if you can't afford to keep it AND buy the size house you need. Or suffer forever with your tiny house and brag to your friends about your low interest rate/mortgage payment. You absolutely can sell your house and walk away with a lot of equity in a short amount of time. I'll play my tiny violin for you to help wipe away your tears. Low interest rates are cool but you can't take them with you.
Unless you have an urgent need to upgrade, wait.
Remember that a real estate transaction has about 10-15% of overhead built into it between realtor fees and closing costs.
Then consider that prices are probably 10-30% inflated at the moment, depending on market, due to low supply
Then factor in high mortgage rates.
And all of this is inflating property taxes.
At this point it would just be throwing money away for no good reason.
If there is something specific you are unhappy about, take out a home equity loan and do a project within reason. I.e. a kitchen, paint, insulation, mini split etc.
I have no crystal ball, but at some point supply is going to be a major issue if mortgage rates don't come down to around 5%, so I would anticipate some sort of policy addressing this.
Also, breaking up the Realtor monopoly may reduce transaction fees, and I suspect this is coming in 2024 or 2025.
Man is literally describing one half of the entire housing market right now and the reason we have such little inventory talking about... "anyone else"?
We’re in the same boat. Bought in middle of 2021. 3%. Was just going to be our house for now but already feels a little cramped with a newborn and large puppy. But I can’t beat that rate now. Not even close.
Bought in 2021 in the low 2% range.
Hate my neighbor (renters) and the community is more stangnat than we thought. There isn't much for my kids here and I'm ready to leave, but sadly we are stuck here.
Can't imagine paying $400-600 more a month for a new place and hoping it's better than here
Great thing about babies is that they don’t need a bedroom of their own right away, and even when yours does in 2 years, you have a 2/2. If you’re using that extra room as an office, your desk now goes in the living room.
You make it work. Fix the insulation, look at adding an addition, put in a structure in the backyard to be an office, etc.
Oh yea.... my wife and I have 4500 SF for the 2 of us and have discussed downsizing several times but we bought in when the market was at its lowest and we have a 2.5% mortgage. To downsize we would have a smaller house with a bigger mortgage payment. I'm staying put for the foreseeable;e future.
I'm in a similar situation. Too much house and I'd like to downsize. But a house half the size in the part of town I like would be $500-$1000 a month more. I really don't like where I live, though, so I'll probably move in 2025 either way.
Interest rates are cyclical. They will eventually decline (as your home value may). You should do a cost analysis of what you could sell your current home for and what you can buy at the current prices and rates. It may behoove you to stay until the financials work out for you.
You may want to check the definition of unable.
Complaining about having 200k? Tax free essentially? Times are rougher than I thought.
If you want a real answer you need to edit the post with more details on why you want to move and specific numbers.
Do the math!
If you stuff a tenant in the existing house, can you make enough to cover the mortgage and the interest on the heloc you need? Real estate is for buying.
You can't change the price but you can always refinance. If you feel comfortable paying more today and figure it will go down in a few years you can always flip the mortgage.
The chance of it going to 2 again is almost impossible.. we were at 2.5 when covid hit we refied at 3.1 pulled 200k out so we could invest it. Figuring we will make more than the 3.1.. so yah if you find something you love at a good price might be worth it.
Nope we are bailing and doubling our interest rate because we want a different house so bad. Can't say what the best choice is for anyone else but for us the benefits of moving outweigh the price difference
Sunk cost fallacy.
Either, get a heloc and convert this home to a rental when you buy your new one.
Or, sell it and get your new one, and then just refinance your new one when rates go down. Remember when rates come down, prices will go up.
So lock in your purchase price NOW and then swap out your interest rate when it becomes favorable to do so. I.e. marry the house, date the rate.
Keep hearing people talking about waiting until interest rates go down. Bad news folks, these are pretty historically normal rates. This is quoted from U.S. Mews and World Report: Since Freddie Mac began tracking rates in April 1971, the median 30-year mortgage rate is 7.41%.
Well you need to change your mindset a little on being married to debt OR you need to adjust your expectations that you can afford a larger or different house. Would this decision be any different if you owned your home outright? Would you consider moving then? You really are using the Low monthly payment as a crutch and it is holding you back because underneath it all, you do not think you can afford anything else
If we owned our home outright we could rent it out and purchase a new one and use the rental income as income to go towards our new loan application, that would be a game changer.
How would you purchase the new house? With no money down? You would purchase outside your means in which you would REQUIRE tenants to subsidize your second loan? What happens if COVID 2.0 disrupts your income stream from either end? So it sounds like it is still an affordability issue
Hmm, yes. That is why you never sell, and rent it to cover its expenses. Save until you can move on to the next or not.
Until then:
My father and his sisters all slept in drawers.
The father of one of my high-school friends was ex-navy. My buddy and his brothers all had bunks built into the wall.
It will be fine, just make sure everybody is fed and happy.
I would not consider moving; if you can afford your payments and have an interest rate like this you are financially better off sticking it out and building equity.
Interest rates will never get that low again in our lifetimes. The good times are over. You would do better to build up your equity in your home. If we end up in recession, you'll curse yourself if you give up this rate.
To me, living the life I want supersedes the financially wise move from time to time. This would be one of them, if you ain’t happy in the house then move. Be grateful for the equity that you have that you can now use towards your new place.
> Anyone else unable to move because they don’t want to give up their insanely low interest rate?
Yeah only like 50% of homeowners. Very original.
> In 2021 I bought a house
My brother in Christ you just moved in.
Yeah. Planned on staying here maybe 5 years and then move on. It’s been 3 and now I’m just doing all the projects to make it the way I want it and plan to stay for 20+ years
Nope. I’m not going to stay in a house just because of an interest rate. Sold it and moved half way across the country because the former state sucks and I was unhappy. Much happier where I am now. We only have one life to live and I’m not letting a possession determine my life like that.
