You are NOT Insane to Sell Your House with a 2.8% Mortgage

With interest rates going back up, many people are mistakenly thinking these new rates are high. The incredible run of low interest rates that we have grown accustomed to are now back in their normal range. When I bought my first house, interest was at 7% and no one was complaining it was high. 

But what if you are one of the lucky ones with a mortgage interest rate of 2.8%? Many of these fortunate people believe they are now stuck in their current house for life, since it would be insane to sell a house with a 2.8% mortgage. At least that’s what everyone is telling them. Why would you ever consider a fortunate thing a burden that has you stuck?

DO NOT let your home’s mortgage interest rate ever become the deciding factor for when to sell your house. It should NEVER be the deciding factor!

The home you live in is not an investment, it is an expense. Look at any budget form and you will understand this fact. Consider it a consumer item with the potential to make your life better. The decision to move to a different house should be made based on the need/want of a different option. If you forget this, you will never be able to take that great new job in a different city that will double your income because the new house would have a higher mortgage interest rate. You will consequently pass on every great opportunity that requires selling your house. What a shame.

Keep in mind, the changes in interest rates only affect the dollar value of the house you can afford. When the rates go down, you can afford a house with a more expensive price tag. When the rates go up, the purchase price that falls into your affordability range goes down. Even though the price you can afford swings with the interest rate, you can still buy a new house and you can still afford a new house. 

Let’s look at the reasons one might want to sell a house, no matter the current interest rate.

A great new job offer

When you get a call that your best friend from college wants you to join her practice and the job is your dream job, you should take it if it will fit into your family plan. This new job means you will be moving to a new area and looking for a new house. Your new house will be within the price range you can afford at the current interest rate. 

Can you imagine staying in a job you think is mediocre and passing up your dream job simply because your current house has a great mortgage rate? That would be an insane decision.

You just had triplets and the house is now too small

As your family size changes, so do your housing needs. If the house you are currently in is too small, and you can afford to make a change, it is time to get a bigger one. No matter how great your current mortgage is, staying in a house that does not fit your needs will be a sore spot every day until your housing needs change again. 

Bite the bullet and move to a house that fits your family’s needs. Even if you feel the house you can afford is a downgrade, you will be much happier in the new house that fits your family’s needs. A family’s happiness always trumps interest rates. Just be sure you stay within your budget.

Your dream home becomes available

Have you always wanted to live on a particular street? Is there a particular house you wished you could have, but it wasn’t available when you moved to town, but now is for sale? 

Why pass up your dream house because your current house has better loan terms than your new house will have? If your dream house is up for sale and you can afford it, then go for it. If you pass on your chance, you will forever regret not doing something you really wanted to do when you had the chance. You will not look back fondly and relish the great mortgage terms you had back in the day. But you will look back fondly on the years you spent in your dream home.

You are retiring and want to downsize

Just as when your family grows and you need a bigger house, there will come a time when your family again goes back to two and you might wish to have less house. The size of the house, the amount of yard work, or even the location can drive this decision to move. Staying in that big house just because you have a great interest rate isn’t practical. In fact, you might be able to sell the big house and downsize to a house with no mortgage at all. Zero is an even better interest rate.

You want better weather

Maybe you have lived in the Chicago area for the last 15 years and are now tired of shoveling an average of 37 inches of snow every winter. Shoveling snow can get old fast. Once you have stated you are ready for a warmer climate, you will be miserable if you stay just because you have a great interest rate on your current home. Every time it snows, you will be reminded that you wish you were somewhere warmer.

If your happiness lies somewhere else, then move to your happy place.

Your spouse had a stroke and is now in a wheelchair

There are times when health issues make a house unworkable. Bedrooms on the second floor, twenty steps up to the front door, or narrow hallways and doors can all make a house suddenly unusable if one of you needs a wheelchair.

I have seen sudden health changes many times during my career. I would have hated to hear someone tell their spouse “We can’t move to a house without stairs because we have this great interest rate on our mortgage.” 

There are many other examples of reasons you may need to move to a different house. But remember, whatever your reason is to move, never let the interest rate you currently have on your mortgage hinder you from moving to a new home if the need arises. It should not even be a factor in the decision.

The only thing that counts is the current house no longer meets your family’s needs and a new house that is better suited is within your budget. 

Interest rates will constantly change throughout our lives. I remember when mortgage interest rate was 14%, and people were buying and selling houses even at a really high interest rate. Houses will be bought and sold no matter the interest rate. 

Make your housing decision based only on two factors, your needs and your budget. Interest rates only change the price of the house your budget can afford. You simply shop in a different price range every time the interest rate changes. 

Interest rates change daily. It is rare to ever experience a large change in a short period of time, like we faced just recently. Whenever a rapid change happens, everyone who wants to borrow money notices the change, and either are elated when it goes down or are disgruntled when it goes up. The opposite is true for those wanting to buy CDs with their money. Be a person who doesn’t care where the interest rates go. Since you can’t control them, don’t worry about them. Shop for a house when you need one and buy the one that will fit your budget at the time. If interest rates suddenly drop, you can always refinance.

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4 thoughts on “You are NOT Insane to Sell Your House with a 2.8% Mortgage”

  1. I completely agree. One of the reasons we chose to aggressively pay down our 3% mortgage is because I never wanted to feel stuck in a house due to the loan terms. Everyone who talks about the smart thing being to stretch out a low interest rate loan the full 30 years never mentions the flip side (that you are deciding to live in this house 30 years and any move from it will come with angst).

    We are in the middle of moving and paying down the 3% mortgage over the past 5 years has allowed us to save up to buy the next house in cash, avoiding a 7% rate.

      • JS, your home is not an investment. The decision to move should be based on the need of a house not the price of the loan. Your premise only holds true in retrospect. There are many times in history when paying off 3% did better than investing in index funds. If you needed the cash flow, you would have been better off not having a house payment. Don’t fall into interest rate tunnel vision.


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