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For homeowners sitting on a 2% or 3% mortgage, moving can be a tough sell. Even if the family could use another bedroom, a bigger yard or a shorter commute, buying another home at today’s prices and rates could mean paying hundreds or even thousands of dollars more every month. For some, squeezing into the house they already have is starting to look like the better deal.
In a recent Reddit discussion, homeowners were asked what mortgage rate would finally convince them to sell. Plenty landed somewhere around 4% to 5%. Others effectively said there is no number.
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One homeowner with a 2.25% rate and less than $100,000 left on the mortgage put it simply: “Not budging.” Another had an even more practical solution to needing additional space: “Never selling. Bunk beds work well.”
It’s Really About the Monthly Payment
The problem isn’t necessarily that homeowners refuse to accept higher rates. It’s that rates rose after home prices had already climbed dramatically, making the cost of replacing an existing home much harder to justify.
“This isn’t a rate question, it is a monthly payment question,” one commenter wrote.
Another said their house was purchased for $335,000 and is now worth about $750,000. That sounds like an enviable amount of equity until they look at upgrading. Better homes in the same neighborhood start around $1.2 million. Even putting roughly $400,000 down would leave an $800,000 mortgage and an estimated payment of around $5,500 per month before property taxes and insurance. Their current payment is about $1,800.
“It’s just not worth it,” they wrote.
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Another homeowner calculated that buying back the exact same house at today’s rates, after using the equity from selling it, would cost about $700 more every month.
That’s why even a drop in rates might not suddenly unleash a wave of sellers. Home prices, incomes, taxes and insurance costs are all part of the calculation. As another commenter explained, prices could fall, rates could decline or wages could eventually catch up, but some combination may be necessary to make moving attractive again.
For homeowners trying to figure out whether upgrading, downsizing, remodeling or simply staying put makes the most financial sense, getting another perspective can help. Advisor.com aims to make financial guidance more accessible by matching people with fiduciary financial professionals. Its roughly five-minute matching quiz connects you with vetted professionals who help with budgeting, taxes, estate planning and other financial decisions. Once you find a suitable match, you can book services directly.
Sometimes Life Wins Anyway
Not everyone is staying put.
One homeowner gave up a 2.75% mortgage for a 6.5% rate because living in a townhouse with shared walls and no yard had become miserable. “Literally our quality of life was suffering with noise, privacy, space, etc.,” they wrote. “Worth it for us.”
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Another family went from a 2.5% rate to 5.25%, trading a quarter-acre property for nearly 11 acres and getting the five-bedroom house their growing family wanted. “I would 100% do it again,” they said.
Others are finding ways to avoid selling altogether. Some said they’d remodel or finish a basement. Others would rent out their existing home and buy another property. One homeowner with a 2.75% mortgage said they’d consider a cash-out refinance if rates ever fell below their existing rate, potentially adding enough space so they’d “never need to move.”
The discussion suggests there isn’t one magic mortgage rate that will suddenly get everyone moving again. For some, 4% might do it. For others, 5% could be enough if the right house appears.
But for homeowners whose current payment is dramatically cheaper than anything available today, the question isn’t simply how low rates need to go. It’s whether the next house is worth giving up a financial deal they may never see again.
Image: Shutterstock
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This article What Would It Take to Get Homeowners to Give Up Their Low Mortgage Rates? ‘Never Selling. Bunk Beds Work Well’ originally appeared on Benzinga.com
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