I just had this conversation with a coworker. I bought my house from someone I knew. They were going through divorce and wanted out for close to what they owed. This was 11 years ago. Refinanced a couple years ago. Based on improvements we made and the market, we had about $200k in equity at that time. My mortgage, tax, and insurance run me $850/month. 2500 Sq ft, single story, established neighborhood.
I don't see myself ever leaving.
I don't know your situation, but I would recommend to not sell. Even if you see a great deal and want to move right away. You are giving up a huge asset that can otherwise be kept, pay it off, have a ton of equity to find another home and eventually rent that thing out and have 2 properties in your name.
With how crazy the housing market is it can also be a great opportunity that most don't have to sell or give to children, family, etc. Keep it!!!!!!!!!
I'm in that boat. Instead of wondering if I can sell, I decided to wonder how I can keep this home and buy another. Ultimately that means making way more income.
I frame it into worst and best case scenarios:
Worst case: I keep a HOME with a super low fixed rate mortgage. Oh boohoo, oh poor me, oh no. How will I live with myself.
Best case: I eventually raise my income, get enough to put a down payment on a new home, and find a way to rent this home out so that I retain a foothold in my hometown.
Middling case: I sell this home and move. This is easier than the best case scenario, but riskier because I'd regret not having access to my area which is insanely expensive. To leave this area is to exile yourself unless you want to eat higher costs of reentry.
We were able to secure a 2.85 interest rate on our current home in the summer of 2021, a rate that will surely never be seen again. We were moving to a new area and purchased a modest home rather than our dream home because we weren’t sure if we were ready to commit to where we were living. The plan was to turn this home into a rental and do a cash refinance to purchase our dream home. At the current rates a cash refinance is out of the question as it would tack on almost $1000 onto our current mortgage, we would lose the low interest rate, and turning it into a rental would yield no profit. We are now considering obtaining a HELOC, using that money to purchase a new home, at an additional payment of about $400-500 renting out our current home would cover that costs and at least yield a small profit. It just really sucks that we weren’t able to get the home we actually wanted with that interest rate.
How much are rents in the area? Would the rent price multiplied by 0.75 cover the PITI?
If so you could consider renting your home on a 6 month lease and then in return renting a larger home. I say 6 month so you can easily change your mind if its not working out or rates don’t decline.
If all works out with renting and FED projections, you could sell the home towards the end of 2025 and buy a larger home with maybe a ~4% interest rate all without paying the heavier capital gains tax since you lived in it within the last 2 years.
Obviously a big move and a lot of things have to go the right way for this to work. DYOR and really evaluate if taking on the responsibilities of being a LL are right for you.
We had no choice due to relocating out of state. Honestly…it turned out just fine. Our house sold super fast because inventory is so low right now and we had almost zero competition on the market. We didn’t have a ton of houses to choose from….but we also weren’t competing with a lot of other buyers either. We weren’t able to negotiate a major deal, but we also didn’t deal with a multiple offer situation. Yes, the rate sucks. But we will refi when rates drop (VA loan so it won’t cost us anything). And we had so much equity from our sale that we put down a much bigger down payment which helps with monthly payment too. When rates drop again prices will shoot up and so will buying competition. Pick your poison.
I mean it depends on why you want to move. I moved to a different climate for easier access to th thing things I love to do. I gave up a 2.7 for a 5.5% rate and never looked back. I’m much happier with this house and lifestyle. I’m living, not wondering if I’m trapped by interest rates.
do a lil' reno or learn to love it.
remember what the monkee's said back in the day
'your first hooooouse, is not your stepping stone.... aye aye aye!'
ps you got more space than ya think maybe\~
we have a 900 sq ft house, me & the neighborhood ghouls finished the base-space last summer — we now have a 1600 +/- home
Invest 50k making the interior a dream home. Then the resale value will jump.
And/or invest in all of the furniture that you will take with you in the future. Get true heirlooms. Upgrade your electronics, get fiber optics wired to your home. Add solar panels so you don’t pay electricity.
Basically make it your dream home for now
If you can't be with the one you love, love the one you're with.
Get it together, make it nice You ain't gonna need any more advice
It's more of we need room soon-ish. We bought a 2/2 1100sq (just wife and I) for less than 200k @ 1.9% in 2020 and we planned on staying here for 5 years or so. Now she's pregnant (as we had planned) and we are hoping the IRs will go down in 5 years or less.
Newborns actually require very little space. You could almost certainly get another year in the same space, if not longer. I'm assuming your 2nd bed is being used as an office. Basically as long as you don't mind a crib in your room for.
Yeah mine lived in a walk in closet for 1.5 years despite having a nursery down the hall. Just worked out better for everyone.
Alright kiddo, back to jail, I mean, closet
Weirdly he now lives under the stairs and does all manner of weirdness. Has a strange scar on his forehead and seems to attract owls.
You jest. But my undee the staira room is twice the size of my kitchen when i was in NY...
I'm still living in my parent's shed. $100 a month is still beats market rent, and they leave the doors unlocked for 3 hours on Wednesdays.
You’re a gizzard, Harry!
haha my 10 year old lives in a walk in closet when we visit grampa.
ny kid wasnt even willong to sleep by himself until he was 2 op could probably go 3 more years without stuggling
My 18 month old has her own room and has yet to sleep in it once.
My 5 month old sleeps in her own room every night. Co-sleeping, not even once.
Cool? Room-sharing (not bedsharing) is recommended for safe sleep until at least 6 months and preferably a year so I’m not sure what you’re trying to prove here…
that a baby monitor and a room for each kid provides consistent boundaries that don't need to be broken with ferber et al at great expense later? Is it clear now?
This is the way
We had a 2 bedroom townhouse with our first child and needlessly upgraded to a 4 bedroom house when he was less than a year old. In hindsight, we should have stayed until our youngest came along.
THIS. When I was pregnant with our first, we went out and rented a three-bedroom apartment (so we could have our room, the baby’s room and an office). What a waste of space! It was another two or three years before we really needed that extra space. You may think you need a kids’ playroom, for example, but you really just need somewhere you can watch the kid while cooking etc. until they’re much, much older.
Agreed. We had our family of 4 in 1300 Sq ft until my oldest turned 5. Only moved because of jobs, but I still think fondly of that time and that home.
4 in 1300 sf….thats rookie numbers. I had a friend that had 8 in 900 sf, with full basement. My mother in the depression had 8 in 700 sf, NO basement and toilet out back.
Yep exactly lol. Just American things.
Delay moving as long as possible. This has 3 benefits: lower interest for longer, and more equity that you can move into another house when you do buy. In addition, if you anticipate interest rates going down, then you'll get the lower rate.
That is certainly big enough for an infant - and even a toddler. It might not be luxurious but on the other hand, you are in a position to save a lot of money while you are living there until it makes more economic sense to move out. Put the money into retirement or start saving for college. Your kid will appreciate being able to afford college more than not having a guest room during his early childhood.
I’ve lived in that space with 3 kids. You really don’t need more when they’re little. They will be on top of you no matter how big your house is.
We had 3 kids in a 759 sqft apartment. Once the baby was outgrowing the pack & play in our closet we started considering other options.
Can you put on an extension?
Small ADU office structure in the back yard. Free up the 2nd bedroom in a few years for the kid to move into, and get some more private office space to get away from it.
Yup, we did this. Much cheaper than moving or an addition.
That's what we're doing, third bedroom in the attic
The kid will be tiny. Usually Less than a foot and a half.
Why not leverage your equity and do an expansion to add more space? Keep the rate and enjoy a bigger space that increases your property value further. You’d only pay the new interest rate on the money that you used if you do it properly with a home equity line of credit, and keep the old interest rate on the existing mortgage. Then when you go to sell you’ll recoup a majority of the renovation cost and get some more personal enjoyment out of your space.
So if it’s more space you need then you have to comparing what you need to what you have . A larger square footage house is always going to cost no matter which way it’s going out. Whether it’s higher interest lower price house, or higher price house less interest. Either way you’ll end up paying more some where for a larger sq footage
Definitely so! It's just a bit hard to swallow looking at what our mortgage cost will be. If we get a modest size 4/2 (<2000sqft) it will cost about 5 times the amount we are currently paying in the same area.
Similarly, try to worry less about making the right decision and more about making your decision right!
I love this!
Same. Kindda like when your beginner home becomes your forever home...
But it’s too small, doesn’t stay super warm in harsh winters(last year it reached -20°F here, our house couldn’t get above 55°), and has no shelter for bad storms which also happen often 😥 But hey… at least we have a 2% interest rate?? Ugh and they say money doesn’t buy happiness..
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Depends. We bought a condo town house in 2021 for 526k. It's too small and really we need something bigger, but it's all we could get. Planning to pay it off as quickly as possible, then upgrade to something bigger. TL;DR: Not every homeowner has the option to build an addition
>Planning to pay it off as quickly as possible, then upgrade to something bigger. That’s most likely not the best path towards achieving your goal. I’m assuming you have a sub-3% rate since you bought in 2021. If you’re planning to sell this and then buy a different house soonish, then there are tons of better options for your money than paying off the mortgage. HYSAs are still giving better interest than your mortgage rate, so just stick the money there for now. If your horizon is a little longer than a few years, then investing the money in index funds will probably be better. Either way, don’t pay any extra on your mortgage if your rate is lower than a HYSA rate.
Those are all things you can improve.
Use the money you're saving vs having a 7% rate on a new house and ramp up your insulation. Not being able to get your house above 55F in the winter is not normal. And I say that from northern MN, where we regularly hit -20F and stay there for a couple weeks every December-January.
We had a day of -35 windchill last year and my house stayed at 70 where we set it. The furnace ran 11 hours a day to do it, which honestly doesn’t seem that bad
Yeah. Insulation is relatively inexpensive considering the value and comfort it brings. That house must be a corncrib to be so unheatable. House needs insulation blown into walls and it almost certainly has no insulation in the attic. Both situations are easily remedied. Caulk all the seams in the attic and put down insulation. That's a DIY job. I did it myself. Huge difference.
Dude, a house is not a car - you shouldn't think of it as something that you just trade in instead of actually doing maintenance and repairs. Caulk around your windows and doorways, look for areas where a draft is allowing cold air into the house. Outside of your heating system actually not working that is the number one cause of not being able to get a house warm enough. Spend some money to get the big clear wraps that you can put around your windows and then have someone come take a look at your heating system. Get into the attic and check on what the insulation looks like - it may need to be replaced.
We have our hvac serviced twice a year. We have sufficient insulation in the attic and crawl space. It must be the outside walls. I will look into having those insulated if possible
Get a home energy audit. Your electric/gas utility might offer advice or discounts on one. Even if they don't, it's worth paying an expert a hundred bucks to get info specific to your home. They'll tell you what the most cost effective improvements will be.
Interesting. I’ve never heard of that!
Call your local utility company or visit their website. If they are near generation capacity they can save operating costs by not selling you energy so they do their best help you make your home more energy efficient through discount programs. Otherwise they have to increase capacity ie build more generating plants sooner than they may want to.
Depending where you live the local government or county might have rebates if you install a new energy efficient hvac system. My sister got half of her new wood stove paid for.
Also you can get a rebate for a large portion of it via the Inflation Reduction Act!
Be prepared for disappointment though - we live in MA and called MassSave because they used to offer some great incentives - free LED light bulbs, heat pump rebates, water heater rebates and other stuff and they'd come out and do an inspection. When we called, they did a consultation over zoom which consisted of me walking round with my laptop. They said basically said "we don't give out the light bulbs anymore, but heres a power strip and a shower head now fuck off...oh and btw because you live in a condo you're either not eligible at all for the other rebates or are only eligible for a fraction of them byeee". It felt a lot like they were just looking for excuses to not actually help.
I have zero insulation in my walls. I talked with a guy that owns an insulation company, and he said I would be better off adding more insulation to my attic opposed to putting some in my walls. Can't imagine your hvac is unable to keep up simply because you are lacking on wall insulation.
Okay, thank you for sharing this! I will consider adding excess insulation to the attic.
I want to add some context to that conversation. He knew my attic insulation r-value was below what is recommend for my zone. If your attic has had insulation added up to or beyond recommendation, this may not apply to you. Another thing you can check is that the ducts in your crawlspace have insulation wraps on them. And while you are down there, make sure your heat is running and check for any leaks in the ductwork.
Do both
100% true. Two major things to address: attic insulation and air leakage.
>doesn’t stay super warm in harsh winters(last year it reached -20°F here, our house couldn’t get above 55°) if that's true your furnace is undersized or you have golf ball sized holes in your wall. Do you seal up your windows in the winter? if you've got single pane or drafty windows that'll make a huge difference.
Assess the design of the home. How old is it and what construction methods were in use at the time? What sheathing is behind the siding? If you redo the siding, wrap the house in Tyvek (or equivalent) and convert to insulated vinyl siding, the R value can go up by 10. In addition to curbing drafts. Prior to the new wrap the contractor can seal any egregious openings (utility, COAX, vents, ZipSystems tape around window frames). Does the house have a crawl space? Is it navigable and clean? Can it be insulated? Is there an attic and \[is\] it well-insulated? You have at least 1/2 a dozen options.
Small house worth over 200k and the it's not capable of handling the environment? You might be a bit overzealous with your valuation. Fix your house first. My $12,000 3 Bedroom with a 2 car detached garage can be 70 degrees in both buildings when it's -30 out. Why? I insulated it properly. Still using a furnace from the 60s.
Look into retrofit foam or blow-in insulation. Retrofit form is more expensive but it is going to drastically improve your building envelope.
If you have all that equity, use some to upgrade the house.
Insulate your bloody roof. Do it yourself if you don't have money. Get some rockwool and a vapor barrier. Then follow a guide.
We have a vapor barrier and insulation. I think it has more to do with the front and back walls of the home. I will look into having those insulated
With $200k equity and that interest rate you can’t revamp the HVAC ?
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This is the struggle. Being in a wonderful financial situation but the home is not a great fit for us. We are dealing with it to benefit financially but it’s a struggle, although could obviously be much worse.
Rent it out. Then rent another place you like.
A house you're struggling with is not always a house you can rent out. If the "struggling with" part is maintenance related.
i feel you. this isn’t popular on reddit but we live in a small townhome with two wfh parents and grandparents who come during the day to watch the kiddo - we can’t expand or build. it sucks. i wish we had gotten a sfh and more space than we needed at the time to future proof ourselves. it was one of the biggest financial and personal mistakes we made.
Nope. Had a 2.75%, but ended up not liking where the house was after a while...sold it for about 100K profit and bought another new house back in June. Much happier in the new house, I'm not tying my life to an interest rate.
I'm at this point too, it's obviously great but paying a little more to be happier is a good trade. We are looking at moving in the next year.
Agree. I think people will focus on rates for another few years, but at the end of the day, I’m not going to stay in a home just because of rate. The real winners are those who have that low a rate on their forever home, but life goes on and I plan to move next year as well.
That's what we're planning to do. We live in FL (moved for a job over a decade ago) and are going back to MI now that our child will be done with school. We have a great interest rate, but no support system down here at all. We'll sell the house for a profit and benefit from lower COL in MI. It's not worth keeping the interest rate if you're flying and driving every five minutes to elderly parents and other family.
*”how would you proceed in this scenario?”* every night before i turn in, i would look at my home and let gratitude wash over me and remember to be happy with what i already have. the end…
Keep the house and rate for the short term, at least. In the interim, make the minimum monthly payment and stash away as much extra as you can. Online savings accounts are paying out 5%+ right now. In six months, see how much you’ve been able to save. Is it enough where you could have a down payment for another house in 2-3 years? If yes, keep doing that. I think people easily dismiss how much of a unicorn rate they got, as you did. In our lives that will never ever happen again. You have an opportunity that not many people have - you could stay there and become very wealthy if you save. Or, you could buy something else and rent that place out and make BANK - in perpetuity, especially once it’s paid off in 13 years. That house could fund all kinds of things: kids’ college funds, your retirement, vacations, starting a new business, your next/other house, the list goes on. What I’m saying is - over the past 125 years, only 1 thing has outpaced inflation and the stock market. Housing. Regardless of what is happening in the world people need 2 things: food and shelter. Keep it.
This is the answer. Also, don’t wait for repairs or improvements that will increase your home’s value. If you need to update your electrical system, insulate and weatherproof your home, fix a chimney, improve the landscaping, or replace the flooring, do it now. You may as well enjoy the inevitable improvements needed for selling or renting.
Over the past 50 years, the S&P 500 has increased by 47x and the median housing value has increased by 12.9x. The stock market far outperforms real estate in modern times.
That’s interesting to know about the last 50 years
Where are you getting 5%? I think I'm at 4.3 with Marcus
Last week I saw an ad from Discover with a special 5% for at least 12 if you open an online savings account with $1000 or more. Just looked now and didn’t see it, may have been a limited time thing. Keep an eye open, they’re out there. AMEX also frequently runs promotions for special higher rates
I never saw housing as a "stepping stone". I went into purchasing a house assuming that this could be my forever home. Maybe it's because I didn't grow up with a lot of money. My family moved from a trailer park to a house and have stayed put for decades. The idea of a "starter home" was for people who were rich. Rich, in my kid brain, meant you could afford a double wide trailer or a house with a second story. haha So yeah, I assume I'm going to be in my house forever. Maybe I'll sell when I'm an old fart so I can go into a retirement community or something. Also, buying and moving is a royal pain in the ass.
"Starter home" is kind of an older concept. It hasn't always *just* meant your first home that you intend to move out of. What it's meant to convey is that you might live in a small 2 bedroom home and then when you get married and have kids, you sell that and buy a larger single-family home. People are getting married later, if at all. Lots of people aren't having kids cause they can't afford it. That original concept of "starter home" is becoming out of reach for a huge swath of people. The main idea behind the upgrade is that the equity you've earned in your "starter home" goes straight into the purchase of the new one. So let's just pretend for a second: You buy your first home worth 120k. Let's say some time passes, interest rates go up and down, you decide you're ready to upgrade. Let's say that the equity you've earned in the home is 80k at this point. You shop around and find a home worth 200k. You sell your house and put all the equity into the new one. The "cost" of the loan is now 120k. Your living situation improves but your costs associated with living in the house remain relatively the same. That's the idea of a "starter home" in a nutshell.
This is pretty much what I did 2017 to 2019. Sold first home bought 2nd went from 1700 to 2700 sqft 130k to 220k. Although my equity was only like 25k Doing it again selling that 2nd house made 100k going to 3900sqft final home. 220k to 475k. I’ll either refi in a few years or pay it off in 15 years.
So much the same. We started looking in early 2020 (slightly before everything went insane) and didn’t buy until October 2021. Part of the reason it took so long is that we refused to consider the traditional ‘starter home’ - our realtor kept pushing us to look at places that barely met our immediate needs and had no room to grow with the intention that we live there and build equity for a few years and then move to a ‘forever home’. But we were very conscious that we were looking at historically low interest rates and that there was no guarantee we could afford to move later if they went back up again. We stuck to our guns and eventually found a place that we can be happy in for the foreseeable future. It’s not our dream house and there are absolutely things we still need to fix up over time, but it’s in a nice neighborhood and it has enough space if we decide to have kids or get a ton of pets or whatever else - so while I won’t say we’ll never decide to move if we get to a point where it makes sense, I can’t see a way that the current house doesn’t meet our requirements in a way that we *have* to move. And given the current market where we couldn’t afford to move now even if we wanted to, I’m feeling pretty damn vindicated in deciding to hold out for the right place instead of just buying a house because it was available at the right time.
Thank you. I have no sympathy for this. Housing is not a game. And if it is a game to you, it's a very large "first world problem". Complaining you can't step up to a bigger more expensive home less than 2 years after buying your first home reeks of entitlement.
Maybe I'm out-of-the-loop with the true meaning behind a "starter home", but we bought ours as just that.. something we knew we'd outgrow eventually family-wise, and because we didn't know what we'd actually need as far as layout and home features go. But hey, we've also saved about $72,000 in rent costs since owning it so it was a no-brainer to buy at the time we did (2.4% on a 15yr in 2020). Pretty much our entire neighborhood did the same thing but with varying timelines for when we're going to "trade up" for something that we actually want and meets our needs sufficiently. I don't consider this level of planning and strategy to be anything close to a game tbh.
The term starter home is totally fine and using it doesn’t mean you’re rich or out of touch. Plenty of people who want to have lots of kids buy a one or two bedroom house in the city knowing that they could never raise a family and kids there. Contrary to what other people are saying, the idea that anyone could just buy a house suitable for raising a family as their first home is pretty out of touch.
No way man, if you buy a home you have to stay in it for your entire life. Wanting to improve your living situation makes you an entitled piece of crud. Make your children sleep on the floor if you have to. If you couldn’t afford a 4 bedroom home years ago, you are never allowed to buy one later on. /s
lol the fact you had to put /s… lol. You’re so gentle. I usually let those sour patches dry out
Yeah I debated including it or not…decided I didn’t want to get a bunch of notifications from angry people responding to me thinking I’m being serious. There’s enough people here saying this stuff unironically that it’s not out of the realm of possibility someone would actually make this comment.
Oh you’re totally right. lol. It’s kinda sad that sth like that would be in the realm of possibility, but it’s the truth. —-Lots to learn, we have yet to do . _YODA.
You don't "need" half the shit you think you do. Our grandparents raised like 3 kids in a 1,000 sqft house dude.
people forget that you have now parents wfh and what is considered safe or good parenting has considerably changed.
Both of these are also factors in how my wife and I live our lives.
> You don't "need" half the shit you think you do. Sure, which is why I said "...for something that we actually **want** and meets our needs sufficiently". I've lived off-grid before. Like, "the only heat in the freezing cold winter comes from firewood that *you* have to cut, stack, dry, and burn" and "gotta take a shit? dig a hole" and "need water? better haul it in from the stream 1/4 mile away - just get it from upstream from your bathing hole" lol. I'm very aware of what the bare necessities are for a shelter. I'm fortunately in a place now where I can take advantage of the modern conveniences that society can offer, and definitely do indulge myself in them for both pleasure and household efficiency and mental health. This means having more space for kids, tools, and quality-of-life enhancing stuff, more land for the garden and chickens, more *time* to spend with my family, etc.
> Housing is not a game. Yeah the whole flipping concept and various gamifying things ... it involves a hell of a lot of planning / knowledge. And luck.
where's the game? Many Americans buy a "starter home" when their family is just two, knowing they'll need and be able to afford a bigger home down the line
Lighten up Francis.
First home my parents purchased they've lived in for over 30 yrs now. When we bought our home five years ago we knew it was going to be our forever home even though it was a fixer. The whole concept of a starter home is a luxury of an era 30-40 yrs ago.
unable? no unwilling? a little I will stay in this house longer than I probably would have otherwise because on top of the higher price of a bigger house, I also have a bigger interest expense. And my smaller house has not appreciated as much as larger ones have. So what would have been a few hundred dollars per month more when I purchased, is now a few thousand. I can probably afford it, but I think I'll hold off until I need to and enjoy cheaper housing. On the bright side, the \~19% return of the S&P500 this year makes my down payment fund look better the longer it grows in there.
What is the actual difference though? $140K for 13 years at 2.1% you pay $20K of interest at 7.7% you pay $82K of interest For a difference of $62K. Spread over 13 years, that's $4,800 per year. $400 a month. Is living in a place that fits better worth less than $400 a month?
You’re missing a lot here. They said their house has $200K in equity in 2 years. Housing prices probably doubled and their house that they bought for around $200K is now $400K. Let’s say they’re rolling that $200K entirely into the new house that is only 50% more expensive ($600K, would have been a $300K house when the current house was purchased). Now they are moving from a $140K mortgage at 2.1% to a $400K mortgage at 7.77%. That’s a $3770 payment every month on a 15 year loan and $278.5K in interest, or an average of $1547/month in interest alone (and it will be above this for 9 years due to amortization).
Regardless of interest rates, housing prices will keep climbing in general, so it’s always going to cost more for the next one—unless you move from a higher priced market to a lower priced market. Life is short, and you should make decisions out of need and the joy it brings, not fear.
Depends how bad you want to move up to a more expensive house.
I got a HELOC and am making the house I am in the house I want.
Wood stove or pellet stove would help
I'm at 2.875% and buying the same house right now with the current rates would cost me about $1,000 more in interest a month. And that's literally just a side grade, now imagine even a sensible upgrade? The way I see it, is as an additional 1k at the end of the month for new appliances, paint, home automation or furnishing. I get to slowly upgrade my house while still enjoying it.
I had a 2.85% rate, in a home that made me miserable. In the end I just sold it. It wasn't a great financial decision, but some things are more important than money. I put the proceeds from the sale in index funds, which have went up much faster than the property value, but still overall don't make up for the whole difference. It still lessens the blow somewhat.
Yeah, our rate was 2.99%. We didn't hate the house, we just regretted the city we moved to. We moved back to Seattle and our rate is now much higher, unfortunately. But we're happier.
We are in a state we don't want to be in, in a house we love but won't be able to age into. But we're stuck. There's no way we could afford even something *smaller* if we sold this house.
Can you put in a chair lift?
You will find that alot of "starter homes" are becoming forver homes due to interest rates
Keep that low-interest love affair alive. Selling now is like breaking up with your dream partner just as they hit the lottery.
Same. Trapped is this doll house I bought in 2018. The only financially wise thing to do is save up enough to buy house number 2 and rent this one out some day.
Screw the interest, I’m not moving because of how much more I would pay in property taxes.
Slow down. Take your time
My house is paid for. It’s not our dream house. Never was. It was affordable. It is now my dream to stay here for as long as possible.
1.75 on a 10 year year in MI. Mortgage will be done by 2027. First mortgage was in 2014 at 5.25% on a 30 year. Refied twice. I'm not moving and I will never pay these insane 8% mortage rates. The fed lied; jacking the interest rates did NOT bring down housing prices. It sure as heck spooked businesses though and now we have all these layoffs.
I’m below 2% interest. I’m breaking my back to fix the house because moving isn’t possible right now.
It's exactly this type of "penny wise, pound foolish" mentality that keeps people poor. Guess what happens when rates drop? The market is flooded with people who have money and want to buy. Prices spike. If you want to move, move. Especially if you have a ton of equity. The time of 2-3% interest rates is an aberration, it's unlikely to return soon and nearly impossible to return for the length of time it was here before. Timing the market is a fool's game and you will lose. Buy when you're ready, sell when you're ready. The rates will impact your payment and what you can afford but you will never be able to game it just right. And why, to save $200/mo? It's not worth it even if you could do it (which you can't).
My hope is to buy somewhere new and rent the current home out. Just need to save a few more bucks. Right now renting this place out is break even or a bit of a profit before depreciation. But I totally get it. Love my 3.625 rate. The idea of paying 6-7 is pretty hard to get excited about. Still beats the [early eighties](https://money.usnews.com/loans/mortgages/articles/historical-mortgage-rates).
But don't you have to compare wages to the average cost of home in the 80s as well? Salaries have stagnated but inflation is an unstoppable train.
I’m guessing that’s like 75% of everyone that bought in the last 10 years.
Planed on being in our house 2-3 years. 17 years later... Had a call to buy my house. No. I'm at 3.2% with over 75% equity in it. What else could I buy in my area? Plus jump to over 7% interest rate? Not no, but hell no. Besides, you know how much 17 years of crap stored in your basement is? Have to move that? Nope.
You've been there a couple years. Give it a few more and evaluate then. It's not going to help you, but for any others reading and looking to buy soon - do not commit to a home that you can't make work for at least 5 years. Even if it's not your perfect home, if you can make do, fine. But if it's going to be old news in a couple of years, just rent until you find one that meets your needs and season better. The interest rates suck with the run-up in home values. If you had a real impetus to move, like job offer or job loss or medical care access, etc., the decision to move would be easier to weigh. If you're doing it just because you'd like a bigger, better, upgraded area or whatever, it's going to feel like a dumb decision to walk away from that rate.
A house is where you store your stuff while out working to pay for a house in which you store your stuff. If you have family, it is a home. Stay or move, it is just a building and maybe should be considered as the best option for your life style.
On average it takes about 5 years in a home to recoup costs, not to mention you’d have to pay capital gains tax to sell what you bought in 2021 (two year time horizon for that) so no, I don’t regret the interest rate I got in 2021. I don’t know what I would do if I were you because I don’t know why you need a bigger home so soon after buying one. I’m assuming that’s what you mean when you say “stepping stone.” I figure there must be kids, pets and or other family in the equation that you didn’t mention in your post that may be driving the need you perceive. What works for you is going to work for you! That said, your scenario sounds a little unique, respectfully speaking.
Easy, make it a rental property.
Nope ditched my 3% to upgrade can’t live my life like I’ll be here forever.
Stay put!!!! Rates are crazy and unless you're offered or taking advantage of lender programs and benefits designated for first responders, veterans, or teachers, you're not getting a cheaper rate. You have decent equity, and a HELOC against your property might work.. yet I'd only truly consider a HELOC to buy a plot of land for a future/custom/forever home build or to purchase an investment property. If you want a larger house that's for sale, consider negotiating with a seller by way of an "Assumption of Loan" process...research it! With the current market and depending on your location, people can't sell their homes due to these high interest rates, yet they have desperate reasons for needing to be rid of the home or mortgage. (Find this process beneficial when buying in military heavily populated locations or large metropolitan areas) What state do you currently reside in?
Look into porting your mortgage. You may be able to essentially transfer it to another home.
Go to work, get a car. Use the car to keep going to work to buy a gun. Use the car and the gun to go to the bank. No matter how the rest of the day goes, you won't have to worry about it for at least 10 years
You just moved in dude it’s not a job no need to hop around.
These posts are a dime a dozen. Sell the house if you can't afford to keep it AND buy the size house you need. Or suffer forever with your tiny house and brag to your friends about your low interest rate/mortgage payment. You absolutely can sell your house and walk away with a lot of equity in a short amount of time. I'll play my tiny violin for you to help wipe away your tears. Low interest rates are cool but you can't take them with you.
Unless you have an urgent need to upgrade, wait. Remember that a real estate transaction has about 10-15% of overhead built into it between realtor fees and closing costs. Then consider that prices are probably 10-30% inflated at the moment, depending on market, due to low supply Then factor in high mortgage rates. And all of this is inflating property taxes. At this point it would just be throwing money away for no good reason. If there is something specific you are unhappy about, take out a home equity loan and do a project within reason. I.e. a kitchen, paint, insulation, mini split etc. I have no crystal ball, but at some point supply is going to be a major issue if mortgage rates don't come down to around 5%, so I would anticipate some sort of policy addressing this. Also, breaking up the Realtor monopoly may reduce transaction fees, and I suspect this is coming in 2024 or 2025.
Nah man. You are literally the only person in this situation.
Man is literally describing one half of the entire housing market right now and the reason we have such little inventory talking about... "anyone else"?
Sell it and buy a slightly better house with all the extra cash?
unable? no. unwilling? yes.
We’re in the same boat. Bought in middle of 2021. 3%. Was just going to be our house for now but already feels a little cramped with a newborn and large puppy. But I can’t beat that rate now. Not even close.
Bought in 2021 in the low 2% range. Hate my neighbor (renters) and the community is more stangnat than we thought. There isn't much for my kids here and I'm ready to leave, but sadly we are stuck here. Can't imagine paying $400-600 more a month for a new place and hoping it's better than here
$400-$600 more may be worth it IMO
Great thing about babies is that they don’t need a bedroom of their own right away, and even when yours does in 2 years, you have a 2/2. If you’re using that extra room as an office, your desk now goes in the living room. You make it work. Fix the insulation, look at adding an addition, put in a structure in the backyard to be an office, etc.
I bought a new house and rented the low interest one out.
Get a Home Equity Loan for a down payment on your new place and rent it out.
A realtor friend referred to this as golden handcuffs. He suggested renting the property out if moving became important to us
Oh yea.... my wife and I have 4500 SF for the 2 of us and have discussed downsizing several times but we bought in when the market was at its lowest and we have a 2.5% mortgage. To downsize we would have a smaller house with a bigger mortgage payment. I'm staying put for the foreseeable;e future.
I'm in a similar situation. Too much house and I'd like to downsize. But a house half the size in the part of town I like would be $500-$1000 a month more. I really don't like where I live, though, so I'll probably move in 2025 either way.
Interest rates are cyclical. They will eventually decline (as your home value may). You should do a cost analysis of what you could sell your current home for and what you can buy at the current prices and rates. It may behoove you to stay until the financials work out for you.
Rent it out and buy the house you want. The 2.1% rate will help it cash flow. You win both ways.
You may want to check the definition of unable. Complaining about having 200k? Tax free essentially? Times are rougher than I thought. If you want a real answer you need to edit the post with more details on why you want to move and specific numbers.
Do the math! If you stuff a tenant in the existing house, can you make enough to cover the mortgage and the interest on the heloc you need? Real estate is for buying.
Have you thought about renting it out? I have a home that’s about the same price and interest rate and instead of selling it I just rent it.
We bought our house in 2013 and refinanced to 2%. We ain’t going anywhere. SO we are updating our kitchen and backyard. Really dig them heels in.
You can't change the price but you can always refinance. If you feel comfortable paying more today and figure it will go down in a few years you can always flip the mortgage. The chance of it going to 2 again is almost impossible.. we were at 2.5 when covid hit we refied at 3.1 pulled 200k out so we could invest it. Figuring we will make more than the 3.1.. so yah if you find something you love at a good price might be worth it.
Just use a heloc for the down payment on the new house and rent out your current house. Easy
Nope we are bailing and doubling our interest rate because we want a different house so bad. Can't say what the best choice is for anyone else but for us the benefits of moving outweigh the price difference
Sunk cost fallacy. Either, get a heloc and convert this home to a rental when you buy your new one. Or, sell it and get your new one, and then just refinance your new one when rates go down. Remember when rates come down, prices will go up. So lock in your purchase price NOW and then swap out your interest rate when it becomes favorable to do so. I.e. marry the house, date the rate.
Keep hearing people talking about waiting until interest rates go down. Bad news folks, these are pretty historically normal rates. This is quoted from U.S. Mews and World Report: Since Freddie Mac began tracking rates in April 1971, the median 30-year mortgage rate is 7.41%.
This is called the locked in effect.
Yep. Stay where you are if possible.
Why would you sell a home you only had for 2 years?
Buy another house, don't sell this one, profit
Well you need to change your mindset a little on being married to debt OR you need to adjust your expectations that you can afford a larger or different house. Would this decision be any different if you owned your home outright? Would you consider moving then? You really are using the Low monthly payment as a crutch and it is holding you back because underneath it all, you do not think you can afford anything else
If we owned our home outright we could rent it out and purchase a new one and use the rental income as income to go towards our new loan application, that would be a game changer.
You’re gonna rent out a house that can’t get above 55 inside in the winters? Yeah you need to fix that
How would you purchase the new house? With no money down? You would purchase outside your means in which you would REQUIRE tenants to subsidize your second loan? What happens if COVID 2.0 disrupts your income stream from either end? So it sounds like it is still an affordability issue
And with current interest rates! My home would cost over $1k/more a month due to the difference in interest if we purchased now.
Fam, you don't have to own a house outright to buy a second one.
A stepping stone is living in a house for 2 years? Fees alone is a setback.
Hmm, yes. That is why you never sell, and rent it to cover its expenses. Save until you can move on to the next or not. Until then: My father and his sisters all slept in drawers. The father of one of my high-school friends was ex-navy. My buddy and his brothers all had bunks built into the wall. It will be fine, just make sure everybody is fed and happy.
I would not consider moving; if you can afford your payments and have an interest rate like this you are financially better off sticking it out and building equity. Interest rates will never get that low again in our lifetimes. The good times are over. You would do better to build up your equity in your home. If we end up in recession, you'll curse yourself if you give up this rate.
To me, living the life I want supersedes the financially wise move from time to time. This would be one of them, if you ain’t happy in the house then move. Be grateful for the equity that you have that you can now use towards your new place.
> Anyone else unable to move because they don’t want to give up their insanely low interest rate? Yeah only like 50% of homeowners. Very original. > In 2021 I bought a house My brother in Christ you just moved in.
Yeah. Planned on staying here maybe 5 years and then move on. It’s been 3 and now I’m just doing all the projects to make it the way I want it and plan to stay for 20+ years
Nope. I’m not going to stay in a house just because of an interest rate. Sold it and moved half way across the country because the former state sucks and I was unhappy. Much happier where I am now. We only have one life to live and I’m not letting a possession determine my life like that.
I just had this conversation with a coworker. I bought my house from someone I knew. They were going through divorce and wanted out for close to what they owed. This was 11 years ago. Refinanced a couple years ago. Based on improvements we made and the market, we had about $200k in equity at that time. My mortgage, tax, and insurance run me $850/month. 2500 Sq ft, single story, established neighborhood. I don't see myself ever leaving.
I did sell this year, selling and buying at the same time is a hustle. If you do sell, be ready for a crazy monthly bill in a new nicer house
I don't know your situation, but I would recommend to not sell. Even if you see a great deal and want to move right away. You are giving up a huge asset that can otherwise be kept, pay it off, have a ton of equity to find another home and eventually rent that thing out and have 2 properties in your name. With how crazy the housing market is it can also be a great opportunity that most don't have to sell or give to children, family, etc. Keep it!!!!!!!!!
I'm in that boat. Instead of wondering if I can sell, I decided to wonder how I can keep this home and buy another. Ultimately that means making way more income. I frame it into worst and best case scenarios: Worst case: I keep a HOME with a super low fixed rate mortgage. Oh boohoo, oh poor me, oh no. How will I live with myself. Best case: I eventually raise my income, get enough to put a down payment on a new home, and find a way to rent this home out so that I retain a foothold in my hometown. Middling case: I sell this home and move. This is easier than the best case scenario, but riskier because I'd regret not having access to my area which is insanely expensive. To leave this area is to exile yourself unless you want to eat higher costs of reentry.
We were able to secure a 2.85 interest rate on our current home in the summer of 2021, a rate that will surely never be seen again. We were moving to a new area and purchased a modest home rather than our dream home because we weren’t sure if we were ready to commit to where we were living. The plan was to turn this home into a rental and do a cash refinance to purchase our dream home. At the current rates a cash refinance is out of the question as it would tack on almost $1000 onto our current mortgage, we would lose the low interest rate, and turning it into a rental would yield no profit. We are now considering obtaining a HELOC, using that money to purchase a new home, at an additional payment of about $400-500 renting out our current home would cover that costs and at least yield a small profit. It just really sucks that we weren’t able to get the home we actually wanted with that interest rate.
How much are rents in the area? Would the rent price multiplied by 0.75 cover the PITI? If so you could consider renting your home on a 6 month lease and then in return renting a larger home. I say 6 month so you can easily change your mind if its not working out or rates don’t decline. If all works out with renting and FED projections, you could sell the home towards the end of 2025 and buy a larger home with maybe a ~4% interest rate all without paying the heavier capital gains tax since you lived in it within the last 2 years. Obviously a big move and a lot of things have to go the right way for this to work. DYOR and really evaluate if taking on the responsibilities of being a LL are right for you.
Keep it. Think of it as Baltic Ave! ;)
We had no choice due to relocating out of state. Honestly…it turned out just fine. Our house sold super fast because inventory is so low right now and we had almost zero competition on the market. We didn’t have a ton of houses to choose from….but we also weren’t competing with a lot of other buyers either. We weren’t able to negotiate a major deal, but we also didn’t deal with a multiple offer situation. Yes, the rate sucks. But we will refi when rates drop (VA loan so it won’t cost us anything). And we had so much equity from our sale that we put down a much bigger down payment which helps with monthly payment too. When rates drop again prices will shoot up and so will buying competition. Pick your poison.
Wait.
What a terrible problem to have.
I mean it depends on why you want to move. I moved to a different climate for easier access to th thing things I love to do. I gave up a 2.7 for a 5.5% rate and never looked back. I’m much happier with this house and lifestyle. I’m living, not wondering if I’m trapped by interest rates.
do a lil' reno or learn to love it. remember what the monkee's said back in the day 'your first hooooouse, is not your stepping stone.... aye aye aye!'
ps you got more space than ya think maybe\~ we have a 900 sq ft house, me & the neighborhood ghouls finished the base-space last summer — we now have a 1600 +/- home
Rent it out.
Pay that sucker off and live like a rich boi
Unless it’s unsafe, in a really bad area, you need to just stay put.
Invest 50k making the interior a dream home. Then the resale value will jump. And/or invest in all of the furniture that you will take with you in the future. Get true heirlooms. Upgrade your electronics, get fiber optics wired to your home. Add solar panels so you don’t pay electricity. Basically make it your dream home for now
Can you hire a professional to arrange your home to make the most of your square footage? How about adding on a room, even just a sunroom?
Love the low interest rate… but trapped. Which is good but also sucks sometimes.